 "Indian banking industry increases their cyber insurance cover in FY24")
The increase in cyber related incidents, frequency of claims and enhanced regulatory focus is nudging banks to increase cyber insurance cover. The coverage by banks and financial institutions increased by nearly 8 per cent in 2023-24 as compared to the previous financial year, according to insurance brokers.
The cyber insurance claims ratio by the banking industry in India has increased to over 50 per cent in financial year 2022-23 as compared to 40 per cent in financial year 2021-22.
“The overall claims ratio for cyber insurance in India would be approximately in the range of 150 per cent-200 per cent as compared to last year, whereas for financial institution or banking sector the claims ratio would be more than 50 per cent in FY24,” said Manoj Rane, Sr. Vice President, Practice Head-Liability Vertical, Alliance Insurance Brokers
For the financial institutions in India, protection of sensitive personal and financial data of customers and reputation of the institutions are key concerns apart from the impact of business interruption that will be caused due to cyber related incidents.
According to insurance industry players, the cyber threat landscape continues to evolve from phishing schemes to ransomware attacks posing challenges to the financial institutions in safeguarding their digital assets while maintaining trust and confidence among its customers. Further, outsourcing IT services to third party is a major area of risk for these institutions.
Most of the established banks were some of the initial buyers of cyber insurance when it was launched in the early days. Further, post the Covid-19 pandemic the banking sector has been expanding onto the digital space, making them more vulnerable to cyber-attacks triggering multiple cyber insurance claims, insurance industry officials said.
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According to industry officials, usually, cyber risk insurance and cybercrime insurance are two separate policies.
However, for banks it is combined because they also have a traditional policy called -- ‘Bankers Blanket Indemnity policy’.
According to Oriental Insurance Company, the Bankers Indemnity policy protects the bank from loss of money and, or securities on-premises or during transit due to various threats. It also provides cover against financial loss arising from forgery, fraud, and dishonesty.
According to Ritesh Thosani Senior Vice President, Cyber Practice Leader, Marsh India, “In the recent past, many insurers started restricting their coverage for losses from business interruption and ransomware by introducing sub-limited coverage, along with higher BI (business interruption) waiting periods. Banks these days, ask for improved, full limit covers for business interruption and ransomware protection, along with BI waiting period (hourly deductible) ranging from 8-10 hours.”
Regulatory focus on cyber security is another reason for increase in demand for cyber insurance by the banks and financial institutions for such products.
Amit Solanki, Head Liability & Special Risk, Howden India, said, “More financial institutions opted for cyber insurance as compared to the previous year. A lot of small & medium sized entities sought cover for the first time.”