In an era where a single click can bridge continents and transform markets, multinational corporations (MNCs) find themselves navigating a maze of cyber risks that can shift with every border crossed. To not only survive but thrive in this interconnected world, MNCs must prioritize a nuanced approach to cyber insurance, ensuring robust coverage that adapts to the distinct threats lurking in every jurisdiction they operate. This proactive strategy is not merely wise—it is vital for safeguarding global growth ambitions.
The cost of global connectivity
Cyber threats are not confined to isolated incidents within a single country. As companies expand globally, their networks, databases, and online assets become more accessible to cybercriminals worldwide. MNCs face challenges such as ransomware, data breaches, and supply chain attacks, all of which can cause substantial financial and reputational damage. Moreover, a cyber attack against a multinational in one country can lead to business interruption loss in a subsidiary located in another country. These threats are further complicated by differences in regulatory frameworks and different degrees of cybercrime prevalence across regions.
According to industry reports, cybercrime could cost the global economy over $10 trillion annually by 2025 – this year. This figure includes costs related to direct financial losses, business downtime, lost productivity, reputational damage, economic disruptions and more. It’s an alarming forecast that underscores the necessity for comprehensive cyber risk management strategies. Organizations need to invest in modern technology and consider insurance solutions that match their global needs.
Cyber risks vary regionally
While we operate in a global market, we cannot ignore regional differences, especially when it comes to cybersecurity. Regulations, threat landscapes, and risk tolerance vary widely from country to country and even within regions. Consider the following examples:
- Europe: Strict data protection laws, including GDPR, impose hefty fines for data breaches. Non-compliance can result in fines up to €20 million or 4% of annual global turnover, whichever is higher. Whilst GDPR fines would generally not be regarded as insurable under local laws or public policy, companies can face local costs associated with the regulatory investigation and notification requirements, as well as legal costs and other costs and liabilities following a data breach.
- United States: The fragmented nature of state-level cyber regulations makes compliance difficult. Companies can face varying requirements across states, complicating risk management strategies.
- Asia-Pacific: Rapid digital transformation and weaker cybersecurity frameworks create unique vulnerabilities. Whilst the Asia-Pacific region is experiencing a surge in cybersecurity regulations in countries like Singapore, Malaysia or Hong Kong, many nations in this region are still developing their cybersecurity protocols, exposing businesses to increased risks.
- Latin America: Driven by increased digital activity and cyber threats, Latin America is experiencing a surge in cybersecurity regulations. Whilst several countries are implementing new laws such as Brazil and Chile, disparities remain. The lack of robust cybersecurity defenses can lead to increased incidents of data breaches and ransomware attacks.
Understanding these variations helps multinational firms accurately assess risk and tailor their multinational cyber insurance program to provide global coverage that can respond locally with local coverage, local knowledge and local services.
Local cyber insurance policies offer tailored coverage that addresses specific risks and regulatory requirements in different countries, such as varying data privacy laws. These policies generally enhance response capabilities by providing access to local breach response teams, legal counsel, and IT forensics.
Balancing global reach with local expertise
Regulatory compliance is a critical factor in the issuance of cyber insurance policies. Some countries mandate that insurance coverage be provided by local insurers. This means that a global cyber policy may lack validity or enforceability unless it is accompanied by a local policy. Additionally, some jurisdictions may impose restrictions on cross-border claims payments, making local policies essential for ensuring that any losses are compensated in the local currency. This approach not only mitigates potential legal or tax complications but also aligns the policy with local regulations.
Local cyber insurance policies offer tailored coverage that addresses specific risks and regulatory requirements in different countries, such as varying data privacy laws. These policies generally enhance response capabilities by providing access to local breach response teams, legal counsel, and IT forensics. The local insurer is able to help the client manage their local risk and provide a local policy in local language with local incident response, claims handling and claims payment. Additionally, having local policies can optimize tax efficiency (tax settled locally by local office) and facilitate smoother internal reinsurance arrangements for multinational corporations. In some cases, clients, partners, or governments may also stipulate the necessity of local insurance as a contractual requirement for conducting business.
Many insurance providers often find it challenging to offer policies in various countries. However, AXA XL is well-positioned to bridge this gap with our extensive global network serving clients in over 208 countries and territories. We are equipped to deliver both global and localized cyber insurance policies. Our ability to provide localized coverage ensures that companies can benefit from tailored solutions that align with their operational requirements while still being supported by the strength and expertise of a global insurer. This dual capability allows our clients to effectively navigate the complexities of cyber risk management across different markets.
For example, if there is a cyber incident in Brazil, a local cyber insurance policy needs to be in place. The insurer can engage with the customer locally, retain local counsel, work locally with IT forensics and have the ability to pay the claim locally.
Taking more localized cybersecurity measures
MNCs must adopt a global mindset but be prepared to act locally. Different regions face distinct threat landscapes and infrastructure vulnerabilities, requiring localized defenses. Tailoring cybersecurity by geography ensures stronger protection, faster response, and trust with regulators and customers. According to Mathieu Cousin, AXA XL’s Cyber Proactive Customer Service Manager, “As organizations strive for agility, cost-effectiveness, and efficiency, they often adopt a standard approach to their global IT operations and cybersecurity measures. However, this strategy can lead to vulnerabilities, especially in a world that is increasingly less globalized.”
According to Mathieu, “A ‘one-size-fits-all’ model may overlook regional disparities in technology access, infrastructure maturity, and legal frameworks. This means not only recognizing the unique challenges of operating across various jurisdictions but also implementing adaptable strategies that align with diverse regulatory environments and threat profiles. (For more on local cybersecurity strategies, read Mathieu’s article - Local solutions to global threats: Rethinking cybersecurity in a changing landscape.)
The global cyber threat landscape continues to evolve at a rapid pace. Securing comprehensive and tailored cyber coverage for each operational region has become more essential for many companies, not only for minimizing financial and reputational risks but also for safeguarding the future of the business. By investing in tailored cyber coverage and cybersecurity measures that align with specific operational needs and regional risks, companies can bolster their defenses and enhance their resilience against cyber threats.
This article does not constitute an offer, solicitation or advertisement in any jurisdiction, nor is it intended as a description of any products or services of AXA XL. The information contained herein is intended for informational purposes only. Insurance coverage in any particular case will depend upon the type of policy in effect, the terms, conditions and exclusions in any such policy, and the facts of each unique situation. No representation is made that any specific insurance coverage would apply in the circumstances outlined herein. Please refer to the individual policy forms for specific coverage details.
