The challenges of cybersecurity insurance development: The case of Latvia

Purpose. This paper aims to provide an overview of the current challenges of cybersecurity insurance, focusing on the identification of development constraints and opportunities and the key impact factors of this recently emerging insurance market in Latvia. Methodology. The authors used theoretical and empirical research methods, e.g., a literature review, surveys of experts from principal insurance companies and professionals from prominent mobile network operators, and interviews with experts in cybersecurity and pioneers of cybersecurity insurance in Latvia. Findings. The research results illustrate the immense difficulties in providing cyber risk insurance in Latvia. The lack of historical knowledge and evolving nature of cyber risks create significant challenges in quantifying and expressing cyber threats in monetary value. Cyber risk modelling is in its infancy, as events and threat vectors are still evolving. Due to the evolving nature of cyber risks, simulating events and fitting into traditional risk management forms are the primary challenges for insurance companies. Despite the increasing relevance of cyber risks to businesses, research on guidelines and methods of mitigating cyber risks with cyber insurance is still limited. Social implications. Cyber insurance is a direct result of public awareness of cyber threats and preparedness to mitigate business risks. Thus, cyber insurance is an integral part of educating and building a more resilient society. Originality/Value. The authors propose various approaches to cybersecurity insurance development, such as technology awareness building, standardization of mandatory reporting requirements and public–private partnerships in which the government covers part of the risk to overcome insurability limitations. Keywords: cyber insurance, cybersecurity, cyber insurance market, cyber risks