COVID-19 a “wake-up call”

The sheer scale of the COVID-19 pandemic serves as a stark reminder to properly assess and manage low-probability risks that bear tremendous loss potential, according to global reinsurer Munich Re. This is especially true of risks that are exposed to an underlying deterioration – as is the case with certain natural disasters made worse by climate change.

Recent experiences following the lockdown of public life and the business world in many countries have been a wake-up call regarding the staggering potential for systemic risks to result in losses that subsequently trigger many different repercussions. “Yet it is by definition impossible to insure risks that lead to losses everywhere at the same time, thus violating the fundamental criterion of insurability,” it warned in a statement.
 
It noted that the coronavirus pandemic has indirectly affected the rapidly growing insurance segment for cyber risks. Lockdowns have forced most office staff to work from home and a lot of companies to migrate many business operations online, followed by a sharp rise in cyber attacks.

Munich Re anticipates pandemic-fuelled momentum from digitalisation and companies’ rising awareness of cyber risks will further boost growth of the cyber insurance market, even surpassing the current forecast for growth, from slightly above $7 billion in 2020 to around $20 billion in 2025.