The CrowdStrike outage in July 2024 looks set to cost insurers vast sums but does highlight the importance of cover to businesses around the world. Many businesses across industries were ground to a halt by the outage, which was completely out of their control.
GlobalData’s Thematic Intelligence: Cyber Insurance 2023 report found that the global cyber industry was worth $16.7bn in premiums in 2022 and is forecasted to grow to $33.4bn in 2027. For perspective, cyber specialists Coalition estimated this one outage could cost cyber insurers in the region of $960m. This suggests that it is undoubtedly a severe one-off event for cyber insurers.
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The outage was not a cyberattack, meaning there may be scope for insurers to avoid claims on those grounds—although that does not look to be the case at the moment. The frustration for insurers is that incidents like this are almost impossible for them to prevent. A lot of the discussion around cyber policies focuses on prevention, including staff training and security monitoring. But in this case, businesses around the world could do little to prevent the high level of disruption they faced.
The only positive for insurers may be that it highlights the need for businesses to have comprehensive cyber policies. GlobalData’s 2023 UK SME Insurance Survey found that only 32% of UK SMEs had any kind of cyber insurance. The UK is one of the larger cyber markets so that trend is likely to be replicated around the world, with many countries likely to have far lower levels of penetration. Insurers wanting to grow this product can use this as an example of why cyber is so essential. The size of the news story and the impact of the outage will make business leaders more aware than ever of the need for cyber insurance.
The challenge will be the extent to which this raises the risk and ultimately premiums. Cyber premiums are already expensive due to the high level of risk insurers are taking on. If the CrowdStrike outage leads to a rise in premiums, it will be a significant barrier to new business, with many companies still struggling with a long period of economic difficulty following Covid-19 and the cost-of-living crisis.
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By GlobalData
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