Munich Re eyes growth in hacker attack insurance

Reuters News
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Posted: Apr 14, 2011 10:01 AM
Munich Re eyes growth in hacker attack insurance

By Christian Kraemer and Jonathan Gould

FRANKFURT (Reuters) - The rise of computer hacking may be a growing threat to companies but it offers new business for insurers, the world's biggest reinsurer Munich Re said.

"Cyber risks can generate considerable costs and become an issue affecting a company's equity capital," said Andreas Schlayer, who is responsible for IT risks like hacking at Munich Re.

"Damages can be especially high in the case of IT disruptions on stock exchanges, telephone and mobile phone companies, air and rail transport, banks and car makers," Schlayer said, adding that governments have been developing models of how much cyber attacks could cost their countries.

The ever-increasing use of computers and the growing inter-connectedness of individual companies, many of whom have outsourced their IT operations, is ratcheting up the risk, particularly when it comes to liability claims, he said.

"Stolen data from a single customer can cost $200, so you can quickly get into the millions," Schlayer said.

Global premium volumes to cover cyber risks are currently up to about $2 billion annually, with the lion's share coming from the United States, which has seen prominent hacking cases in recent years involving companies such as payment card processor Heartland and retailer TJX.

Damages in those cases ran to more than $100 million, Schlayer said.

The privacy-risk insurance segment, which includes direct damages from hacker attacks, liability and business interruption cover has seen growth in the United States of 100 percent to 150 percent per year.

"Naturally that (rate) cannot continue," Schlayer said, adding that in the European market, growth was in the single digits.

Munich Re has about 30 percent of the reinsurance market for these types of risks, he said.

Cloud computing, involving moving IT services and data systems to the Internet, presents a major challenge for insurers in future, as companies' dependence on service providers like Microsoft, Google, SAP, Fujitsu and Salesforce.COM grows.

"Here insurers will need pool solutions and liability limits are indispensable," Schlayer said.

(Editing by David Cowell)