COVID-19 and Cyber: How a global pandemic is accelerating digitalisation – and its risks
As the COVID-19 pandemic impacts the world, societies’ way of working has changed dramatically. Even though most businesses have made a surprisingly fast transition to working remotely, many are still playing catch-up when it comes to addressing ever-increasing cyber threats. By ensuring a pre-emptive strategy for offering complex and adequate cyber insurance, Munich Re sees this challenge not as an insurmountable obstacle, but as an opportunity for sustainable new business throughout the entire industry.
The exponential shift towards digitalisation brings new vulnerabilities
The global community and businesses have shown a remarkable level of resilience in the face of such a life-changing crisis as COVID-19. It is a crisis which has seen a strong increase in digital solutions and communication methods across all industries, among companies of all sizes, schools and universities, as well as on an individual level. A survey by the online broker Clark and the polling firm YouGov shows that 1 in 3 Germans (31%) have used more digital services because of the coronavirus pandemic, while 75% admit that their confidence in the security of their digital services has not increased compared to before. This is a good indicator that, as threats such as social engineering and phishing or ransomware attacks grow, there is also a higher exposure rate due to inadequately protected private devices as well as home office environments.
A perspective for cyber insurance
Several sources, including Interpol, the FBI and cybercrime studies from security providers, have reported on the exploitation of the COVID-19 pandemic by cyber criminals and on losses, for instance, from phishing. The number of cyber attacks against the World Health Organisation, for instance, is more than five times higher since the beginning of the pandemic than it was in the same period last year. Since the frequency of cyber losses is clearly likely to rise, cyber rates will probably also be increased significantly when it comes to insuring against trending cyber susceptibilities such as ransomware attacks, data breaches, tightening legal data protection requirements, etc.
Even though the shock of the pandemic to the global economy may cause some companies to decide against buying cyber insurance coverage in the near future due to budgetary factors, many companies may rely more heavily on their IT capabilities since much of their business is now handled remotely. For this reason, and after the initial economic shock and budget savings, it is expected that, in the medium term, investments will be made in IT security. For many businesses, cyber insurance will be a reasonable option.
The cyber challenge as a sustainable solution
In the course of the ongoing digitalisation amid COVID-19, providing comprehensive solutions for cyber remains a key challenge, in particular since cyber risks and loss scenarios have the potential to change quickly. For this reason, understanding and monitoring cyber accumulation remains a core task for the entire insurance industry. The complexity of the risks involved and the need for risk-adequate pricing require top-notch teams of cyber experts that can cooperate across industries and markets.
Munich Re has a sound cyber risk management process in place with the know-how of an expansive network of experts and specialists. The reinsurer relies on its self-developed accumulation models, while seeking external expertise from different vendors on the market in order to guarantee state-of-the-art accumulation management. This approach is based on supporting clients with a comprehensive and transparent path to cyber risk management while remaining prudent and sustainable with regard to overall risk appetite. The current effects of the coronavirus crisis may expose and trigger a number of cyber policies, but it is unlikely at this time that the impact will be more widespread. Nevertheless, the situation and its development must continue to be actively and carefully monitored. COVID-19 has shown how apparent the risks can be. It is therefore of utmost urgency that the industry remains prepared, by ensuring cutting-edge risk management that takes advantage of a global network of experts and service partners that can guarantee the professional handling of a multiple-incident scenario across industries and on a global level.