Challenges and Opportunities
The Future of Cyber Insurance in China
On July 17, 2023, The Ministry of Industry and Information Technology and the State Administration for Market Regulation of China released a guidance document to promote the standardized and healthy development of cyber insurance. This directive, issued at the national level, lays out five key points:
1.Establishment of a Comprehensive Cyber Insurance Policy Standard System: The directive calls for a robust policy standard system that can provide clear guidelines for the development and implementation of cyber insurance policies.
2.Strengthening Innovation in Cyber Insurance Products and Services: The document emphasizes the need for innovative insurance products and services that can effectively meet the evolving needs of the cyber market.
3.Enhancing the Role of Cyber Technology in Insurance Development: The directive recognizes the crucial role of cyber technology in driving the development of insurance products and services, and calls for efforts to leverage this technology to enhance insurance development.
4. Promoting the Release of Cyber Industry Demand: The guidance document highlights the importance of stimulating demand within the cyber industry, which can in turn drive the growth of the cyber insurance market.
5. Fostering the Development of a Cyber Insurance Ecosystem: The directive underscores the need for a vibrant cyber insurance ecosystem, which includes insurers, policyholders, service providers, and regulatory authorities.
This guidance document is a significant move by the Chinese government to foster the growth of the cyber insurance market. By setting out clear policy directions and emphasizing the importance of innovation, technology, and industry demand, the directive paves the way for a more standardized and healthy development of cyber insurance in China. It will be interesting to observe how these directives influence the cyber insurance landscape in the country, and whether they can effectively stimulate growth and innovation in this sector.
The trajectory of liability insurance development in China has been closely tied with its legal and regulatory environment. When a particular type of insurance is defined at the national level as compulsory or recommended, it tends to experience explosive growth. Cyber insurance has been present in China for nearly 15 years. However, market acceptance remains comparatively low, due to several key factors:
1.Lack of Compulsory Status or National Recommendation: Cyber insurance is not currently mandated or nationally recommended, which results in a limited number of policyholders and, consequently, few underwriting companies. At present, only a small number of international insurance companies and large Chinese insurance companies offer this type of insurance product.
2.Shortage of Professional Cyber Insurance Brokers: There is a lack of professional brokers specializing in cyber insurance, which can hinder market growth.
3.Absence of Qualified Claims Adjusters and Related Service Providers: The market lacks professional cyber insurance claims adjusters and related service providers, crucial for managing claims and providing necessary services.
However, with the recent release of a government document promoting the standardized and healthy development of cyber insurance, and the Chinese government's current emphasis on cyber security laws and regulations, we anticipate potential growth in the cyber insurance market. Nevertheless, it may take time to establish the capacity for claims services, posing both a challenge and an opportunity. This situation offers opportunities for the international insurance market and service providers. They could leverage their expertise and resources to help fill the gap in claims services and contribute to the development of China's cyber insurance ecosystem. As the Chinese government continues to prioritize cybersecurity, the role of cyber insurance is likely to become increasingly important, offering considerable potential for growth and innovation in this sector. If you would like to obtain the complete copy of the regulations, please contact: jay.li@well-insured.com and rockefeller.pan@well-insured.com
