Howden's 2024 cyber insurance report
Published
Read time
Risk, resilience and relevance
At no other point has the cyber insurance market experienced the current mix of conditions: a heightened threat landscape combined with a stable insurance market underpinned by robust risk controls.
The last 12 months have brought resurgent ransomware activity, persistent geopolitical instability and the proliferation of generative artificial intelligence (Gen AI). Current conditions represent an opportunity for clients to secure protection at favourable terms. For insurers, the opportunity is to lean into a class with clear potential for steady exposure-led growth, ongoing profitability and innovation.
The foundations are now in place for the next phase of development, with opportunities in international geographies and other underserved areas poised to drive growth. Increased insurance penetration is the path to achieving resilience and relevance.
Cyber insurance is crucial to strengthening resilience around the world and insurers are now in a strong position to bring about real change.
Source: Howden
Resurgent ransomware activity
Ransomware continues to dominate the cyber loss environment. Strengthened cyber resilience is paying dividends for policyholders amidst the heightened threat landscape, with cyber attacks increasing their lead as the top global risk in Allianz’s Risk Barometer.
A rising number of ransomware attacks now involve the theft of sensitive personal or commercial data for extortion purposes (i.e. threatening to leak data into the public domain). This not only increases the complexity of incidents but also brings a greater risk of reputational damage.
Companies that have invested in risk controls and crisis management are now less susceptible to material impacts, rebalancing cost-benefit considerations for some firms over whether to pay ransoms. Furthermore, the growing prevalence of double and even triple extortion has undermined the assumption that paying a ransom will put a stop to the hack.
As cyber lives up to its dynamic reputation, the value of insurance is being brought into even sharper focus as it incentivises (and helps to implement) better cyber hygiene, strengthens resilience and indemnifies losses.
Source: Howden, NCC Group
Geopolitical instability
An increasingly febrile geopolitical environment is adding to the sense of uncertainty. Cybercrime remains a huge threat to businesses globally and there is little sign of activity relenting any time soon, with its professionalisation being one of the most marked and important trends over the past few years.
Although many cybercrime groups operate independently from state-backing, the two are still often interlinked. This has been illustrated by the growing levels of cybercrime coming from Russia, as well as the targeting of companies and critical infrastructure by criminal groups for political reasons.
Howden's analysis of attacks recorded by CSIS found that close to 90% of attacks (April 2023 to March 2024) were politically motivated. Global cyber powers appear to have accepted that concerted state-sponsored, and often aggressive, cyber campaigns have become a norm.
The reach and duration of ongoing wars in Ukraine and the Middle East, alongside lower-level activity aimed to undermine the democratic process in a major election year, are likely to have profound effects on global cyber security.
This reaffirms the important work being done by the market in getting ahead of the cyber warfare issue and determining proactively the scope of cover.
Source: WEF
The rise of Gen AI
While ransomware and systemic risk continue to dominate the cyber threat landscape, another major and relatively new development has been the explosion of Gen AI.
Two emerging conclusions on how Gen AI will reshape the threat landscape over the next few years are becoming increasingly clear:
- Sophisticated, state-backed threat actors will use Gen AI to sharpen their tactics, techniques and procedures.
- Gen AI will push up the potential aggregation, severity and frequency of claims in predictable areas by enhancing the capabilities of commercial hackers.
With the rapid development of Gen AI, less skilled hackers will see the biggest uplift to their capabilities. Many novice threat actors will gain access to tools, code and intelligence that will enable them to start hacking. And as expert hackers sell their capabilities online, AI will accelerate the democratisation of hacking.
Meanwhile, organised crime groups will increasingly focus on more lucrative hacking, and the most sophisticated hackers, backed by nation states, remain closely focused on conflict and geopolitical goals rather than making money.
Looking ahead, cyber security experts are positive on AI’s ability to reinforce defences. The practice of using AI to detect and defend against attacks is developing at pace.
The full potential of cyber insurance can be unlocked by improving access to areas currently underserved by the market. Howden is spearheading these efforts by applying differentiated insights and expertise to deliver pioneering solutions. Innovation is key to growth, requiring a new approach to broking that is cycle-savvy, innovative, entrepreneurial, global and home to the sector’s strongest talent.
– Shay Simkin, Global Head of Cyber
