APAC sees rapid growth in cyber insurance demand – Gallagher Re

The Asia-Pacific (APAC) region has seen significant digital transformation in recent years, particularly accelerated by the COVID-19 pandemic. This shift has heightened cyber risks across the region, fueling a growing demand for cyber insurance solutions, according to insights from Gallagher Re.

The cyber insurance market in APAC has been expanding at a rate of nearly 50% per year, now accounting for 7% of the global market as of January 1, 2024. However, there remains considerable room for growth.

For comparison, cyber insurance premiums in the U.S. represented 0.0353% of GDP in 2022, while the average across APAC was only 0.0025%, making it at least 14 times lower. Gallagher Re highlights that while countries like Thailand, Malaysia, Vietnam, Indonesia, and the Philippines are emerging players in this space, larger markets such as China and India also have significant potential for further penetration.

A key factor driving the future expansion of cyber insurance in APAC is regulatory pressure. Countries like Singapore and China are enforcing stricter data protection laws, and compliance often requires companies to have adequate cyber insurance coverage.

Gallagher Re notes that this regulatory push could lead to increased market penetration, particularly among small and medium enterprises (SMEs), which represent a largely untapped market in the region.

Despite the growth opportunities, challenges remain. The lack of standardization in policy wording and coverage, coupled with the fast-evolving nature of cyber threats, makes underwriting and risk assessment difficult for insurers. Gallagher Re points out that the relative lack of historical claims data in this new field adds to the complexity.

Reinsurance solutions, according to Gallagher Re, can help insurers address these issues by mitigating the financial impact of large-scale cyber incidents, allowing them to underwrite larger risks and provide more comprehensive coverage.

In the medium term, Gallagher Re expects market penetration rates to rise, particularly in the retail and SME sectors. To support this growth, insurers are likely to enhance the cyber risk management services they offer to clients, helping businesses and individuals better manage their cyber exposure. This, in turn, could reduce the frequency and severity of claims.

The advancement of data science and analytics, including artificial intelligence, is another development expected to impact the sector. Gallagher Re suggests that these technologies will improve insurers’ ability to assess risks, set more accurate pricing, and manage claims more efficiently.

As APAC governments continue to strengthen their cybersecurity regulations, the demand for cyber insurance is expected to rise further. Insurers will need to stay responsive to regulatory changes and adjust their products to meet the evolving requirements across the region.

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