Best’s Special Report: Cyber Catastrophe Stress Test Gauges Potential Impact on Segment Leaders in a More-Developed Future Market
In the new Best’s Special Report, “Cyber Insurance Market: Stress Testing the Future,”
Using two scenarios as described in a Lloyd’s 2017 emerging risk report — a cloud service provider interruption and mass vulnerability —
The report notes that gross losses under the 1-in-50 and 1-in-200 scenarios do not take into consideration ceded reinsurance arrangements to which these companies may be party; however, the analysis also does not take into consideration companies’ silent cyber exposure (i.e., when perils are neither specifically included nor excluded), which potentially could be significant.
“For the majority of these companies, even the gross losses do not come close to the natural catastrophe probable maximum loss estimates used for stressing the balance sheet strength of the companies,” said
”Cyber risk inherently will span multiple functional skill domains, requiring expertise from claims, underwriting, actuarial and enterprise risk management, and making the process truly a team effort across an insurer. Addressing the talent gap will be a critical aspect of risk management,” said Sridhar Manyem, director of industry research and analytics.
Stress-testing cyber risks against a company’s balance sheet to confirm that the cyber portfolio does not pose capital stresses, and an evaluation of risk mitigation strategies, such as selective underwriting, reinsurance, establishing risk preferences and risk pricing, will be key aspects of A.M. Best’s review of an insurer’s approach to managing cyber risk.
To access the full copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=277047.
A.M. Best’s
Copyright © 2018 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.
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Sridhar Manyem, +1 908-439-2200, ext. 5406
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