Cyber risks are biggest ‘banana skin’ for Irish insurers, study finds

Cyber risks are Irish insurance companies’ biggest concern, according to a study by accountancy firm PwC and the Centre for the Study of Financial Innovation.

Risks such as hacking and other breaches of data security were ranked ahead of the impact of low interest rates, regulatory burdens, the cost of guaranteed products and the unpredictability of investment performance in a list of the Irish insurance industry’s greatest fears for their business over the next two to three years.

These concerns edged the financial impact of natural catastrophes into sixth place.

Ireland scored slightly above the world average on PwC’s Banana Skins Index, which seeks to measure the industry’s level of risk anxiety.

On a global basis, the insurance experts surveyed for the study ranked cyber risks in fourth place, with the sector worrying more about regulation, the global economy and interest rates.

Low interest rates affect insurance companies that sell savings products with guaranteed returns, while they also hurt investment income at life assurance companies.

PwC Ireland insurance partner Padraic Joyce said the industry faced “the disruptive impact of new technology, changing customer expectations, more exacting regulation and enduring economic uncertainty”.

Insurers that could manage emerging as well as familiar risks would be best placed to succeed, he added.

More than 800 insurance practitioners and industry observers in 54 countries, including Ireland, were questioned for the study.

“With advancement of digital technologies and many of the large insurance multinationals based in Ireland, it is not surprising that the risk of cyber threats is the top concern for Irish insurers,” said PwC Ireland’s Ciarán Kelly.

Cybersecurity would be “an area of increased focus for the industry in the years ahead”, he added.

Irish insurers also scored better than the world average on their level of preparedness to handle insurance risks, the PwC study found.