With the digital transformation that has been underway in recent years, cyber risks have become a growing threat for many companies, especially SMEs and SMIs. These businesses rarely have the internal human resources to deal with cyber attacks, and have no insurance coverage for this type of risk. In addition, the rise of working from home due to the pandemic has increased companies’ vulnerability to these attacks.

For insurers, the high level of claims arising from cyber risks is already affecting their profitability: premium volume jumped by 49% and the loss ratio rose to 167% in 2020, compared to 84% the previous year. The figures for 2021, which are not yet available, have certainly continued to rise, at least in terms of the number of cyber attacks. As a result, Insurance premiums to cover cyber risks are skyrocketing, while coverage levels are being reduced, specialized brokers say. This situation threatens not only businesses with little or no coverage, but also the insurance sector in the event of simultaneous contagion to thousands of customers, to the point of jeopardizing the principle of mutualisation on which insurance is based.

These problems need to be resolved as a matter of urgency, especially as they are likely to increase in the coming years, in parallel with the digital transition. At the Institut Louis Bachelier, the Cyber Insurance risk: actuarial modeling research programme, directed by Caroline Hillairet and Olivier Lopez, has for more than three years been actively producing academic work to guide actors in the sector.

You will find an example of the research work in this new issue of the Opinions & Débats series. Caroline and Olivier discuss the major concerns related to cyber risks and make recommendations for their better mutualisation in the insurance sector, which, next to the victims themselves, is in the front line in the face of these threats.

Enjoy your reading and Happy New Year 2022 to all readers of Opinions & Débats!

Jean-Michel Beacco
Delegate General of the Institut Louis Bachelier