Cyber attacks set to become ‘uninsurable’, says Zurich chief
The chief executive of one of Europe’s biggest insurance companies has warned that cyber attacks, rather than natural catastrophes, will become “uninsurable” as the disruption from hacks continues to grow.
Insurance executives have been increasingly vocal in recent years about systemic risks, such as pandemics and climate change, that test the sector’s ability to provide coverage. For the second year in a row, natural catastrophe-related claims are expected to top $100bn.
But Mario Greco, chief executive at insurer Zurich, told the Financial Times that cyber was the risk to watch.
“What will become uninsurable is going to be cyber,” he said. “What if someone takes control of vital parts of our infrastructure, the consequences of that?”
Recent attacks that have disrupted hospitals, shut down pipelines and targeted government departments have all fed concern about this expanding risk among industry executives.
Focusing on the privacy risk to individuals was missing the bigger picture, Greco added: “First off, there must be a perception that this is not just data . . . this is about civilisation. These people can severely disrupt our lives.”
Spiralling cyber losses in recent years have prompted emergency measures by the sector’s underwriters to limit their exposure. As well as pushing up prices, some insurers have responded by tweaking policies so clients retain more losses.
There are exemptions written into policies for certain types of attacks. In 2019, Zurich initially denied a $100mn claim from food company Mondelez, arising from the NotPetya attack, on the basis that the policy excluded a “warlike action”. The two sides later settled.
In September, Lloyd’s of London defended a move to limit systemic risk from cyber attacks by requesting that insurance policies written in the market have an exemption for state-backed attacks.
At the time, a senior Lloyd’s executive said the move was “responsible” and preferable to waiting until “after everything has gone wrong.” But the difficulty of identifying those behind attacks and their affiliations makes such exemptions legally fraught, and cyber experts have warned that rising prices and bigger exceptions could put off people buying any protection.
Greco said there was a limit to how much the private sector can absorb, in terms of underwriting all the losses coming from cyber attacks. He called on governments to “set up private-public schemes to handle systemic cyber risks that can’t be quantified, similar to those that exist in some jurisdictions for earthquakes or terror attacks”.
In September, the US government called for views on whether a federal insurance response to cyber was warranted, which could be part of, or outside, its current public-private insurance programme for acts of terrorism.
A report from the US Government Accountability Office in June highlighted the potential of cyber incidents to “spill over” to other linked firms. It said examples such as the Colonial Pipeline hack, which created temporary gasoline shortages in the south-east US, demonstrated “the possibility that a single cyber incident could ripple across critical infrastructure with catastrophic consequences”.
Greco also praised the US government’s steps to discourage ransom payments. “If you curb the payment of ransoms, there will be fewer attacks.”