One door to knock when selling cyber insurance

Brokers looking for new large cyber accounts might want to knock on doors of companies who look after other people’s money.

More than half (55%) of Canadian asset managers surveyed said they intend to purchase insurance to protect themselves against cyber incidents, KPMG Canada said in a recent report.

Respondents, including some large mutual fund managers, were asked how they plan to address cyber security, James Loewen, KPMG Canada’s national sector leader for asset management, said Tuesday in an interview. Respondents were asked to choose among eight answers, one of which was buying insurance, and select all that apply. Other responses included installing systems to detect and/or prevent cyber-incursions, forming a risk management committee to address cyber security and outsourcing cyber security to an information technology vendor.

KPMG did not name the respondents, but some were “very large” financial services conglomerates, Loewen said. KPMG released results of the survey on Sept. 27 in its third annual Canadian Asset Management Industry Opportunities and Risks report.

For brokers placing cyber for mid- to large-sized clients, what is telling is how asset managers’ perception of risk has changed over the past year. KPMG asked respondents each year to name the Top 5 risks for the Canadian asset management industry.  Cyber placed first this year, but did not even make the Top 5 in 2017, Loewen noted.

In 2017, respondents were concerned about cyber security but they didn’t necessarily see it as an over-riding risk for the industry, Loewen said. “Now, I definitely think that has changed.”

Respondents included large banks, brokerages and companies that manage mutual funds.

While 55% of respondents specifically mentioned buying insurance, this does not mean the other 45% are necessarily going without cyber coverage. Of the other 45%, some may already have insurance. Others might say “we are going to outsource to a technology company to look after that for us and therefore potentially mitigate the need for insurance,” Loewen said.

Other major risks to the Canadian assets management industry cited by respondents to this year’s survey include:

• cost challenges and squeezed profit margins;
• push for a lower management fee environment;
• intensified competition and consolidation;
• failure to adopt new technologies successfully; and
• increasing complexity of regulation and cost of compliance.

For asset managers, the main cyber security concern is the risk that a miscreant could gain access to sensitive data about customers, Loewen said. “Managers are very worried about reputation.”

This story was originally published by Canadian Insurance Top Broker.