Ajit Jain, the vice chairman of insurance operations for Berkshire Hathaway, acknowledged the increasing popularity and profitability of the cyber insurance sector, estimating it to be a $10 billion global market. During Berkshire Hathaway's annual shareholder meeting in Omaha, Jain emphasized the complexity of cyber insurance liabilities, pointing out the difficulties in determining potential losses from cyber incidents and the aggregation risks involved.
Jain's cautious approach to cyber insurance stemmed from the uncertainty surrounding the quantification of losses and the lack of sufficient data to accurately assess the true cost of insuring against cyber risks. Despite experiencing profitable margins so far, with losses staying below 40% of the premiums collected, Jain raised concerns about the overall lack of data to fully grasp the potential financial impact of cyber incidents.
In light of the surge in cyberattacks during the pandemic, highlighted by a report from the International Monetary Fund, Jain's reluctance to actively underwrite cyber insurance policies was further fueled by the escalating risks associated with such attacks. The significant financial toll faced by companies like Equifax following a major data breach underscored the potentially devastating consequences of cyber incidents and the imperative for insurers to have a comprehensive understanding of cyber risk dynamics. At the recent shareholder meeting, Berkshire Hathaway reported robust first-quarter operating earnings, driven by the strength of its insurance businesses in underwriting and investment income.