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This is a very interesting report and worth reading. The report (https://lnkd.in/ewmKnpYv) highlights the growing challenge that insurers, the insured and society face with cybersecurity and cyber attacks. Cyber pricing seems to cloud loss ratios, current risk modelling is ineffective (RoB), accumulated losses are difficult, almost impossible to model. A great picture on page 21 demonstrate supply chain interconnectivity (Australia must be considering this today – timely picture on page 20). The massive increase in software supply chain hacks (AKA Okta, SolarWinds – scary picture on page 25).
One finds it concerning that we continually seek to model cyber risk forward, using loss data. We wrote in 2022 that cyber was economically uninsurable and since written the need to close the risk transfer gap. Insurance alone is not the answer, in fact one suspects that cyber insurance will play a minimal role in cyber risk management. Cyber regulation is transferring cyber risk back to financial statements. (https://lnkd.in/eM4guVCb). The effects of cyber attacks are simply to big for insurers and government to cover (Australia port hack, ICBC bank hacks). There’s not enough capital in the market to underwrite cyber risk and why would an investor back securities tied up in a risk that cannot yet be managed by the insured? One wonders the effect of last weeks cyber attack on ICBC and market sentiment for cyber securities.
Cyber is a difficult and complex risk to manage, but what are the alternatives? Cyber is being regulated, driving cyber Left of Bang and forcing boards to proactively manage cyber risk. Transferring cyber risk to financial statements and away from the reliance on cyber insurance. Reducing the cyber protection gap and generating LoB data for insurers.
There are very few ways to address the cyber risk gap. We proposed solutions to address the challenges insurers and the insured face here (www.augusatgrp.com). In part cyber regulation starts the risk transfer process ball rolling.
Ted Dziekanowski Brian D. McCarthy Rachel V. Rose, JD, MBA Bob Dix
#paravasecuritysolutions #cyberriskmanagement #cyberinsurance #cybersecurity
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