According to a recent poll from Reinsurance News, the re/insurance industry appears to be unsure in regards to how big of an impact the recent CrowdStrike IT global outage will have on the standalone cyber insurance market.
For those who need a reminder, the outage, which took place on July 19, was caused by the security company CrowdStrike, which sent out a corrupted software update to its huge number of customers. As per Microsoft, CrowdStrike’s update reportedly affected 8.5 million Windows devices.
Hundreds of people from across the insurance and reinsurance sector responded to the poll.
Of this, 29% of respondents – which includes figures from major firms such as, Gallagher, MS Amlin, Gen Re and AIG – believe that the outage will have a severe impact on the cyber insurance market.
While 28% believe that the outage’s impact on the cyber insurance market will be manageable, which includes votes from figures at RenaissanceRe, Marsh and Fortitude Re.
Interestingly, over one-third (37%) believe that the IT outage will have a a major impact on the cyber insurance market, while just 6% expect it to have a negligible impact.
The results from the poll come after analysts at Fitch Ratings recently said that the outage is not expected to have a material impact on the financial results of insurers and reinsurers, with preliminary market estimates of global insured losses sitting in the mid-to high single digit billion USD range.
Sridhar Manyem, Senior Director, Industry Research & Analytics, at ratings agency AM Best, commented on the outage: “CrowdStrike is exactly the kind of aggregation risk that the industry is worried about. One security bug or a software flaw has the potential to bring down businesses such as airports, aircraft industry, financial institutions or software companies. The interconnectedness of systems was in full display last week and demonstrated how businesses can be brought to a standstill abruptly and on a large scale. This incident is likely going to impact multiple insurers.”
He also explained that current loss estimates are preliminary and we do not know yet the full impact on insurers, “but we think this could be an earnings event due to underwriting terms (limits, higher deductibles) and reinsurance.”
“Insurers have been tightening underwriting standards through increased retentions, manageable limits, shifting their focus to small and medium-size enterprises, the use of reinsurance, etc. This is still developing and has the potential to be a contracted claims and legal process and we will be monitoring the situation. This event serves as another example why cyber is such a dynamic market and clients/insurers need to be on top of emerging issues ”
According to CyberCube, preliminary insured losses from the CrowdStrike IT outage for the standalone cyber insurance market are anticipated to fall between $400 million and $1.5 billion.
Additionally, Parametrix, a provider of cloud monitoring, modeling, and insurance services, suggested that the outage will have an insured loss range of $540 million to $1.08 billion.
Reinsurance News recently spoke to Parametrix’s CEO, Jonathan Hatzor, who explained that insurance carriers that have greater exposure to large enterprises are more likely to face the brunt of the losses stemming from the outage.
It is very clear that the CrowdStrike outage will have an impact on the cyber insurance market, but we won’t know the full scale of it for some time.
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