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Cyber Insurance to Become Like Fire Insurance for Industry in 21st Century, says Allianz


07/14/2016


Cyber Insurance to Become Like Fire Insurance for Industry in 21st Century, says Allianz
Insurer Allianz is of the view that demand for cyber insurance in Europe would accelerate due to a duty to protect data more stringently and the growing threat of hacking.
 
The insurer launched its first product aimed at Germany's small-to-medium-sized manufacturers when it made this comment.
 
Christopher Lohmann, head of the region Central and Eastern Europe at Allianz Global Corporate & Speciality (SGCS) said that with fewer than one in 10 firms having taken out a cyber insurance policy, such insurance has been slow to take off in Europe.
 
New regulations such the Germany's I.T. security law which orders 2,000 providers of critical infrastructure to report serious breaches and which came into force last year, coupled with greater awareness among companies will spur demand for such cyber security insurance among the industry, he believes.
 
"There are many reasons to believe that cyber insurance will evolve into the fire insurance of the 21st century," he said. For many business and their reputations, a functioning IT system and secure data are critical, he added.
 
According to the German government's latest IT Security Report, attacks on industrial production sites are rising as Germany offers rich pickings for hackers and since it is the home to world champion manufacturers.
 
A study by consultancy KPMG in 2015 about Germany’s industrial cyber security status notes an increase of 50 percent over 2013 with forty percent of German companies were affected by e-Crime over the past two years.
 
Due to their lack of big budgets for I.T spending, particularly vulnerable to cyber attacks in Germany are the country’s small-to-medium-sized manufacturers - known as the Mittelstand and which form the backbone of its economy.
 
In order to enable companies to collect and exchange data and make it easier to control machines remotely, many of the small and medium sized companies are moving to connect machinery to the Internet and this has increased the threat of cyber attacks and hacking.
 
However Germany only contributed around $10 million last year towards cyber premiums despite the rising threat of hacking and cyber threats. According to Lohmann, compared to that figure, the estimated premium volume of $2.5 billion in the United States for cyber insurance presents a huge difference. 
 
For all companies whose business models depend on I.T., cyber insurance is expected to become a matter of course, feels Peter Grass from the German Association of Insurers.
 
"The development is relatively rapid - also because the public and politics are becoming ever more aware that this can be an economic problem," he said.
 
In 2014, massive damage was suffered by a German steel mill following a cyber attack on the plant's network. Computer viruses were found to have infected a nuclear power plant in April.
 
Around 15 insurers dealing in cyber insurance are now active in the market while the first cyber insurance policies were launched on the German market in 2011. Axa, Hiscox, Ergo (part of Munich Re) and Zurich Insurance are the other big players.
 
(Source:www.reuters.com)