Chubb and the National Center for the Middle Market (NCMM) have unveiled an engaging glimpse into the financial performance of middle market companies. The insights gained are thanks to the 2023 Year-End Middle Market Indicator (MMI), which surveyed 1,000 executives. These companies are essential contributors to the U.S. economy. They are navigating through a period of significant financial growth despite facing challenges such as inflation, natural disasters, and an uptick in cyber threats. With a reported revenue increase of 12.4%, the highest since 2012, their success is a testament to the sector’s resilience and strength. However, amidst this positive growth, there remains a pressing concern regarding cybersecurity and the sufficiency of insurance coverage to mitigate risk.
Half Believe Their Cyber Insurance is Adequate; What About the Other Half?
Some 47% of companies believe they have sufficient cyber insurance in place. This implicitly suggests a parallel proportion might be navigating this digital era underprepared. Cybersecurity, in particular, has surged to the forefront of these companies’ risk management strategies.
With 62% of respondents marking it as a top concern influencing insurance decisions, the report spotlights a growing awareness of cyber vulnerabilities. Despite this, a majority still acknowledge the need for or are considering, enhanced cyber insurance coverage. This scenario underscores a pivotal moment for middle market companies: the recognition of cyber threats and critically evaluating their preparedness and response capabilities.
“Cyber Security Solutions”
Mike Kessler, Division President at Chubb Global Cyber Risk, emphasizes the evolving nature of cyber threats. The survey’s findings suggest a shift towards proactive risk management. “We work with companies and their broker or agent to provide insight into the causes of cyber incidents and cyber security solutions to help prevent attacks, as well as assess protection gaps and tailor coverage to help clients recover from a cyber incident,” said Kessler.
Moreover, the MMI report sheds light on broader insurance gaps. Many businesses recognize the need for better coverage in multinational operations and environmental liability areas. This acknowledgment of insurance inadequacies extends beyond cyber threats. This reflects a holistic approach to risk management in the face of multifaceted challenges.
As middle market companies continue to thrive, the dual themes of growth and vulnerability coalesce. The data presents a narrative of businesses at a crossroads: achieving record financial milestones while navigating a landscape marked by complex risks. This juncture demands a nuanced understanding of risk management, where cybersecurity emerges as a critical focal point. Companies are thus called to balance optimism with strategic vigilance, ensuring unforeseen threats do not derail their growth trajectories.
Raw Data From The Report
Escalating Cybersecurity Risk: Insufficient cybersecurity coverage rose to number six of overall top emerging risks. The identified coverage gap prompted companies to prioritize cybersecurity as the number one determinant in their insurance buying decisions.
- Concerns over insufficient cybersecurity insurance coverage was named the sixth top emerging risk at 17%.
- Additionally, when it comes to concerns factoring into insurance purchasing decisions, Cyber was the number one factor at 62%, followed by 60% – Workforce, 55% – Infrastructure, 48% – Catastrophic incidents (not cyber) or in some cases, natural disasters.
- Cybersecurity was the number one spending allocation in IT at 10.5%, just ahead of daily operations at 10.2%.
- Cyber disruptions have increased 14% pts from the 2020 Q4 (17% vs. 31%). This was ranked as the number two disruption behind general economic disruptions, but ahead of operational disruptions like natural disasters, port closures, etc.
Data Industry Breakdown
Financial Institutions:
- Less likely to have recovered from an operational disruption with 33% saying it had impact to revenue. For cyber/data specific disruptions, 31% had an impact to revenue.
- 38% of companies with operational disruption and 31% who experienced cyber disruption could have been covered by insurance but were not.
Life Sciences:
- 40% of life science firms have been disrupted by cyber – tied for the highest with technology.
- However, it was the lowest of industries that said cyber was a factor into their decision to purchase insurance.
Technology:
- 13% of IT budget is spent on Cybersecurity – highest of all industries.
- 40% have been impacted the past 2 years by a cyber/data disruption (vs. 31% of all middle market firms).
- 24% have only partially recovered, with an average impact of 29% of annual revenue.
- 32% did not have insurance against this disruption – but could have.
- Of the top emerging risks – 31% say cybersecurity.
About the Middle Market Indicator (MMI)
The MMI, a bi-annual flagship research report initiated in 2012, provides a detailed examination of these issues. Conducted by RTi Research on behalf of NCMM and Chubb, the survey encompasses responses from CEOs, CFOs, and other financial decision-makers across a spectrum of industries. It aims to capture the sector’s pulse on various fronts, including business capabilities, performance, growth drivers, and economic outlook. Reflecting the middle market’s diversity and scale, these companies have annual revenues ranging from $10 million to $1 billion. They employ almost 50 million people, representing a significant portion of the private sector’s GDP and employment. The survey’s findings are weighted to mirror the sector’s size, industry distribution, and geographic spread accurately. With a margin of error of 3.1%, narrowing to 2.7% at the 75% confidence level.
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