Aon has released its 2024 Intangible versus Tangible Risks Comparison Report, which highlights the need for businesses across Europe, the Middle East, and Africa (EMEA) to reassess their cyber insurance and intellectual property (IP) protection strategies.
The report emphasises the evolving threats from generative artificial intelligence (Gen AI) and the growing exposure to losses related to IP and intangible assets.
The report finds that the likelihood of loss is higher for intangible assets compared to tangible assets. The average probable maximum loss for intangible assets is nearly 43% higher than that for tangible assets. The report also notes that only 17% of information assets are currently insured, in contrast to 60% coverage for property, plant, and equipment (PP&E).
This gap in coverage has persisted over the past two years, despite the increasing value of intangible assets and the rising frequency of significant cyber breaches.
According to the survey, 54% of businesses experienced a material or significantly disruptive security threat or data breach one or more times in the past 24 months. Additionally, 69% of businesses are using or planning to implement AI products or services, which raises the potential for cyber incidents and regulatory compliance challenges.
Despite these risks, many businesses still lack adequate coverage for trade secret theft and intellectual property liability, leaving them potentially exposed to significant financial risks.
The report also points to the growing threat from Gen AI, which is expected to increase the frequency and impact of cyber-attacks over the next two years. Gen AI is likely to enhance the existing tactics, techniques, and procedures used by cyber criminals, making it easier for novice attackers to carry out effective cyber operations. This trend is expected to contribute to a rise in global ransomware threats.
Furthermore, only 36% of respondents indicated that their cyber insurance policies cover ransomware costs, leaving a significant number of businesses vulnerable to financial losses from cyber incidents.
David Molony (pictured above), head of cyber solutions EMEA at Aon, noted that cyber insurance has rapidly evolved to better address the key loss drivers associated with cyber events. He mentioned that cyber insurance offers more favourable coverage and premium pricing for businesses that demonstrate strong cybersecurity practices.
However, Molony also pointed out that the increasing value of intangible assets, along with the rise of generative AI, represents a significant shift in cyber risk. He added that the European Union’s new AI Act is likely to introduce additional regulatory complexity, and businesses must prepare for these evolving risks and potential liabilities.
Molony emphasised that the recent global IT outage underscored the dynamic nature of cyber and technology risks, highlighting the importance of robust business continuity and incident response protocols. He stressed the need for comprehensive cyber insurance policies to mitigate these risks.
According to Molony, the evolving risk landscape presents opportunities for global businesses to rethink their risk strategies, whether through traditional risk transfer mechanisms or by leveraging alternative capital arrangements such as captives and reinsurance markets.
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