How to Navigate AI-Driven Cyber Risks

How to Navigate AI-Driven Cyber Risks
December 10, 2024 7 mins

How to Navigate AI-Driven Cyber Risks

From Awareness to Action: Navigating AI-Driven Cyber Risks

Business leaders are aware of AI-driven cyber risks and their implications. But understanding changing risk profiles to make better decisions around the management of new exposures is the key to cyber resilience.

Key Takeaways
  1. The global threat environment has dramatically evolved, with AI-driven cyber threats, such as phishing, malware and social engineering, now more prevalent and sophisticated.
  2. Despite the high risk of cyber attacks, only 30 percent of surveyed organizations currently have cyber insurance coverage, underscoring an underappreciation of its value and overexposure to unnecessary financial risks.
  3. Technological advancements like AI, introduce new risks that require understanding and management, including the continuous evolution of cyber insurance products.

With over 600 million cyber attacks happening every day,1 the global threat environment has evolved dramatically, impacting organizations worldwide. Artificial intelligence (AI)-driven cyber threats, such as phishing, malware and social engineering, have become more prevalent and sophisticated. State-sponsored attacks, hacktivism, and cyber crime syndicates also contribute to the complex and volatile cyber threat landscape.

While the market is developing comprehensive cyber insurance policies that cover a broad range of incidents, including data breaches, ransomware attacks and business interruption to address these risks, organizations need to work toward better understanding and quantifying their changing risk profiles.

CrowdStrike Outage – Exposing the Fragility of Global Supply Chains

Case Study

CrowdStrike Outage: Exposing the Fragility of Global Supply Chains

The global IT outage caused by a faulty CrowdStrike software update has highlighted the importance of digital resilience that accounts for the complexity and scope of IT, OT and IoT networks. The event also provides a potential playbook for how threat actors can disrupt critical infrastructure at scale.

From an insurance perspective, this leads to questions on company readiness and cyber and digital resilience. There is also the ripple effect caused by disruptive cyber attacks, large scale outages and the amplification of AI, as threat actors experiment through exploitation, manipulation and control of large-language models.

Quote icon

CrowdStrike is an example of how quickly challenges can exacerbate due to connectivity and digital reliance. The event itself also demonstrated why cyber cover is so important. It is a modern-day policy for foreseeable modern-day events.

David Molony
Head of Cyber Solutions, Europe, Middle East and Africa

Understanding and Quantifying Risk Profiles

The evolving technological and security landscape has shifted asset portfolios. Now, the total average value of intangible assets is 2.45 percent higher than tangible assets.2 Just a decade ago, the value of tangible assets was multiple times higher than intangible assets.

Cyber risk and generative AI currently sit at the top of C-suite concerns — and for good reason. The chances of an intangible asset cyber event occurring is three times more likely than an attack on property, plant and equipment (PP&E).

Yet, organizations report that insurance only covers 17 percent of information assets compared to 60 percent for PP&E. Also, only 60 percent of firms wish to buy cyber insurance in the current landscape.3

“The underappreciation of the value of cyber insurance contributes to an insurance versus cyber risk gap, leaving many organizations vulnerable to unnecessary financial exposures,” says David Molony, head of Cyber Solutions in EMEA. “This risk will grow as AI lowers the barrier to entry for cyber criminals and heightens the impact of cyber attacks.”

Companies must ask themselves:

  1. Is the market doing enough to attract new buyers?
  2. Do organizations truly understand their changed risk profile?

“The insurance protection gap right now is enormous, and requires magnified levels of innovation,” adds Molony.

40%

of C-suite level representatives do not even know cyber insurance exists; and if they do, they don’t have sufficient understanding of the product to buy.

Source: Munich Re Global Cyber Risk and Insurance Survey 2024

Read the Report

Fewer Organizations Today Believe Their Cyber Insurance Coverage is Sufficient

Despite the extent of cyber risk, which exceeds that of PP&E risk, only 30 percent of respondents say their organizations currently have cyber insurance coverage with an average limit of $17 million.

Percent of Companies That Consider Their Cyber Insurance Coverage Sufficient FY2024 FY2022 FY2020 FY2019 FY2017
Yes 56% 58% 53% 58% 63%
No 27% 29% 32% 28% 23%
Unsure 17% 13% 15% 13% 14%

Source: 2024 Intangible vs. Tangible Risks Comparison Report, Aon

70%

of organizations are still not purchasing stand-alone cyber insurance coverage although cyber liability is a top 10 business risk.

Source: 2024 Aon Intangible Versus Tangible Risks Comparison Report: De-risking AI, IP, and Cyber

Read the Report

Cyber Insurance Products are Evolving

Measuring intangible assets poses significant challenges, but advanced analytics and risk modeling techniques can provide a clearer picture of potential exposures. International cooperation and information sharing between insurers, businesses and regulators are also crucial in addressing the protection gap effectively.

To further unlock growth, insurers need to make the insurance product more meaningful for buyers, while also continually adapting to the changing risk landscape. They should develop new distribution channels as well. “Small to midsize enterprises have been historically less served by cyber insurance,” explains Rory Egan, head of Cyber & Analytics in Aon’s Global ReSpecialty, Reinsurance Solutions practice. “So, getting more policies into the hands of small and medium enterprises is going to be key.”

Reinsurance also plays a key role in the growth of the cyber insurance market, according to Egan. Around 40 to 50 percent of premium is ceded to (re)insurers via proportional and non-proportional reinsurance solutions. For the growing non-proportional component, around 15 percent of capital supporting the insurance market is from third party capital providers, including cyber catastrophe bonds, cyber industry loss warranties and parametric solutions, he notes.4

Cyber insurance is not a substitute for IT security risk management, but a complement in the risk management toolbox for residual risk.

The Future of Cyber Insurance

Proactive risk management and continuous education are essential for organizations to stay ahead of evolving cyber threats. By embracing these strategies, the cyber insurance market can effectively support businesses in managing their cyber risks and closing the protection gap.

“Aon’s research on intangible risks shows that risk professionals see cyber loss scenarios as their key business risk, well in excess of any loss scenario on tangible assets. This is in terms of the probable maximum loss and the likelihood of occurrence at their own firm,” says Egan. “However, the research also suggests a perception gap exists around the tremendous value of cyber insurance as a product that can meaningfully address this risk.”

With the right product articulation and innovation, such as Aon’s cyber risk analyzer tool, cyber insurance way to manage increasing risks. Not only can it help businesses improve risk perception, but it also improves navigation of the complex and ever-changing digital landscape.

Learn more in our on-demand webinar: Addressing the Cyber Insurance Protection Gap in the Age of AI.

Aon’s Thought Leaders
  • Rory Egan
    Head of Cyber & Analytics – Global ReSpecialty, Reinsurance Solutions
  • David Molony
    Head of Cyber Solutions, Europe, Middle East and Africa

1 Microsoft Digital Defense Report 2024, Microsoft
2 2024 Intangible vs. Tangible Risks Comparison Report, Aon
3 2024 Intangible vs. Tangible Risks Comparison Report, Aon
4 Aon Reinsurance Solutions

General Disclaimer

This document is not intended to address any specific situation or to provide legal, regulatory, financial, or other advice. While care has been taken in the production of this document, Aon does not warrant, represent or guarantee the accuracy, adequacy, completeness or fitness for any purpose of the document or any part of it and can accept no liability for any loss incurred in any way by any person who may rely on it. Any recipient shall be responsible for the use to which it puts this document. This document has been compiled using information available to us up to its date of publication and is subject to any qualifications made in the document.

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