Cyber incidents have the potential to strike different, large segments of the global economy at the same time and lead to severe financial and even physical damage. Growing geopolitical tensions and reliance on digital technologies are amplifying cyber risks considerably, and the threat of an unprecedented, extreme cyber incident looms large.
The fast-evolving nature of cyber threats complicates insurers’ efforts to accurately quantify extreme cyber risks and limits the amount of protection they can offer. This, combined with low cyber insurance take-up, means the cyber protection gap remains huge. This report provides an overview of the challenges associated with insuring extreme cyber risks, including the constraints on traditional actuarial techniques in measuring potential cyber losses. It proposes further steps that can boost insurers’ risk-absorbing capacity and help create a more resilient and sustainable market for cyber insurance.