As if 2020 and the global health crisis of COVID-19 were not enough, there is another scary factor at play…Cyber Risk. Cyber-attacks are on the rise and in the news. Earlier this month between 800 – 1,500 businesses across the globe were affected by an attack aimed at a US Security firm and there is no sign that this trend will end anytime soon.
For insurers, increased digital engagement and the increase of remote work means increased risk and the need to understand these threats in order to protect themselves. Some may think “it can’t happen to us” or “how bad could it be?” Here are some frightening statistics: 66% of companies affected by cyber-attacks suffer significant revenue loss with and average downtime of 21 days due to a ransomware attack.Nervous yet?
A hot topic in the cyber insurance market is reinsurance capacity and retrocession needs. Risk and changing regulations must be closely monitored for carriers to reinsure themselves and protect against cyber threats. There is also the opportunity to offer protection to a variety of businesses with risk-specific products like privacy liability, extortion, business interruption, data restoration and remediation costs.
How to know how much is at risk?
Reinsurance can protect, but only when proper evaluation of risk is determined. At issue, cyber risk modeling is new and cannot rely on historical data and existing actuarial models and ratings measure. What’s a company to do? Newly developed modeling tools can quantify risk exposure, typically by analyzing use of commercial software, security controls and third-party services. Using a range of simulated events, financial calculations can provide a summary of potential damage to the reinsurer’s portfolio. With these tools, cyber risk exposure can be quantified, allowing proper pricing of reinsurance contracts.
Understanding exposure is key to the increasing and evolving landscape of cyber risk. Having the tools to navigate this terrain can help insurers manage their risk and reinsurance policies. With no end in sight for the world of cybercrime, every insurer needs to make sure they are protected.
Learn more about Sapiens reinsurance solutions.