Cyber Risks and Insurance

A Global Threat

Bengt von Toll, Head of Cyber Europe and Latin America

Source 2016: https://www.cnbc.com/2017/02/07/cybercrime-costs-the-global-economy-450-billion-ceo.html

Source Estimation for 2021: http://securityaffairs.co/wordpress/50680/cyber-crime/global-cost-of-cybercrime.html

The costs of cyber crime

450 2016

2021

Cyber risks constitute one of the greatest threats we face…

Economic losses are increasing without limits

bn US$

6,000 bn US$

Our biggest risk is: Strategic risk not to find any

insurance solution for cyber.

Digital transformation demands new solutions from

(Re)insurance industry/Top 10 Risks Europe

Source : Allianz Risk Barometer 2019 /https://www.agcs.allianz.com/content/dam/onemarketing/agcs/agcs/reports/Allianz-Risk-Barometer-2019.pdf

Business Interruption

2018: 42% (1)

1

37%

Image donvictorio / Shutterstock.com

=

Cyber Incidents

2018: 40% (2)

2

37%

Image Donat Sorokin / TASS / dpa Picture Alliance

= Image mauritius images / Masterfile

2018: 30% (3)

Natural catastrophes

28%

3

=

Fire explosion

2018: 20% (6)

6

19%

=

New technologies

2018: 15% (7)

7

19%

Image Ociacia / Shutterstock.com

=

Image Shutterstock.com

Changes in legislation and regulation

2018: 21% (5)

4

27%

Market developments

2018: 22% (4)

5

23%

Image blackred / Getty Images

Climate change / weather volatility

2018: no value

8

12%

Image: Alto Crew on Unsplash

Loss of reputation or brand value

2018: 13% (8)

9

13%

Image mdd / Shutterstock.com

Shortage of skilled workforce

2018: no value

10

9%

Image: Dylan Gillis on Unsplash

0

5

10

15

20

25

2015 2016 2017 2020 2025

0

100

200

300

400

500

2014 2015 2016 2017 2018

PI RI

GWP global cyber insurance market1 GWP Munich Re cyber portfolio

Strong correlation with cyber security market

Higher awareness of cyber risks/claims reporting

will drive demand for insurance solutions

GDPR implementation in Europe

Munich Re serves all client segments via Reinsurance

and Primary Insurance carriers

Well established player in US and RoW

Munich Re aims to keep 10% market share

in the growing cyber market

RoW US

Digitalization

Claims

Legislation

Cyber insurance market with strong expected growth

Munich Re – Cyber reinsurer of the year 2017 and 2018

Cyber is one of Munich Re’s main strategic growth areas,

therefore we further invest in leading-edge expertise and strong global market presence

1 Estimates based on different external sources (Marsh & McLennan, Barbican Insurance, Allianz).

in US$ bn in US$ mn

Cyber risks are in fact a global threat…

No region around the globe seems to be exempted anymore

Video: Malwarebytes/ Youtube: https://www.youtube.com/watch?v=IEAtGCkbq5Y#t=23s

Cyber risks are in fact a global threat…

Attacks show a global reach

Threat-Matrix Cybercrime Cyberkid Cyberwar and

Cyberspionage Cyber-Terrorist Hacktivist

Motivation Money Fun, curiosity Strategic Ideology/Religion Politics, Ethics

Choice of targets Individual, by chance or

directly aimed

By chance, political

reasons Individual, collateral

Ideological, anti-western,

collateral, media-effected

Ideological and political

targets

Organisation Strongly pronounced Partially Perfect Regional Structured

Competence High Low-high Very high Low-high (external help) Middle-high

Overview on Cyber threat actors

Attacks are driven by human behaviour

Accumulation

Virus &

Malware

Data

breach

IT Service

provider outage

Infrastructure

Failure

Significant Accumulation Potential arises form shared vulnerabilities

and disruption/outage of central IT services and external networks

State of the art risk management as true business enabler

Observed Accumulation Paths

Common software vulnerability

(Wannacry, NotPetya)

Common hardware vulnerability

(Meltdown, Spectre)

Disruptions to IT Service Providers

(Cloud Service Outage)

Attacks on critical infrastructure and/or industrial

control systems

Risk management approach

Cyber risks which are deemed to be insurable and

manageable are tracked against a pre-determined risk

appetite

Critical infrastructure risk, or “Outage of External

Networks” are deemed not within appetite

Accumulation

Virus &

Malware

Data

breach

IT Service

provider outage

Infrastructure

Failure

Transparency is required to eliminate uncertainty regarding coverage

State of the art risk management as true business enabler

Silent Cyber

Transparency – Do we write cyber?

Almost every conventional non-life policy

can be exposed to cyber risk

Silent Cyber exposure is potentially significant,

but it presents also a nearly untapped area of business

opportunities

Action required

Achieve transparency of the inherent exposure

Turn the silent coverage into at least non-silent or even

better affirmative coverage

Risk assessment and pricing

Accumulation control

Munich Re offers a fully fledged, market proven product

with solutions for the whole value chain

Risk

Assessment

Insurance

Policy

Post Incident

Response/Services

Pre Incident

Services

INSURANCE

Claims

Enquiry

Risk

Assessment Coverage

Pricing

support

Accumulation

Control

Data Breach

recovery

Forensics

Extortion

Negotiation

Crisis Manage-

ment

PR

Legal/ Regulatory

Notifi- cations

Hotline 1st Level Response

Sales

Reports

Employee

Aware- ness

GDPR

Checks

Security

Monitoring

Protection

Suite Platforms

App

We bring well-established

experience to the table with

experts who can operate in all

industries and organisations,

from large corporates, to SMEs,

and personal lines

We are actively identifying and

developing cyber initiatives to

improve our customers’

experience and enhance

underwriting

We continuously monitor

changes to the cyber

environment, seek to improve

our understanding of the risk,

and then adapt our cyber

products to ensure we remain

relevant to our customers

Experience and Expertise Continuous Improvement Innovation

Munich Re‘s value add

Where can we support?