While global economic losses caused by the WannaCry ransomware attack were estimated by cyber security firm Cyence at US$8 billion, insurance ratings agency AM Best has said that the re/insurance industry will only cover a small portion of this amount.
The WannaCry attack impacted numerous industries across 150 countries and sparked debate and discussion about cyber insurance and other safeguards against future attacks in its vein.
In a note published by AM Best, the agency said that it expects insurers and reinsurers to cover only a small part of the damage.
“However, AM Best expects that insured losses will be a fraction of this, given the industry’s cautious and tepid position in cyber,” it said.
Cyber risks are the fastest-growing threats in the world due to an increasingly interconnected society, leaving insurers and reinsurers with their work cut out for them. The fast-evolving nature of technology means that there is little historical data for insurers to work with, making it tough for the industry to keep pace with cyber threats.
“AM Best recognizes that the sophistication of cyber risk insurance policies is evolving, which is the reason many insurers are fairly cautious about putting up too much capacity in this area. Being very good risk managers, insurers tend to view cyber as a great business opportunity, but at the same time are very cautious about taking on cyber exposures beyond a certain risk tolerance,” the ratings agency explained.
Even if attacks such as WannaCry cause losses in the billions, these events are learning opportunities for the industry.
“The insurance industry can also benefit from this attack, if it leads to a better ability to devise and craft appropriate policies with clear definitions and language, to attain the desired level of protection and coverage for policyholders,” AM Best added.
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