Governments need to step up and help the insurance industry cover growing threats from cyber attacks, the head of reinsurer Swiss Re has said.
Christian Mumenthaler said governments around the world need to provide a backstop in case of huge attacks, much as they do for terror incidents. “You need the same here, otherwise the public market cannot really develop fully,” he told the Financial Times in an interview.
At the moment, he said, governments are not willing to take on the risks: “At the current stage the appetite of governments to engage in such a dialogue is zero.”
Cyber insurance is one of the fastest-growing parts of the industry as companies try to protect themselves from attacks such as WannaCry and NotPetya, both of which disrupted businesses this year.
Insurers are worried about what they call accumulation risk: the possibility that a large number of their clients could be hit at the same time by the same attack, creating huge potential payouts.
“You need diversification,” said Mr Mumenthaler. “If you have accumulation, if you have scenarios that hit everything at the same time, one of the principles of insurability is actually put out of play.”
He added: “If you take natural catastrophe they won’t happen at the same time so I can write tonnes of natural catastrophe [insurance].”
Mr Mumenthaler said Swiss Re’s response to cyber accumulation risk has been to take a cautious approach to the market. “We can write a little bit of cyber but we don’t want to be overweight in this risk field. We want to be underweight.”
Some governments are slowly taking steps to provide a backstop for cyber attacks. Last month, Pool Re, a government-backed terror insurer in the UK, said it would add material damage and direct business interruption caused by cyber terrorism to its cover.
Elsewhere, insurers are bringing in government expertise to help them manage the risks. In September, Hiscox appointed Robert Hannigan, the former director of UK intelligence agency GCHQ, as an adviser on cyber security.
Cyber is not the only area of technology where Swiss Re is taking a different approach from many of its large peers.
Mr Mumenthaler is also sceptical of the growing trend for insurers to buy up stakes in start-ups, often via specially created venture capital funds. Allianz, Axa and Munich Re are among those to have taken that approach.
Swiss Re is steering clear. “If we see a start-up that can help us, either it’s very strategic and then we would buy them 100 per cent or copy what they do, or if it’s not that strategic then I think we can collaborate with them. But investing 10 per cent, 15 per cent, 20 per cent in them, I can’t make a case. We’re not a VC fund. I don’t see why my investors would prefer me to do that versus them making it,” said Mr Mumenthaler.
He added that, while he sees a lot of potential for technology to make a big difference by making the process of buying insurance and making claims cheaper and easier, the changes could take longer than some people expect. “There is a lot of hype. There’s a lot of noise in it. A lot of over-expectation.”