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Cyber Risk Survey Report

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The digital age which we operate in, constantly presents new challenges to the (Re)insurance market. This Cyber Risk Report was conducted by Weightmans’ EC3 team to provide clarity on the extent to which (Re)insurers are ready for these challenges.

This report was prepared on the basis of a survey carried out over two weeks between 28 September and 9 October 2015. It canvassed insurance stakeholders in a set of 16 questions drawn up jointly with specialist magazine Insurance Day.

The 102 respondents were divided into three types: insurers, brokers and reinsurers. A number of questions were specific to one or two of these respondent groups only.

The answers were compiled and analysed by Weightmans’ EC3 team. Their experience and input provided perspective into the survey results and were invaluable in helping shape both the main part of the Report and the comments under the answers to each individual question.

To supplement the survey findings, interviews were conducted with the following individuals:

  • Niall Brophy, Technical Claims Manager, StarStone
  • Graeme Newman, Chief Innovation Officer, CFC Underwriting
  • David J. Shannon, Chair, Technology, Media & Intellectual Property; Chair, Privacy and Data Security, Marshall Dennehey
  • Dominic T. Clarke & David Mackenzie, Blaney McMurtry LLP
  • Francis Mackie, Partner, Weightmans LLP

Contributions were also made by the following individuals in Weightmans’ EC3 team:

Foreward

The business world is transmogrifying before our very eyes, necessitating a wholesale re-think of the legal issues and risks surrounding it. The rise of technology is transforming manufacturing companies into software businesses, using increasingly digitised processes, with factories and plants controlled by computers - and mechanics gradually morphing into software technicians; services firms too are increasingly resembling software or data houses, now that so much business is conducted online and in the cloud.

The nature of crime is changing also. This October saw the Office for National Statistics showing cyber crime as a separate category of offence in the official crime figures, and the result is illuminating: whilst traditional crime is falling eight per cent, online fraud and cyber attacks now account for half of all crime.

The big question is: how prepared are we for this new cyber age? The challenges here are particularly acute for the (Re)insurance industry, responsible for underwriting these new risks for businesses and individuals. As the very nature of risk changes – or, in the words of Partner Ed Lewis, as old risks manifest in new ways – the industry needs to decide how it is going to measure them, and then how to provide cover. The trouble is of course, that the bank of historical data needed to calculate risk in the future, simply doesn’t exist. Indeed there is a paucity of data generally around cyber risk. This is why we decided to conduct this Cyber Risk Survey, as our contribution to the industry’s discussion and debate. We hope you find this Report useful.

We believe the effects of the cyber revolution will be as transformative and far-reaching as those of the industrial revolution almost 200 years ago. We need to be ready for it.

Summary

The big question is: how prepared are we for this new cyber age?

Kieran Jones
Partner, Insurance Director
Weightmans LLP

kieran.jones@weightmans.com

Download the full PDF report version here.