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Standard and Poors has issued a report on the insurance and reinsurance markets ability to underwrite cyber risk. Well worth a read. It raises concerns that the cyber insurance market is at risk of serious damage unless there are changes to the approach to underwriting.
S&P doesnt believe there is enough capacity in the re-insurance market to cope. Citing a growth in premiums and the lack of capacity in the market to cover the risk and the reluctance of capital markets to invest in linked securities given the lack of certainty.
Their view is that the market could absorb the risk if there was better modelling, but in my view we are some way off any form of realistic modelling of the risk, like that used in life insurance. There aren’t enough cyber people out there, to support companies today. Finding those who understand cyber to support modelling will be difficult. But it needs to happen.
Another approach suggested is for the insurance industry and governments to underwrite the risk. But governments dont like to be exposed to market forces, but like the lender of last resort it may be the only option today.
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