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One would argue there are more than a few caveats ahead for the cyber insurance industry. While the demand for cyber insurance grow, the insurance and reinsurance industry continues to face problems in finding the capital to support claims and demonstrate to regulators that they have enough capital to cover cyber risk. Especially when the insurance industry does not understand enough about cyber risk to effectively underwrite it, and no amount of uncorrelated incidents will enable effective and accurate cyber insurance pricing.
We should not get excited about loss ratios as increased premiums, limits and exclusions as they are used to demonstrate improvements. As yet the cyber insurance industry has no answers as to how to manage cyber risk. For example how will the industry manage the 99% problem that is small business cyber, small businesses that supply chain rely upon. Or will it enable insurers assess organizational maturity for cybersecurity, as organizations themselves cannot manage cyber risk.
There is a positive. With the implementation of cyber regulation, covered entities will have to demonstrate they are managing cyber risk. regulation that transfers cyber risk from cyber insurance to financial statements and with a fair dose of legal risk for boards, will close the protection gap. It will make cyber insurance less of an incident management product, and more a product that covers an ever decreasing protection gap.
Ted Dziekanowski Stephen Pitt-Walker, JD, FGIA Rachel V. Rose, JD, MBA
#cybersecurity #cyberriskmanagement #cyberinsurance
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