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Lloyds of London recently published a report on systemic cyber risk, estimating that a catastrophic cyber attack could cost as much as $16Tr, best case $2.2Tr and likely $3.5Tr on a 5 year period. The basics for the cyber insurance industry are that the global reinsurance market is worth at best $350bn; the insurance industry wants to grow GWP over the next 5 years; insurers have not yet found a solution to price cyber with any meaningful repeatable accuracy; here’s not enough capital to underwrite cyber risks if the Lloyds estimates are only 10% accurate; regulators in the U.S and EU are implementing cyber regulation with the SEC final cyber rule, EU NIS 2 and DORA.
1. How necessary is this? Cyber insurance is necessary, it’s been the only tool 99% of companies who have it have to manage cyber risk use. But the cyber insurance industry does not have the data to economically underwrite the risk. More importantly society needs to find a solution (Chris Inglis).
2. How feasible is it. Anything is feasible, but it won’t fix the problem, it will likely make cyber risk management worst. There’s no level of certainty around cyber attacks and their effect; governments are just starting to address cybersecurity risk management as an issue for society. If one looks at Lloyds figures, who has $2.2trn or in the worst case $16trn to hand. Who will spend the money, there are not enough resources available to implement a cyber response plan of this scale. Will it fix the cyber problem, no. Companies need to implement cyber risk management to protect their assets and in some case (CNI) society.
There are solutions however. Cyber regulation is a start, insurers should focus on getting their clients cyber aware and managing the risk. That is needed to prevent a systemic cyber attack ‘left of bang’, while focusing on ‘right of bang’.
The reason I go to the dentist every 6 months is to prevent, as best I can, myself from having to have my teeth pulled out. The reason I fit a smoke alarm is to get me out of bed to put the fire out, before it burns my house down. What makes cyber any different?
Ted Dziekanowski Brian D. McCarthy Rachel V. Rose, JD, MBA Bob Dix
#cybersecurity #cyberriskmanagement #cyberinsurance
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