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The costs of business interruption due to a breach is the top cyber risk concern for businesses across all industries.
This is according to Aon’s 2016 Captive Cyber Survey, aimed at offering a better understanding of organisations’ current attitude towards cyber threats, risk assessment, insurance purchasing trends, loss adjustment concerns and provides insight into current retail market trends, including captives and other risk financing solutions.
Aon’s findings also indicate that there is a disparity between companies recognising that cyber is one of the fastest growing and permeating risks, and actually understanding what their individual exposures and coverage needs are.
Captives are a great alternative risk transfer solution for bridging this gap while the industry’s approach to cyber risk management catches up to the evolving pace of technology.
The survey findings indicate that 94% of companies would share risk with others in their industry as part of a captive facility writing cyber. What’s more, Aon experts anticipate alternative risk transfer options to become increasingly sought after as these solutions give companies some control over underwriting, coverage scope and claims adjustment, while providing an opportunity to share best practices, experience and data in a private setting.
Additional highlights include:
* 60% of large companies don’t buy cyber insurance.
* Of those that do, 68% of companies surveyed buy cyber for balance sheet protection closely followed by ensuring due diligence comfort for the board.
* Only 25% of respondents that buy limits are confident that they comply with international best practices and standards for information security  governance.
* 95% of companies state clear policy wording as the most important issue in the cyber risk market, and 75% of large companies express concerns about the loss adjustment process.
Given the evolving nature and complexity of cyber exposures, Aon found that the use of cyber risk assessments is surprisingly low.
Conducting such an assessment is a useful tool for improving risk understanding and maturity as well as helping organisations better prepare for potential business interruption during or after a breach.
Aon recommends the following three steps to begin a cyber risk assessment:
* Scenario analysis: Benchmark the existing cyber risk profile and work with business stakeholders to prioritise cyber risk scenarios;
* Financial modelling: Leverage advanced financial simulation tools using deterministic modelling to quantify first and third party costs of select cyber scenarios. Consider performing an analysis on non-damage business interruption scenarios using forensic accounting capabilities.
* Insurability risk review: Test the adequacy of limits against the assessed cyber risk as well as review the optimisation of the proposed insurance programme.