SINGAPORE - The cyber insurance market in Singapore will grow by 50 per cent this year as more businesses look to mitigate the high reputational and financial risks associated with cyber breaches, according to AIG Asia Pacific Insurance (AIG Singapore).
As Singapore gears up in its drive to be the world's first Smart Nation, new interconnected technologies and increasing automation mean a rise in threats of cyber attacks and sabotage for all companies, said AIG Singapore.
Said its head of financial lines Lai Yen Yen: "While cyber attacks grow in size, volume and sophistication, defensive methods and technologies have not seen a corresponding evolution, potentially costing businesses millions in the event of a cyber breach."
Research undertaken by AIG showed that two-thirds of public companies in Asia surveyed acknowledged cyber insurance to be increasingly important in the future, although only nine per cent of these companies were covered by cyber insurance.
"Over the past three years, AIG Singapore has seen a seven-fold increase in inquiries about cyber insurance policies," said Ms Lai. "We predict this strong demand from Singapore companies will continue over the next five years. Based on what we have observed, less than 10 per cent of Singapore companies hold such insurance, but we forecast that the number of companies taking up cyber insurance will accelerate to 40 per cent by 2020."
Strong demand for cyber insurance will continue from finance and technology companies, and new demand will emerge from healthcare companies, said AIG Singapore. The insurer also forecasts cyber risks in 2016 to range from both internal and external factors, including lack of data encryption, increased use of malware, and outsourcing to third party providers.
"Not only do data leaks result in financial losses including compensation payouts and regulatory investigation, but reputational damage and loss of consumer confidence can also have a long-term impact on a company's bottom line," said Ms Lai.
"The profound impact of a cyber attack means risks of this nature are starting to rank in the top three exposures of any business, regardless of the industry or size. Our research in 2014 showed that 42 per cent of companies were concerned about loss of reputation, and 33 per cent were concerned about protecting against financial loss."
Small and medium businesses (SMEs) are also not immune to cyber risk, and the growing recognition of SMEs' vulnerability has prompted the Infocomm Development Authority of Singapore to launch security starter kits. Building on these efforts, AIG Singapore has launched an insurance product for SMEs in March 2016 to get these enterprises started on cyber protection.
AIG has been providing cyber security protection since 1999 and launched insurance cover against cyber attacks in Singapore in 2012.