Global cyber insurance market to see 50% growth in next five years: Swiss Re

Swiss Re said no country has fully realised the economic potential of digital technology in the insurance sector.

The growth of digital ecosystems presents opportunities in business interruption and cyber risk pools, with the global cyber insurance market estimated to have grown by 60% in the past two years and a projected 50% gain over the next five years, reported Swiss Re.

Digital technology has brought about a revolution in value creation, with "intangible assets," including digital data, becoming a significant source of economic value and new risk pools.

The full transformative impact of digital technology on the insurance industry is still unfolding, akin to the productivity paradox that has affected the global economy in recent decades. 

Swiss Re's Insurance Digitalisation Index confirms that no country has fully realised the economic potential of digital technology in the insurance sector.

The index suggests that advanced markets with strong physical infrastructure and widespread internet access have made the most progress in digitalising their insurance sectors.

Emerging markets have the most catch-up potential and have been rapidly doing so over the past decade. Notably, more digitally advanced economies tend to be more resilient to other exposures like natural catastrophes.

Jerome Haegeli, Group Chief Economist at Swiss Re, highlights that digitalisation is expanding access to insurance for more people, closing protection gaps, and offering insurers gains in underwriting, risk mitigation, and risk measurement, improving the quality and efficiency of their work.

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Digitalisation has transformed the corporate sector, with firms shifting from physical goods to information and services. Intangible assets represent a significant growth opportunity for the insurance industry. 

The global value of intangibles of listed companies has grown fivefold in the last 20 years, with nearly 80% of that value remaining uninsured.

Digital data enables more comprehensive underwriting based on granular data from various sources, leading to operational efficiencies and reductions in loss ratios targeted by insurers. Digital technology could also generate 10-20% savings in other areas of the value chain.

New technologies can enhance risk mitigation processes, such as using data analytics and sensor technologies to reduce accidents and improve safety. However, challenges in liability attribution may arise with the use of artificial intelligence in innovations like Advanced Driver Assistance Systems.

Digital transformation remains a top priority for the insurance industry, with a shift from digital distribution channels to other parts of the value chain, including pricing and underwriting processes. 

Nevertheless, the full transformation through digitalisation will be a longer-term endeavour, involving infrastructure development and investments in data engineering and workflow process reengineering.