Navigating the Complexities of Cyber Insurance
The cyber insurance market is facing a complex challenge in balancing historical risk data with future projections, particularly with the rapid advancement of technologies like generative AI (genAI). During a recent Insurtech Insights webinar, a panel of cyber specialists discussed the evolving landscape of cyber risks and the sectors most vulnerable to them.
Connor Brennan, VP at Arch, highlighted the growing sophistication of phishing schemes and social engineering attacks facilitated by AI. “AI is evolving very rapidly and it has gotten extremely hard to tell what’s real and not real,” he noted, emphasizing the need for firms to implement robust verification processes. However, this is becoming increasingly difficult in today’s technological environment.
The Debate Over Standalone AI Coverage
Jeff Kulikowski, EVP of cyber & professional liability at Westfield Specialty, discussed whether the advancement of AI warrants standalone coverage. He pointed out that many existing policies already cover AI-related risks as part of their service models, particularly those with E&O components. “If it’s part of a company’s service model, it should be covered,” he said, adding that few carriers are currently excluding AI-related risks.
The question of whether AI needs to be a standalone product remains uncertain, partly due to pending regulations. Kulikowski noted, “That also depends on a lot of the pending regulation that’s out there right now.”
Sectors Most at Risk
The discussion also touched on which industry sectors are most vulnerable to cyber threats. While finance and healthcare are traditionally considered high-risk, Brennan pointed out that professional services firms are increasingly becoming targets due to the sensitive data they handle. “We’ve definitely seen an uptick in ransomware claims in the professional services space, and I would throw in manufacturing and distribution networks as well,” he said.
Kulikowski highlighted that public entities remain a challenging sector to insure due to their constantly evolving management structures and risk control environments. “It’s not a new risk frontier but I feel like it’s a problem that the industry, and frankly both brokers and carriers, have still not really addressed,” he commented.
Opportunities for the Insurance Market
Steven Schwartz, chief insurance officer at SAFE, identified the manufacturing industry and companies with industrial operational technology as areas where the insurance industry can provide more meaningful coverage. He sees potential in creating programs for large construction projects involving numerous subcontractors, most of whom lack cyber insurance. “Finding the right sort of program opportunities with the right partners in those pockets is a great opportunity for the market,” he said.
