Korea Insurance Research Institute Report on 'Biden Administration's Cybersecurity and the Role of the Insurance Industry'
[Asia Economy Reporter Ki Ha-young] As the digital economy accelerates due to the impact of COVID-19, cybersecurity risks are increasing. With the Biden administration in the United States declaring the strengthening of cybersecurity policies as a top national priority, advice has emerged that the insurance industry must also redefine the role of cyber insurance.
According to a report titled "The Biden Administration's Cybersecurity and the Role of the Insurance Industry," recently published by the Korea Insurance Research Institute on the 10th, the global economic cost of cybercrime last year was estimated at approximately $1 trillion (1,121 trillion KRW), equivalent to about 1% of the world's gross domestic product (GDP).
In particular, 'systemic cyber risks' involving simultaneous attacks on governments and large corporations are intensifying. A representative example is the so-called 'SolarWinds hacking,' where external forces hacked the software of security solution providers used by many public institutions such as the U.S. military, intelligence agencies, and the Treasury Department, as well as numerous Fortune 500 companies.
Furthermore, as remote work expanded due to COVID-19, cyber damages in professional service sectors such as legal and accounting have increased. In fact, professional services accounted for 32% of all cyber insurance claims (by number of cases) in the North American region last year, a 10 percentage point increase compared to the 22% average from 2016 to 2018.
The Biden administration declared cybersecurity enhancement as one of the highest priorities in its national policy direction upon its inauguration. It allocated a cybersecurity budget of about $9 billion and appointed top cybersecurity experts as heads of related government agencies. Regulations mandating cyber insurance enrollment will be introduced for companies highly exposed to cyber risks, such as financial and healthcare institutions.
Additionally, plans include establishing a Cyber Statistics Bureau to share cybersecurity data and creating a task force composed of insurance industry and cybersecurity experts to explore ways to develop the cyber insurance market, including standardizing premium calculation systems.
Hong Po-bae, a researcher at the Korea Insurance Research Institute, stated, "The cyber insurance market will continue to grow in 2021," but also noted, "There remains a possibility of large-scale losses for insurers due to systemic or implicit risks, so strengthening policy cooperation between the government and the insurance industry is essential." He added, "The insurance industry faces the challenge of redefining its role and determining what core functions it will perform in the cybersecurity market." He advised, "South Korea should closely monitor global and U.S. cyberattack trends while continuously discussing measures to assess domestic risk possibilities and strengthen preparedness through the insurance market."
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