Banning spectators from attending the Tokyo Olympics due to COVID-19 is estimated to have cost the global reinsurance industry up to US$400 million, according to Fitch Ratings.

It’s just one of many losses both insurers and reinsurers have faced due to COVID-19, as the pandemic has led the industry to rethink some of the cover it provides and how it is priced.

COVID-19 has highlighted how mass losses can be incurred simultaneously due to a single event, and Fitch Ratings says a cyber attack has the same loss potential, stating that “cyber risk could give rise to the next widespread catastrophe losses triggered by a single event”.

Cyber risks on the rise

Gow Gates new divisional manager for executive and professional risks, Lewis Patton, who recently joined the company, says the risks and costs associated with cyber attacks have been growing for some time, particularly as technology continues to rapidly evolve, and the world moves more and more online.

“The Olympics scenario is a perfect example of the types of catastrophic loss events caused by pandemics and other large scale events, and it certainly highlights the potential for mirrored and systemic losses that cyber events can cause,” he says.

Mr Patton says that, like pandemics, cyber attacks can infiltrate many different organisation’s ecosystems and cause immeasurable losses for governments, businesses, and society as a whole.

How the insurance and reinsurance industry is responding

In response to the rising risk level, Mr Patton says client awareness of cyber risks has continued to increase, and brokers have become more focused on cyber risk management and mitigation. Insurers have also begun to take a more structured and disciplined approach to underwriting cyber risks.

“In the last 12 to 18 months, the availability of cyber cover has decreased, pricing has increased and coverage has, in most cases, narrowed,” he says.

“Not only are both reinsurers and insurers having to juggle the catastrophic loss exposures to cyber, but they are also having to manage the aggregation risk across the various product lines throughout their books of business. Cyber aggregation and catastrophic exposures are particularly front of mind for reinsurers, who often sit across various different insurers portfolios.”

For more information

Mr Patton says having a robust and comprehensive cyber risk management strategy in place helps to mitigate these risks and complexities, as well as making it easier to obtain the right level and types of cyber cover.

For more information, or a discussion of your cyber risk and insurance requirements, you can contact us by emailing info@gowgates.com.au or calling us on 1300 165 116.