Development of cybersecurity insurance

System bugs at several chain hotels in China led to a data breach of an estimated 20 million hotel reservations in 2013. Personal data of 130,000 users of 12306.cn, a website for booking train tickets, were circulated on the internet in 2014. A hacker attack on the backbone network of Netease caused a massive service outage on 11 May 2015, and many mobile apps and online games were inaccessible as a result. On 27 May 2015, a massive breakdown hit Alipay because optical fibres were destroyed, and the disruptions lasted about 90 minutes. On 28 May 2015, Ctrip’s official website and mobile app were blocked for 12 hours.

An increasing frequency of cyber attacks has sounded the alarm on cybersecurity. As internet applications are expanding to a wider spectrum and cyber threats are escalating, the demand for cybersecurity insurance has been on the rise. More and more enterprises hope to buy the insurance to get protections against potential financial losses caused by data leaks and business interruptions.

Enormous market demand for cyber-security insurance

According to the 2015 Report on Internet Development and Security issued by the Internet Society of China and China Internet Network Information Centre, there were 3.647 million websites registered in China as at the end of December 2014, and the number has stopped falling and started to rise in the past three years. Meanwhile, cybersecurity has become a prominent headache for China, as hacker attacks and controls cause tens of billions of dollars in economic losses every year, and the figure keeps rising. These growing threats bring enormous development potential to the cybersecurity insurance market.

According to an underwriting manager at an insurance company, a 2016 survey showed only 10% of SMEs worldwide believe their businesses are too small to be targets of cyber crimes, down seven percentage points from 2015.

Dylan Yu is an associate at Wintell & Co