A.M. Best Briefing: GDPR: Implications for European Insurers and the Cyber Insurance Market. The new regulation, which aims to enhance the consistency of data protection rules across the EU and simplify the regulatory environment, will create significant new obligations for companies processing personal data. The GDPR further intends to increase the effectiveness of the right to data protection, and whilst this is expected to provide regulatory challenges for (re)insurers, the requirement for mandatory notification of serious data breaches is also likely to fuel supply of and demand for cyber insurance in Europe.
Alvise Argenton, financial analyst, said: "European insurers have told A.M. Best they are undergoing a comprehensive review of their data-related risk management, looking at breach-response plans and the resilience of their systems. From an underwriting standpoint, the most significant consequence of the implementation of the GDPR is likely to be a marked growth in cyber insurance revenues, with some carriers suggesting it will represent ‘a shot in the arm’ for the non-U.S. cyber market. The GDPR is, therefore, expected to represent a major change for the European cyber insurance market."
A.M. Best's briefing also notes that the introduction of GDPR is expected to affect demand and supply of cyber insurance, albeit over different timeframes. In the short term, as stricter data-breach reporting rules enhance transparency, a considerable increase in reported breaches will likely spread risk awareness and result in higher demand for cyber products. In the medium term, as more and more reliable data becomes available, with positive implications for pricing models, insurance supply should gain momentum, with new products expected to make an appearance on the market.
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