The frequency of cyber-related incidents and the enhanced regulatory focus on cybersecurity have prompted banks to increase their cyber insurance coverage. According to insurance brokers, the coverage provided by banks and financial institutions increased by nearly 8% in the financial year 2023-24 compared to the previous year
Increase in Cyber Insurance Claims Ratio by the Banking Industry in India
The cyber insurance claims ratio by the banking industry in India has seen a significant increase. In the financial year 2022-23, the claims ratio exceeded 50%, compared to 40% in the previous financial year
Key Concerns for Financial Institutions in India
For financial institutions in India, the protection of sensitive personal and financial data of customers and the reputation of the institutions are key concerns. They are also concerned about the impact of business interruption caused by cyber-related incidents
Evolving Cyber Threat Landscape and Vulnerabilities of Financial Institutions
The cyber threat landscape continues to evolve, posing challenges to financial institutions in safeguarding their digital assets and maintaining trust and confidence among their customers. Financial institutions face various cyber threats, ranging from phishing schemes to ransomware attacks. Additionally, outsourcing IT services to third parties is a major area of risk for these institutions.
Expansion of Banking Sector into the Digital Space and Increased Vulnerability
The banking sector has been expanding into the digital space, making it more vulnerable to cyber-attacks. This vulnerability has led to an increase in cyber insurance claims for banks, especially after the COVID-19 pandemic
Combined Cyber Risk Insurance for Banks
While cyber risk insurance and cybercrime insurance are usually separate policies, banks often have a combined policy called the “Bankers Blanket Indemnity policy.” This policy protects banks from various threats, including loss of money and securities, financial loss arising from forgery, fraud, and dishonesty.
Regulatory Focus on Cybersecurity and Increased Demand for Cyber Insurance
The regulatory focus on cybersecurity is another reason for the increased demand for cyber insurance by banks and financial institutions. Regulatory requirements and the need to mitigate cyber risks have led to more financial institutions opting for cyber insurance
Conclusion
The increase in cyber-related incidents and the regulatory focus on cybersecurity have prompted banks and financial institutions to increase their cyber insurance coverage. The banking industry in India has seen a significant increase in cyber insurance claims ratio. Protecting sensitive data, maintaining reputation, and mitigating business interruption are key concerns for financial institutions. The evolving cyber threat landscape and the expansion of the banking sector into the digital space have made institutions more vulnerable to cyber-attacks. Banks often have a combined cyber risk insurance policy, and regulatory focus on cybersecurity has further driven the demand for cyber insurance.