OREANDA-NEWS. Fitch Ratings says that cyber insurance represents a key growth opportunity for the global (re)insurance industry. However, as cyber risk has the potential to cause significant losses due to substantial aggregation risk and the increasing sophistication of cyber attacks, insurability of certain risks is questionable.

Given the potential magnitude of losses from cyber attacks, governments will inevitably have an increasing role to play in the prevention and indemnification of global cyber attacks. However, Fitch believes that insurance companies will also have an important role to play alongside any government-led initiatives. The industry's ability to monitor and model cyber risks will continue to evolve in the short term, opening up new opportunities to service demand.

Fitch believes that as insurers build their internal understanding of cyber risk protection, the expertise in protecting their clients from cyber risks will also increase. Insurers face the same internal operational risks from cyber exposures as their insured customers. Additionally, the insurance sector is increasingly reliant on complex information systems for management and administration and large amounts of data for pricing and underwriting that add to potential for business disruption from computer hacking incidents.

Fitch expects new data protection legislation currently being formulated in Europe could increase demand for cyber insurance. If passed in its current form the law will include an obligation for companies to notify customers if a security breach has been detected. Across Asia, cyber regulations vary widely by country, whereas US regulations seem to be more advanced.