Allianz : When Bytes Bite

Of course, developing solutions for new risks come with challenges. Given that cyber crime is a relatively new threat, the insurance industry needs to tread with caution in developing such products.

'We lack historical claims data because it involves an insurance product that is still relatively new in our portfolio. Also, companies shun publicity when they have been victims of a hacking attack because they are worried about their reputation. The duty to report incidents is developing in Europe only gradually,' Mai explains.

The portfolio management of cyber risks is also challenging and the accumulation risks are enormous. Through the digital networking of companies and supply chains, an incident at an individual company can quickly spread like wildfire, immobilizing entire industries.

Imagine the operations of an energy provider or a cloud services provider are disrupted due to a cyber attack, it will trigger numerous policies - not just cyber policies, but also other coverage, if property damage and business interruption occur.

'At the moment, the accumulation risk is still manageable because not even 10 percent of companies in Europe have cyber insurance yet,' Mai points out. However, just like director and officer (D&O) liability coverage, cyber insurance is expected to become the standard for European companies over the medium term. 'Cyber insurance will be a blockbuster - and we must prepare ourselves for it. When the much stricter data protection regulations take effect in Europe in 2018, not just big corporations but also mid-market and smaller companies will want to buy cyber coverage,' Mai says.

Other Allianz subsidiaries such as Allianz Germany and Allianz Suisse have recently started offering dedicated cyber products for small and mid-sized companies. Allianz Germany, for example, offers cyber insurance for companies with an annual revenue up to 150 million euros. For ransomware attacks such as WannaCry, a customer also needs to buy cover for extortion incidents, which Allianz Germany offers as a special cover.