As businesses in the UAE adopt advanced technologies like AI, IoT, and blockchain and migrate to cloud-based modes, they experience significant challenges from increasing cybercrimes that result in massive financial losses and operation disruptions.
Fortunately, cyber insurance provides financial protection against cyber incidents. Considering the capabilities and benefits this insurance policy offers clients, UAE is witnessing many businesses opting for this strategy as part of their cybersecurity plan.
What is Cyber Insurance?
According to the UAE Cyber Insurance Market Research Report, cyber insurance “is a specialty insurance product that covers business liabilities for internet-based risks involving sensitive customer information and helps organizations reduce the chances of business disruption during attacks and their aftermath.”
Today, organizations increasingly purchase adequate cyber insurance policies to protect themselves from frequent and sophisticated cyberattacks targeting businesses of all sizes and industries. In this case, policyholders entrust third parties to cover them from losses arising from hacking, breaches, data and system destruction, ransomware extortions, and denial of service incidents.
In general, cyber insurance policies provide coverage in the following ways:
- Direct or first-party financial loss to you or your firm arising from a cyber event.
- Protection against lawsuits filed against you or your firm after privacy or security breaches, including investigations, defense costs, compensation payments, and civil damages.
- Cyber extortion upon a ransomware attack resolution. However, paying a ransom for attackers to unlock your information and systems should be the last course of action and may require the authorities’ involvement.
- Protection against damage to digital assets, such as websites.
Based on the benefits of cyber risk liability policy, commercial entities of any size should consider the product to mitigate cybersecurity risks. You need the insurance cover if your business processes, stores, or transmits confidential information. Besides, cyber insurance is essential for your cybersecurity posture if your firm uses technology and the internet to conduct business.
The State of Cyber Insurance in the UAE
The UAE Cyber Insurance Market Research Report indicates that the cyber insurance market will grow at a compound annual growth rate (CAGR) of 25.6 percent between 2023 and 2028. Dubai, Sharjah, and Abu Dhabi are projected to attain the highest market share during the forecast period. Revenue from the cyber insurance sector is also predicted to grow by 10 percent per annum, reaching $10.6 billion in 2025.
Large enterprises account for the largest share of the cyber insurance market since they have a massive volume of crucial data stored on-premises or in cloud environments. On the other hand, there is mounting adoption of cyber insurance policies from SMEs facing a burgeoning number of cyberattacks since, unlike large enterprises, small and medium companies lack dedicated security teams and adequate IT budgets.
Cyber insurance is common in banking, financial services, and insurance (BFSI) sectors with considerable monetary operations. Other clients include IT and telecommunications, energy and power, healthcare, retail, and defense. Certainly, these industries comprise customers’ confidential information attractive to threat actors. The financial sector holds the largest share of the cyber insurance market since the industry’s rising use of mobile and internet banking makes it more susceptible to attacks. Besides banking, the retail sector’s use of online payment pushes the purchase of insurance covers that promote customer trust.
The key players in the cyber insurance industry include Lloyd, AXA, Allianz, Berkshire Hathaway, Cyence, Safeshare, Assicurazioni Generali, PolicyGenius, and Munich Re.
Key Drivers of the UAE Cyber Insurance Sector
1. Frequent and sophisticated cyberattacks.
The main driver for this advance includes the increasing number of cyberattacks that amplify the need for compliance. The rapid internet penetration, integration of advanced technology into businesses, and adoption of cloud computing have increased the risks associated with online activities, making it necessary to adopt a way to mitigate or transfer risks to insurance companies.
2. Accelerated business digitization strategies
Additionally, businesses today provide online presence through online shopping, mobile, and internet banking services. The health sector stores electronic medical records (EMRs), increasing the risk of data and privacy breaches.
3. Increased regulatory scrutiny.
UAE is undergoing a development phase of stringent data privacy legislation. The Personal Data Protection Law features an integrated framework to ensure the confidentiality of information and the privacy protection of individuals in the UAE. Organizations can acquire cyber insurance policies for coverage in case of administrative penalties imposed for breach of regulatory provisions.
4. The changing political environment
Like any other Gulf country, the UAE has become a target of cyberattacks from state-sponsored threat actors. With the upward trend in these incidents targeting corporate information and critical infrastructure, UAE establishments can invest in cyber insurance policies for liability and financial coverage after an attack.
Meanwhile, the Russia-Ukraine war has spurred growth in the likelihood of state-sponsored cyber incidents targeting critical infrastructure, corporations, and military operations globally. GlobalData analyst Amrit Dhami states that such attacks will “Lead to expensive payouts and damage the reputations of those reluctant to pay.”
5. Ransomware attacks in the region
Ransomware is a significant threat in the UAGE, with a significant number of businesses having experienced a ransomware attack in the last year. With a cyber insurance policy, ransomware victims can be compensated for business interruption, recovery costs, extortion, or the cost of contracting external experts to help recover from an incident.
Challenges of Cyber Insurance in the UAE
Cyber insurance policies have expensive premiums that can restrain the sector’s growth.
However, insurers offering cyber insurance policies are implementing the following solutions to overcome some of the challenges:
- AI in cyber insurance: Insurance companies integrate artificial intelligence and machine learning capabilities to enhance their efficiency in accurately predicting cyberattacks.
- Blockchain: With blockchain attributes, cyber insurance providers can reduce the chances of fraud. The technology’s decentralized and immutable nature enhances trust and customer experience by ensuring all parties access the same information. This capability reduces insurance disputes and expedites settlements.
- Additional support services: Alongside providing coverage for cyberattack expenses and liabilities, insurance providers in the UAE can offer support services, such as preventative planning, breach response services, and post-breach support.
Evidently, UAE businesses will continue deploying innovative digitization strategies, making them lucrative targets for cyberattacks. As a result, Cyber insurance providers should continue conducting rigorous research and development in implementing tailor-made policies for the rising clients and requirements.
