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Thank you for posting Judy Selby. Here’s an observation. If we assume 99% of organizations are SMEs, typically the organizations that don’t or cannot afford cyber insurance. Then one could argue that the market for cyber insurance is greater than that currently identified, if solutions for addressing the economic underwriting of cyber insurance are found.
However add the growth in frequency, severity and sophistication of cyber attacks, as cyber moves towards being a national security problem (One that many companies including the 99% are struggling to address). To the effects of non-affirmative cyber to the reinsurance market (see the recent Nagoya Port hack). Throw in the effects of regulatory capital with the growth in GWP to both insurers and reinsurers, and finally add cyber regulation. The likely result: Cyber insurers may have a few opportunities or problems ahead unless they address the economics of cyber underwriting and cyber regulation.
While one expects growth in GWP could be greater than predicted over the next 7 years. One wonders the effect on regulatory capital for insurers and reinsurers. That one suspects is driving the need to close gaps in capital for both insurers and re-insurers; reinsurers who pick up the effects of non-affirmative cyber losses that are very difficult to predict. The question to be asked is if GWP rise as expected, will raising capital from capital markets simply shift the risk and problem to someone else? Someone will have to pay the bill for cyber and can capital markets be used as the insurers insurer, to cover short falls in liquidity. Especially given the uncertainty in the insurance and management of cyber risk?
Cyber regulation will formalize in 2023 and 2024 with the SEC proposal, EU NIS 2 and DORA at minimum. Transferring cyber risk from cyber insurers to corporate financial statements, through regulatory compliance and release stress on cyber insurers. As it is easier to manage claims if you have failed to comply with cyber regulation, conversely creating D&O insurance issues for boards. Than try and work out who is a nation state backed attacker.
Questions:
1. Will cyber regulation have a major impact on cyber underwriting performance?
2. Should capital markets be used to address liquidity of cyber insurance, given the volatility and lack of understanding of the risk today?
3. Can cyber insurers support their clients better manage the risk, if so how?
Thoughts?
Ted Dziekanowski Rachel V. Rose, JD, MBA Stephen Pitt-Walker, JD, FGIA
#cybersecurity #cyberriskmanagement #cyberinsurance #reinsurance
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