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Is cyber an economically insurable risk today, likely no. Insurers rely on ‘Right of Bang’ data to price the product. Data that represents ‘events’ and ‘outcomes’, events and outcomes that are unpredictable and increasing in frequency, complexity and severity. Life insurance, car insurance, property insurance are highly predictable, ‘what goes in, is highly correlated to what comes out’. A car accident in general has well defined outcomes and cause, effect and financial impact can be correlated, ditto life insurance (smoking, asbestos, exercise), while cyber insurance cannot. With cyber, what goes in does not repeatably equal what comes out and consequential losses only get bigger, the bigger the attack surface. A situation that will not improve as cyber becomes more of a national security problem.
Cyber is a D&O insurance issue, as cyber regulation shifts cyber ‘Left of Bang’ into the board room. Cyber regulation adds a new suite of challenges as regulatory accountability, legal risk and compliance risk increase in the board room.(https://lnkd.in/eDCYNzXn).
There is a ‘silver lining’ in the corporate cloud. Recent regulatory proposals focus on cybersecurity risk management, driving boards to demonstrate their management of cyber risk. Requiring governance, oversight and assurance of cyber and in turn demonstration of the management of cyber risks.
The analogy is one of manufacturing quality management and process improvement. If you understand what goes in to the process, how to mix the ingredients to get a repeatable output, you are better able to demonstrate you are managing risk. You reduce costs, reduce risks and improve efficiency. Today cyber is not a repeatable process, it may never be a repeatable process, but regulation is forcing board ‘situational awareness’ of cyber risks. Risks that will likely affect more than just ‘right of bang’ cyber insurance, but ‘left of bang’ D&O as cyber risk regulation comes online.
Ted Dziekanowski
#cybersecurity #cyberinsurance #directorsandofficers #cyberriskmanagement
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