The cyber insurance market in Malta from a supply-side perspective

Abstract

More than half of the world’s population is nowadays connected online. This connectivity has not only changed society and the way people interact with one another but has also largely impacted the way business is conducted. This heavy reliance on technology, interconnectivity and cloud computing, that was accelerated by Covid-19, has its advantages such as enhanced market access, easier communication with suppliers and customers, and higher operational efficiency. However, this also has its drawbacks, including the emergence of modern threats such as cyber risks. This study initially provides a comprehensive background highlighting the main reasons why cyber risks have become one of the most prominent risks worldwide, and subsequently delves into how cyber risk management and cyber insurance could complement each other to mitigate such risks. However, the main aim of this study is to investigate why the supply-side insurance market in Malta seem unwilling and/or uninterested to sell cyber insurance on a wider scale given the promising opportunities, resulting in a very low market penetration. Qualitative research was undertaken in the form of seventeen semi-structured interviews with professionals working with Maltese-based insurance companies, brokers and agencies. Interviewees were asked twenty questions and a thematic approach was subsequently adopted to present the extensive data collected. Results show that the Maltese insurance market is quite traditional and not eager to offer innovative new products, while the lack of technical knowledge on cyber insurance is evident which makes selling or marketing the product difficult. Furthermore, cybersecurity awareness and demand for cyber insurance in Malta are so low to an extent that both are almost negligible, thus resulting in the local supplyside insurance market not wanting to invest resources in cyber insurance. Although most Maltese insurance players currently believe that entering this market is presently a gamble, the majority believe that demand for cyber insurance shall increase in the future due to various reasons, thus representing a renewed opportunity for the Maltese insurance market to offer this product.