Cyber crime the top concern for insurers

The threat of cyber crime is considered to be the greatest risk facing the insurance industry, according to a new survey of insurers and close observers of the sector, ahead of other fast-growing threats such as climate change.

The CSFI’s new Insurance Banana Skins survey, conducted in association with PwC, surveyed nearly 600 insurance experts in 39 countries, to find out where they saw the greatest risks over the next 2 to 3 years.

Cyber crime emerged as the top concern because it is seen both as a large underwriting risk, and as an acute operating risk for insurance companies.

The No. 2 risk identified by the survey is excessive regulation. According to respondents, new rules on sustainability and accounting are adding to an already costly compliance burden which could damage business effectiveness.

Climate change ranks third as insurers take stock of rising weather and natural catastrophe claims, as well as the operating risks to their business.

The No. 4 risk comes in the form of new technology which needs to be successfully managed if the industry is to meet the challenges of digitization and cost control.

Insurance Banana Skins 2023 lists 24 potential risks. Those on the rise include macro-economic risk, with the world economy in a fragile state, and human talent, reflecting acute labour shortages in crucial areas of the industry such as IT.

A new risk identified this year is Artificial Intelligence, which appears in a high position at No. 7 and is considered to be balanced more towards risk than reward. Another emerging risk is de-globalisation - the threat of barriers to world trade – which makes its entry at a less urgent No. 19.

The overall mood of the industry, as captured by the Banana Skins Barometer, shows a slight deterioration from the previous survey in 2021 because of growing economic and political tensions, and the large agenda of change facing the industry.

David Lascelles and Keyur Patel, survey editors, said: “It is no surprise that insurers feel more anxious about the outlook. The task of addressing risks such as climate change and cyber crime which affect them both as insurers and businesses is enormous. All this comes at a time when technological change and unknowns such as artificial intelligence are posing new challenges.”

Martina Garcia, CSFI Director, said: “The Banana Skins survey shows that, while the industry is understandably feeling more apprehensive about external risks such as climate change or the macroeconomic outlook, it is also increasingly concerned about internal management risks. Further strengthening governance might be the key to enable the industry to address efficiently the deterioration in the external risk environment. “

PwC Insurance Partner, Andy Moore, said: “For large-scale insurers, the prospect of a serious cyber-attack is daunting, especially as organisations rightly look to new digital solutions to promote efficiencies, improve customer engagement and shore up the critical bottom line.

“The challenge for insurers is that as their businesses become more complex - with new hardware, cloud computing and third-party services in longer supply chains - cyber vulnerabilities unfortunately increase.

“Criminals are becoming more adept at monetising their breaches, and with the prospect of sensitive customer data leaks, it seems that for the insurance sector the ability to be resilient to cyber-attacks is a core requirement, with cyber security being less a 'bolt on' and rather something to be designed into the business and IT architecture.”

The survey is the latest in the CSFI’s long-running Banana Skins series on insurance risk going back to 2007. The report was prepared by the CSFI, which is solely responsible for the editorial content, with support from PwC. It can be downloaded from the CSFI website