Cyber Risk Insurance as a Component of an Effective Management System: The Case of Ukraine

Abstract

The development of the digital economy, driven by constant technological advancements, raises cybersecurity concerns. Modern organizations naturally respond to increased cyberattack risks by demanding corresponding insurance services. Ukrainian insurance companies are diversifying their product policies in response to the heightened issue of cyber risks, identifying leakage of confidential information, ransomware attacks, and programming errors as main threat sources. Cyber risk insurance helps enterprises mitigate financial risks associated with cyberattacks and provides financial support in case of an insured event. Ukraine ranks second among the most cyber-attacked countries in the world after the USA, with cyber threats increasing by 3.5% in 2022 and by 15.9% in 2023 compared to the previous year. Despite overall positive trends, cyber risk insurance in Ukraine faces challenges such as insufficient understanding of cyber risk sources, forms, and consequences; complexity in risk assessment; high insurance costs; highly individualized policy terms; and an early stage of the national market formation. Considering the identified peculiarities of the national cyber risk insurance market, Ukraine faces challenges in developing an adequate strategy and quickly adapting. Quality specialized education and awareness are considered the first key tools for the effective development of such a market. The next step could be the creation of appropriate cyber in-frastructure: development of cutting-edge cybersecurity technologies, establishment of data processing centers, and the development of a national cybersecurity program. Ukrainian insurance companies are diversifying their product policies in response to the heightened issue of cyber risks, identifying leakage of confidential information, ransomware attacks, and programming errors as main threat sources.