Analysis Banking & Finance UAE businesses to boost investment in cyber insurance By Shane McGinley, Megha Merani August 9, 2022 Creative Commons Over two thirds of UAE respondents to a survey said they had suffered at least one ransomware attack over the past 24 months Middle East companies deeply concerned about ransomware attackUAE, Saudi and South Africa are most affected countriesMetaverse presents growing risk Revenue from the cyber security insurance sector is forecast to grow by 10 percent per annum to $10.6 billion in 2025, with Gulf companies set to be part of this investment push. “The Russia-Ukraine war has increased the likelihood of state-sponsored cyber attacks that target critical infrastructure, military operations, and businesses,” said Amrit Dhami, a London-based analyst at GlobalData, the firm which carried out the global research. “Such attacks not only target insurers, but lead to expensive payouts and damage the reputations of those reluctant to pay,” Dhami added. Dubai ranks 18th in new index of top digital citiesInside Dubai’s big $4bn metaverse push This concern is reflected in the Middle East, where the 2022 Marsh Microsoft Cyber Risk Survey found that just four percent of respondents are highly confident in their organisation’s ability to manage a cyber threat. As a result, around a quarter of respondents said they plan to increase their investment in cyber insurance by the end of 2022. “The problem is that many of the clients think that it won’t happen,” Ayman El Hout, Dubai-based CEO of Marsh UAE, an insurance broker and risk advisor, told AGBI. “But with the kinds of attacks that are actually happening, it’s not about whether it will happen, it’s when will it happen and are you ready if it happens?” The Marsh survey said a third of Middle East companies cited ransomware as the cyber threat they were most concerned about. A ransomware attack occurs when a cyber criminal uses specialised malicious software (malware) to shut off all access to a victim’s files, applications and databases, and demands a ransom. Cyber security firm Cybereason released a global study in June, based on a survey of around 1,456 security professionals across nine countries, including the UAE. Some 77 percent of the UAE respondents said they had suffered at least one ransomware attack over the past 24 months. Ransomware was also highlighted by IBM’s 2022 X-Force Threat Intelligence Index report as the top attack method used by global hackers last year. Finance and insurance organisations made up the overwhelming majority of targets in the MEA region in 2021, the IBM report said, accounting for 48 percent of all attacks, followed by healthcare and energy organisations. “Cyber criminals recognised the opportunity to capitalise on the rapid digital adoption in the UAE and took full advantage of unpatched vulnerabilities to successfully infiltrate organisations,” Wael Abdoush, general manager, IBM Gulf and Levant and Pakistan, said in a press statement. IBM said the most attacked countries in the MEA region were the UAE, Saudi Arabia and South Africa. Metaverse threats Dubai is also heavily focused on the growth of the metaverse. Crown Prince Sheikh Hamdan bin Mohammed announced the launch of the Dubai Metaverse Strategy last month, with an aim to place the emirate among the top 10 metaverse economies in the world. Its goal is to attract more than 1,000 firms in the sector, generate up to $4 billion in extra gross domestic product by 2030 and support as many as 40,000 virtual jobs. Investment giant Citibank said the global metaverse economy could be worth $13 trillion by 2030, but Marsh’s El Hout warned that companies need to think seriously about investing in managing the potential risks. “The reason for this is that the UAE is going towards more technology, they’re going into the metaverse. They want to transform the whole of the UAE into a more tech-driven economy. “And the more you go into the technology, that’s great, but the risks associated with that increase even more,” he said, pointing to a recent incident when a major UAE brand was attacked and had its client data compromised. Growth in the cyber insurance sector will help spur faster growth of the market as a whole. S&P Global Ratings this week forecast that growth in the insurance sector – calculated in the industry by the value of the Gross Premium Written (GPW) – will increase by approximately five percent in 2022. “Higher domestic inflation and increasing interest rates in the US are expected to continue to pressure central banks in emerging markets, like the UAE, to increase rates to restrain inflation and prevent capital outflows,” said Emir Mujkic, director of S&P Global Ratings. “This could weigh on financing conditions in some markets. However, higher oil and commodity prices positively contribute to GDP growth in the UAE, a primarily net energy exporting economy, and could support an increase in insurance demand in the country.” El Hout said he believed S&P’s forecast was on the conservative side and pegged the growth a bit higher at around seven percent, but he felt this would vary across different segments, as they recovered from the pandemic at different speeds. “I think on the general insurance lines, like property insurers, it’s recovering. Medical insurance, I think in a year’s time will be back on its way. The problem remains with insurers in the motor segment,” he said. El Hout added that there were two major issues negatively impacting the auto insurance segment: providers discounting prices in a highly competitive market, and supply chain issues and inflation resulting in a surge in the cost of car parts and repairs. “Less income and more costs … result in a negative direction,” he said. Last month, the UAE Central Bank followed the US Federal Reserve and increased interest rates by 75 basis points to 1.65 percent, which El Hout said was also positive news for insurance providers. “If the interest rate goes up, you’ll be able to generate more income on the interest from the cash in your bank. Insurance companies have to keep their funds liquid… so [the] interest rate is very important,” he said.