The costs of business interruption due to a breach is the top cyber risk concern for businesses across all industries, reveals the 2016 Captive Cyber Survey report released by Aon Global Risk Consulting.
“Our findings also indicate that there is a disparity between companies recognizing that cyber is one of the fastest growing and permeating risks, and actually understanding what their individual exposures and coverage needs are,” said Peter Mullen, chief executive officer of Aon Risk Solutions’ Aon Captive and Insurance Management practice, who spearheaded the report. “Captives are a great alternative risk transfer solution for bridging this gap while the industry’s approach to cyber risk management catches up to the evolving pace of technology.”
The survey findings indicate that 94 percent of companies would share risk with others in their industry as part of a captive facility writing cyber. What’s more, Aon experts anticipate alternative risk transfer options to become increasingly sought after as these solutions give companies some control over underwriting, coverage scope and claims adjustment, while providing an opportunity to share best practices, experience and data in a private setting.
The report also highlights that 61 percent of survey respondents buy cyber limits in the $10-25 million range, but overall 60 percent of large companies do not buy cyber insurance. Of those that do, 68 percent of companies surveyed buy cyber for balance sheet protection closely followed by ensuring due diligence comfort for the board.
Only 25 percent of respondents that buy limits are confident that they comply with international best practices and standards for information security governance. Meanwhile, 95 percent of companies surveyed state clear policy wording as the most important issue in the cyber risk market, and 75 percent of large companies express concerns about the loss adjustment process.
“Given the evolving nature and complexity of cyber exposures, we found that the use of cyber risk assessments is surprisingly low,” said Kevin Kalinich, global practice leader for cyber/network risk at Aon Risk Solutions.
“Conducting such an assessment is a useful tool for improving risk understanding and maturity as well as for helping organizations better prepare for potential business interruption during or after a breach. Aon is at the forefront of assisting clients to develop and implement a risk assessment approach that is cross departmental and can translate cyber exposures into financial impact.”
Aon recommends the following three steps to begin a cyber risk assessment:
- Scenario Analysis: Benchmark the existing cyber risk profile and work with business stakeholders to prioritize cyber risk scenarios
- Financial Modeling: Leverage advanced financial simulation tools using deterministic modeling to quantify first and third party costs of select cyber scenarios. Consider performing an analysis on non-damage business interruption scenarios using forensic accounting capabilities.
- Insurability Risk Review: Test the adequacy of limits against the assessed cyber risk as well as review the optimization of the proposed insurance program