Systemic cyber risk: SMEs in the firing line

Small-to-mid-size enterprises (SMEs) represent the greatest exposure for cyber insurers, according to AM Best’s latest global survey, which highlights growing systemic risks across the market. 

The report found that most coverage limits are being written for businesses with less than $10 million in annual revenue, with SMEs accounting for more than 80% of all cyber policies.

“This also highlights the systemic risk of cyber insurance. That any of these small businesses could be using the same cloud service or another common service illustrates how one outage or attack would impact several policies,” the report said.

While larger corporates remain attractive targets for hackers due to their size and data holdings, SMEs’ widespread adoption of cloud services and digital platforms creates concentrated risk for insurers.

“The systemic risk of cyber puts an emphasis on aggregate exposure for insurers,” analysts stated in Best's commentary, ‘Cyber insurance survey highlights systemic risk, particularly on SMEs’.

AM Best emphasised that catastrophe modelling for cyber remains “in its nascent stages”, underlining ongoing challenges for underwriters in pricing and managing this fast-evolving risk.

The report is based on responses from the world’s 60 largest cyber insurers, capturing roughly $8 billion in premium, or nearly half of estimated global cyber premium.

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