Government is working with firms to build an industry in Britain
Royal Bank of Scotland and the insurance company Marsh are among the firms collaborating with the Government to encourage anyone working on the “arms race” against cyber attacks to converge on London.
Francis Maude, the Cabinet Office minister, will today meet with business leaders to call on companies to help develop cyber security insurance, which is poorly understood but could provide a fillip to the London insurance industry.
“The UK’s insurance market is world renowned and we want it to be the same in relation to cyber risks,” said Mr Maude. “Insurance is not a substitute for good cyber security but is an important addition to a company’s overall risk management.”
However, insurers are struggling to properly price such insurance, partly due to a dearth of data about online attacks. US companies in certain states are required to declare customer data breaches, such as the theft of 145m customers’ data from internet retailer Ebay last year . The UK instead relies on a voluntary platform for disclosure, CERT, which has around 900 participants.
Cyber insurance is therefore expensive, at 6.3 times the cost of property cover, and the price currently varies little between products regardless of the risks involved. Meanwhile, a survey for the Government showed that 52pc of companies believe they are covered against the cost of an online attack, but insurers have found that less than 10pc are properly protected.
“It’s an arms race. We have a counterparty here, in the bad guys, and the more walls you create the longer ladders they build,” said said Mark Weil, chief executive of Marsh UK.
There is no demand from insurers to introduce obligatory reporting, a senior government official said last week, arguing that a mandatory system leads to firms making the bare minimum of declarations rather than working with officials fully.
Insurance firms and the Government are also lukewarm on the idea of pooling coverage in a similar manner to Flood Re or Pool Re, which spread the risk of floor-prone households and terrorism respectively using several companies with state support.
Lloyd’s of London, the city’s specialist insurance market, will report its full-year results this week. Companies that participate in the market have already reported falling reinsurance premiums and poor investment returns that have cast a shadow over several quiet years without a major catastrophe claim and international growth in some areas.
“We see some insurance become easy to replicate, the costs come down and it’s offered locally. It doesn’t mean London’s dead, it means London needs to reinvent,” said Mr Weil. “London is a unique venue for large, unique risks. Cyber is exactly that kind of issue.”
This article was written by Marion Dakers Financial services editor from The Daily Telegraph and was legally licensed through the NewsCred publisher network.