The Insurance Council of Australia (ICA) says action is needed to create a “viable and sustainable” cyber insurance market.

In a discussion paper released today, it warns that one major cyber incident could “render cyber insurance financially unviable”.

The report sets out a series of recommendations, and stresses that cooperation is needed.

“There are several areas of focus that need to be considered to help create a viable and sustainable cyber insurance market,” ICA says.

“Businesses, insurers and governments must work together to improve cyber capability and resilience.

“Insurance companies need to have the coverage right for policies given the changing digital environment.

“Robust risk assessments and up-to-date analytics are vital in determining what protection a business needs.

“Better incident reporting, which provides insights into emerging risks, will support accurate pricing models for silent cyber and accumulation events.”

ICA CEO Andrew Hall says cyber insurance awareness is low within the Australian business community – with only about 20% of small businesses having cyber cover.

But the digital evolution of the economy and society, particularly since Covid-19, has resulted in increasing awareness.

“As a result of this, in recent years, the number of organisations taking up cyber insurance in Australia has increased rapidly,” he says.

“Right now, there is a small number of insurance providers. The combination of a small premium pool and the increasing sophistication and maliciousness of some cyber-attacks have put significant pressure on insurers and businesses alike.

“This policy paper is the first step in getting the settings right for managing cyber risk in Australia and will give the industry greater confidence in participating in the market and providing cover.”

See Analysis.