How Have Multination IT Giants Turned Out to Be the Biggest Clients of the Cyber Insurance Industry?

Highlights:

• Introduction
• Advantages of cyber insurance policies
• The rise of the sector in North America and Asia-Pacific

As the importance of data increases with each passing day, the threat of data breaches also becomes graver. In fact, one of the biggest threats to personal liberty in today’s modern world is that of cyber-attacks and theft of an individual’s confidential data. Almost all multinational technology companies take data from the users and store it for promoting their products and marketing their services. The data, thus, stored is vulnerable to theft and attacks from malicious actors who take hold of such data and sell it to third-party vendors for huge sums of money. To provide all-encompassing protection against such data breaches and cyber-attacks, the concept of cyber insurance has come up which provides protection and coverage against data breaches, cyber-attacks, business interruptions, financial losses, etc. Thus, cyber insurance enables companies to reduce the risk of various types of cybercrimes.

Understanding the importance of cyber insurance in safeguarding digital assets

In the past few years, the number of cyberattacks on fintech companies, security agencies, government institutions, and other organizations of vital importance has increased exponentially. As per a study conducted by a reputed commercial insurance company, the number of cybercrimes has increased by around 600% since the COVID-19 pandemic and is expected to result in a cumulative loss of around $10 trillion by 2025. While multinational tech giants are at risk from cybercriminals, small and medium-scale industries are equally vulnerable. A study on cybercrime conducted by Accenture, a leading information technology company, showed that around 43% of cyberattacks are aimed at small and medium-scale companies that have little or no expertise in defending themselves from such attacks.

The role of cyber insurance, especially corporate and business insurance, has become extremely crucial. When a technology company provides certain services or products to its customers, they collect and store the data of its customers for future use. Naturally, the company is responsible for keeping its customers' data safe. In case of a data breach, the company can be held liable by its customers; in such cases, cyber insurance provides cover for the company’s financial losses.

Another area in which cyber insurance plays an important role is that of regulatory and legal compliance issues. Many technology companies, including fintech companies, operating in a specific country have to adhere to the regulatory and legal mechanisms regarding cyber security that are put in place by the government in that jurisdiction. In some cases, advertently or inadvertently, these companies fail to comply with these cyber laws, resulting in them paying heavy fines and penalties. Most of the cyber insurance companies operating today offer cover against such exigencies.

The rising demand for cyber insurance schemes in Asia-Pacific and North America to expand the scope of the industry

As said earlier, the incidence of cyber-attacks and data breaches has increased massively in the past few years all across the world, especially in North America. Since most of the major multinational technology companies like Google, Facebook, and Amazon are headquartered in the US, the demand for cyber insurance has particularly grown in the North American region. Moreover, the awareness regarding the importance of data security has also increased at an individual level in countries like the US and Canada which has also helped the cyber insurance industry grow.

At the same time, however, the Asia-Pacific region also has experienced a major boost to this industry in the developing economies of China, Japan, and India. The widespread adoption of technology, the expansion of the e-commerce sector, and the fast-paced transition to digital services, including digital banking, have enabled the sector to flourish in these countries. According to several IT experts, cyber insurance has become an important component of risk management strategies formulated by the technology companies operating in Asia-Pacific. Owing to these factors, the Asia-Pacific region is expected to have the highest CAGR in the 2023-2032 period.

To conclude, the financial support offered by insurance companies in events of data breaches and the vital role played by them in regulatory compliance issues have increased the demand for cyber insurance from almost all the major information technology companies across the globe. The growth of the industry in North America and Asia-Pacific has been exceptional and is predicted to increase the revenue share of the domain in the years to come.

For a comprehensive study on the different growth drivers and investment opportunities in the industry, feel free to contact us.

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