Stakeholders in the insurance sector have stressed the need for a strong cyber insurance market to provide businesses with protection against risks associated with increased usage of digital technology.

They said this has become necessary given the increased dependence of more organisations on digital technology for exposure and operations, spurring the need for security, as the digital space is very prone to attacks and security breaches from hackers.

This is even as government agencies are looking for ways to better reinforce the digital ecosystem,while this will build trust in insurance services, it will also soar insurance adoption and acceptance in the country.

Low insurance penetration in the Nigerian market, compared to acceptance levels in other countries and despite the wide room for growth, is still a major source of concern for stakeholders in the industry.

Cyber insurance is a product that enables businesses to mitigate the risk of cybercrime activity like cyber-attacks and data breaches. It protects organisations from the cost of internet-based threats affecting IT infrastructure, information governance and information policy, which often are not covered by commercial liability policies and traditional insurance products. Cyber insurance comes as an opportunity to change the perception of the low acceptance for wide coverage, which works the same way, as businesses would purchase insurance against physical risks and natural disasters. It covers the losses an enterprise may suffer as a result of a cyber-attack.

Cyber insurance is increasingly becoming essential for companies in both the private and public sector as the risks of cyber attacks against applications, devices, networks and users grow. That is because the compromise, loss, or theft of data can significantly impact a business, from losing customers to the loss of reputation and revenue.

Organisations may also be liable for the damage caused by the loss or theft of third-party data. A cyber insurance policy can protect the enterprise against cyber events, including acts of cyber terrorism, and help with the remediation of security incidents. This seems to be a new premium revenue drive for underwriting companies, to increase their yearly financial performance, only if industry stakeholders consider and institutionise it with both private and public establishments.

To build consensus on how different stakeholders could contribute to addressing the main challenges to the market’s development, the inability to adequately quantify exposure to cyber risks is commonly understood to be one of the most significant impediments to the development of the cyber insurance market in Nigeria.

Recently, the National Insurance Commission (NAICOM) and the National Information Technology Development Agency (NITDA) established a partnership to institutionalise cyber insurance during a courtesy visit to the Commissioner for Insurance, Sunday Thomas, to initiate the process and work out modalities on fortifying Nigeria’s digital ecosystem. The meeting x-rayed the benefits of cyber insurance given the complexities of our digital world.
It was agreed at the meeting that an insured cyber ecosystem would incentivise more people to become digitally savvy, especially now that the government is investing heavily in the digital economy. It was also agreed that the institutionalisation of cyber insurance would play a key role in improving the resilience of Nigeria’s digital infrastructure.

As the country continues to witness exponential growth in digital transformation, safeguarding against cyber risks and ensuring the protection of critical data has become very important.

During the negotiations, both teams explored the multifaceted benefits that cyber insurance can offer, including mitigating financial losses associated with cyberattacks, facilitating speedy recovery from security breaches, and fostering a culture of risk awareness and management in the digital space.

Both agencies acknowledged the pressing need to improve cyber security measures and provide a comprehensive framework to address potential threats and vulnerabilities in Nigeria’s rapidly evolving digital landscape. Furthermore, the collaborative efforts between the duo seek to create an enabling environment for the development of the cyber insurance market in Nigeria. By establishing a robust regulatory framework, encouraging innovation, and fostering public-private partnerships, both agencies seek to stimulate the growth of cyber insurance offerings, thereby providing individuals, businesses, and organisations with the necessary tools to manage cyber risks effectively.

Sadly, the policy that was intended to cover all costs and expenses incurred as a result of a breach, has failed. Some say that businesses have had access to cyber insurance since it was introduced as a product line in insurance nearly 25 years ago to cover their liability in the event of a data breach and even though a significant portion of the world’s population is online, Nigerians often overlook cyber insurance.

Even though the industry is gaining recognition, many individuals do not consider how best to safeguard their personal lives, businesses or transactions in light of the global importance of insurance. By 2026, the global market for cyber insurance will be worth over $28 billion, according to Fitch Ratings.

According to findings by The Guardian, Nigeria still lags behind the rest of the world when it comes to enforcing privacy and security laws for businesses just as attacks affect small, medium, and large businesses all over the country.

An industry stakeholder, Allianz Nigeria, reported that only 51 per cent of Nigerian businesses are confident in the ability of their security team to act, since COVID-19 started in 2020, while 71 per cent of businesses have reported an increase in the threat of data breaches, with financial institutions topping this list.

Industry watchers believe that globally, cyber fraud causes yearly losses of over 127 billion dollars, or about 10 per cent of Nigeria’s GDP, and cyber insurance will not cover any of those losses. Given Nigeria’s growing number of tech startups and establishments, stakeholders who gathered at a forum last week, with insurance regulators and IT experts, said Nigerian businesses are not well positioned to profit from data-targeting cyberattacks.

Also in 2020, the same underwriter hosted an interactive webinar titled, “The Ever-Increasing Impact of Cyber Attacks,” with four industry stakeholders educating business owners on how to safely mitigate risks and raise awareness of the issue.

Experts at the conference expressed sadness that the government had its fair share of cybercrimes when a group, NaijaCyberHacktivists, hacked the websites of the National Poverty Eradication Programme and the Niger Delta Development Commission in 2011.

The website of the Economic and Financial Crimes Commission (EFCC) was also the target of an attack in 2013. In the Nigerian Electronic Fraud Forum’s 2016 yearly report, 19,531 instances of bank fraud were documented. Traditional channels recorded the lowest number. In addition, it put electronic payment fraud results in yearly losses of $2.19 billion. The experts revealed that risks are usually not covered by traditional commercial general liability policies, or at least, they aren’t specifically defined in them.

However, the source stated that any electronic information stored on one’s devices, such as name, email address, phone number, financial records, medical records, payment information, government documents, and so on, can be hacked easily by a skilled hacker.