More and more industrial companies are finding it difficult to insure themselves against hacker attacks and other cyber risks. Some of them are now resorting to self-help.
Has cyber insurance come to an end just a few years after its emergence? In any case, the situation is extremely tense. If companies want to protect themselves against hacker attacks and other cyber risks with these policies, they have to dig deeper and deeper into their pockets – if they even manage to get sufficient coverage. Insurers have become very cautious because claims are increasing in this relatively new segment and are becoming ever more expensive. Companies have to buy their insurance cover from more and more providers and now have to meet strict requirements in order for insurers to accept them as customers.
Torsten Leue, head of the Hanover-based insurance group Talanx, does not believe in the end. It is far too early to write off cyber insurance, he explained at the insurance day of the SZ in Bergisch-Gladbach. He believes that the young market simply needs a little more time to develop.
The growing caution of cyber insurers has to do primarily with their concerns about so-called accumulation risks. While natural disasters, fires or accidents usually occur on a regional basis, a large-scale cyber attack could result in enormous damage occurring worldwide at the same time.
Talanx boss Leue is certain that there will still be a lot going on in cyber insurance. Just as the requirement for the installation of sprinkler systems has become normal in fire insurance, cyberpolicy must increasingly include prevention aspects and crisis management related to the product. “The market will find a solution,” he emphasized. However, it will not only take two to three years, but longer, before customer demand can be fully satisfied.
Problems in covering their insurance needs prompted a number of European industrial companies to set up their own insurers together, including Airbus, BASF, Michelin and Solvay. The company, called Miris, is based in Brussels and received its license at the end of 2022.
The foundation is reminiscent of Talanx’s roots: the German insurer HDI, which belongs to the Talanx Group, was founded in 1903 as a self-help organization for the iron and steel industry and was a reaction to sharp price increases for liability covers for German industry. It is true that HDI and similar start-ups that have existed in the insurance industry over the past few decades have not been able to fully compensate for the lack of capacity in the market. However, they were clear signals to the established insurers and helped to relax the market.
The cyber division is by no means the only area in industrial insurance where there are problems between insurers and their customers. After a long period of low prices and comfortable contract terms, industrial insurers have been raising prices sharply again for a little over two years and tightening their clauses. The situation is also extremely tense in managerial liability insurance.
The increasing price demands of insurers come at a bad time for many companies, after all they mean additional burdens in addition to the challenges of war, the aftermath of the corona pandemic, disrupted global supply chains and inflation.
Insurers have to put up with the accusation that they do not always act in a targeted manner and with a sense of proportion in the event of price increases and tightening of contract conditions. “The insurers often go too general and too much with the shotgun,” criticized Jochen Körner, head of the insurance brokerage group Ecclesia. There are fewer and fewer insurers and brokers who can structure insurance risks well and price them appropriately.
