cyber insurance

Gregory Richardson, Chief Risk and Strategy Officer at Transatlantic Reinsurance Co. (TransRe), has underlined the potentially huge economic benefits of fully privatising risk, noting a need for governmental assistance and cooperation with the private sector.

Insurance and reinsurance companies are in the main, not sufficiently equipped to underwrite and model cyber exposure and lack the required capacity to address the rising threat of an aggregation of losses from ‘silent’ cyber attacks, according to Rick Welsh of Sciemus.

The Bank of England’s (BoE) Prudential Regulation Authority (PRA), in a recent consultation paper, has explored the potential underwriting risks derived from cyber attacks, stressing that more needs to be done by re/insurers to manage the increasing threat of ‘silent’ cyber losses.

The type of cyberattack as seen recently on domain name system (DNS) provider Dyn are expected to become more commonplace, but this scenario highlights how reinsurance and capital markets can assist with the adaptability of cyber insurance as a means of transferring such risk, according to Rick Welsh.

Welcome to the first Artemis Monte Carlo Reinsurance Rendezvous Roundtable, in which participants discuss the potential for ILS to play a role in new and emerging business lines, such as cyber and terror, and explore what direction the marketplace could be heading.

A new cyber exposure model has been launched, called Cyber Foresight, designed to assist with pricing and the assessment of cyber risks, the tool could help reinsurance and insurance-linked securities (ILS) capacity have a more influential impact on the growing threat of cyber attacks.

Cyber risk is reportedly the fastest growing insured peril across the global property/casualty (P/C) insurance space, with the market forecast to expand to $20 billion by the year 2020. With the potential exposure so vast there’s a clear need for reinsurance capital, suggesting opportunities for ILS markets.

The growing threat of cyber terror events across the world has seen a concerted effort from governments and risk transfer counterparties to provide solutions. Among the challenges is the added complexity of physical damage from cyber terror events, according to industry experts.

The increased interconnectedness of today’s world at times of intensified global terror events highlights the potential for substantial cyber terror attacks, a vast exposure that will require the backing of ILS capacity as well as the efforts of the re/insurance industry.

The insurance-linked securities (ILS) market, and London as an ILS market hub, can help cyber risk to flourish as a nascent and growing class of insurance and reinsurance business benefiting from capital markets support, according to a report from BNY Mellon.