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Latin America cyber replicating D&O growth

High-profile data breaches and hacks impacting banks and other financial institutions have heightened interest in specialist cyber insurance within Latin America, but some local players think it will be at least another decade before a significant market develops in the region.

Last year, Banco de Chile became the most high-profile victim of a cyber attack in Latin America, with the company suffering a loss of some $10mn after hackers breached its security systems. According to local reports, the attack is thought to have been orchestrated by criminal gangs in Eastern Europe or Asia.

That heist was the latest in a series of attacks that have also seen Mexican banks Bancomext and Banorte be attacked, with the former reportedly facing down a threat from North Korea-based hackers who tried to steal roughly $110mn.

These events have all served to heighten awareness of the threat posed by cyber criminals. According to market sources, that has also led to increased interest in the protection afforded by dedicated cyber liability insurance.

“The Banco de Chile data breach has been a big alarm for the market,” one source noted, adding: “In Brazil, Chile and Puerto Rico there is now more interest.”

But turning that interest into actually purchasing coverage is another thing entirely.

One Latin American insurance source explained that their business has seen a significant rise in the number of quotes requested for specialist cyber liability coverage since the Banco de Chile event, but that has not translated into a similarly sized increase in actual sales. Instead, the source said they have sold “a handful” of coverages.

As it stands, there are companies looking to sell cyber liability insurance to Latin American insureds. These companies include Argo, Generali, Liberty Mutual and managing general agent Lions Gate Underwriting, among others.

There is an expectation that the number of insureds covered for cyber exposure will eventually rise though, with one source noting that there are a lot of similarities between Latin America’s current cyber liability market and the directors’ and officers’ (D&O) sector that existed in the region 10 to 15 years ago.

In the last decade, D&O and other financial lines coverages have become increasingly prominent in Latin America, and there is hope in the region’s (re)insurance industry that cyber liability will follow suit.

But there are obvious obstacles in the way. What the product actually offers remains unclear to many insureds, while at the same time, few companies feel they will be targeted. The Banco de Chile event has certainly heighted interest in the product, but as one source explained, many insureds still feel they will not ever be the target of such an attack.

What would push Latin America’s cyber insurance market further forward is the introduction of legislation, the various sources agreed.

Evidence of that has already been seen in the rapid recent growth of the European cyber insurance market. Historically, the US has dominated, and while it continues to have the lion’s share of the specialist sector’s premium volume, ever since the introduction of the General Data Protection Regulation, or GDPR, Europe has increasingly garnered the industry’s attention.

As with many industrialised regions of the world, the policymakers in Latin America’s countries are considering imposing rules concerning client data, security breaches and wider cybersecurity and crime issues.

Some countries do already have rules regarding privacy and data protection, with Argentina and Chile two notable examples. As one source highlighted though, an intriguing aspect of Latin America’s relationship with cyber exposure is that companies are more concerned about the safekeeping of their own information rather than that of their clients or policyholders.

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