Cybersecurity is vital for organizations of all sizes because cybercrime is so prevalent globally. Any company that stores data or has an online presence could be the victim of cybercrime, and the results could be financially crippling for the business. For reinsurance companies investing in cybersecurity, there’s a lot to know.
The reinsurance industry is a common target for cybercriminals because firms in this sector store massive amounts of data. Reinsurance companies provide insurance for insurance companies, protecting them against losses, and they might have access to some of their client’s financial information and personal data. This data is valuable to hackers, creating risk for reinsurance organizations.
Companies in the reinsurance industry must take steps to protect themselves and their clients. This guide examines how reinsurance works and explains why reinsurance companies investing in cybersecurity is necessary.
The Role of Reinsurance Companies
The average person might be unaware of reinsurance, but it plays a vital role in the insurance industry. Insurance companies invest in reinsurance to protect themselves from the unforeseen and to mitigate their risk. Reinsurance exists because of it:
Helps Insurance Companies Overcome Large Scale Events
The primary role of reinsurance is to protect insurance companies in scenarios where hundreds or thousands of claims come in at once. These situations can arise after a flood, hurricane, or other natural disaster hits a specific area and does an incredible amount of damage to buildings and other property. Reinsurance allows insurance providers to spread the risk out between multiple insurance firms, reducing the amount the initial insurance company pays out.
Increases Insurer Capacity
Insurance companies can use reinsurance to increase their overall capacity because they take less individual risk. The risk of insolvency decreases when a firm invests in reinsurance, so it can accept more policyholders without worrying about running out of funds if a disaster strikes a geographical area. Accepting more clients means more home and business owners have insurance coverage.
Stabilizes Losses
Reinsurance helps insurance companies stay afloat when policyholders make a significant number of claims. The reinsurance policy will provide liquidity during these times, so employees will continue receiving paychecks, and the company as a whole will continue functioning.
Reinsurance companies play a vital role in the insurance industry by taking on some of the risks and supporting customer-facing insurance firms. The result is a more efficient industry where clients and insurance companies both have the support necessary to continue conducting business.
Five Reasons Why Reinsurance Companies Investing in Cybersecurity Is Important
Reinsurance companies protect insurance firms from large-scale events, providing a valuable service to the industry. These organizations need protection themselves, though, particularly when it comes to cybercrime. Five reasons for reinsurance companies to invest in cybersecurity include the following:
1. Cybercrime Is Increasing
Cybercrime is everywhere and isn’t showing signs of slowing down anytime soon. Cybercrime Magazine reports that cybercrime will impose $8 trillion worth of damages globally in 2023, and that number could increase to $10.5 trillion by 2025, making cybercrime more profitable than the global drug trade. Reinsurance firms will take on significant losses if they don’t protect themselves because there’s money to be made by attacking them and stealing their data.
2. Employees Are Working From Home
Working from home was incredibly common in the early days of the COVID-19 pandemic, and although some people are now returning to the office, the Survey of Working Arrangements and Attitudes reports that about 40% of full-time employees in the United States enjoy a remote or hybrid work environment. The work-from-home movement is excellent for employees because they can avoid the daily commute, but it creates challenges for organizations trying to protect their data. Having insurance company information move between networks makes it easier for cybercriminals to target a particular business, driving the need for adequate cybersecurity solutions.
3. Reinsurance Companies Keep Massive Amounts of Data
Reinsurance companies could hold important data and valuable personal details on their servers and networks, making them a prime target for cybercriminals. These firms handle the insurance needs of other insurance companies so they could have information on the inner financial workings of these organizations. The results could be catastrophic for both companies if this data leaks, so reinsurance firms must do everything in their power to keep it safe.
4. Self-Protection Is Necessary
Companies can’t rely on anyone but themselves for cybersecurity. Cyber insurance is available, but the damage will be done if a reinsurance firm allows hackers to infiltrate their systems because they will lose their credibility and trust within the industry if this occurs. The result will be fewer clients and lost revenues for the firm moving forward, and it could be next to impossible to recover from this scenario.
5. New Products Are Available
The good news for reinsurance companies is that new cybersecurity products become available all the time, especially as startups begin focusing on industry-specific solutions. Reinsurance firms can look directly to these startups and invest in the companies or build an IT team to alter some of the open-source cybersecurity solutions available today. Focusing on cybersecurity will be a vital step for businesses in the reinsurance industry in the coming years as cybercriminals look for innovative ways to separate them from their data and money.
Reinsurance companies investing in cybersecurity is a no-brainer because there is so much they can lose by overlooking this essential aspect of running a company. Investing directly in a startup could be a solution for reinsurance companies as they look for solutions that meet their specific security needs.
Investing in Cybersecurity
Learning how to invest in cybersecurity isn’t always intuitive because there are many ways to do it. The reality is that finding a product that meets your unique needs could be a challenge, but that shouldn’t stop you from searching. Direct investment in a cybersecurity startup could be the answer as you seek increased protection from attacks.
Option3 helps identify underserved areas of the cybersecurity industry to improve outcomes and provide better returns for investors. Our team understands cybersecurity inside and out and uses this knowledge to build our portfolios and manage our investments. Contact Option3 to learn more about cybersecurity investment.