In an era dominated by technology, the specter of a cyber catastrophe looms large, posing a threat not fully comprehended. Companies are racing to bolster cyber resilience, and insurers are crafting solutions to these escalating risks.
In the Q&A, shared by Chubb, Michael Kessler, Vice President, Chubb Group and Division President, Global Cyber Risk, discusses the evolving insurance market for widespread cyber risks, including common misperceptions and solutions. Some takeaways below, with a link to the source at the end.
Defining Systemic Risk:
Kessler noted a significant industry challenge—the lack of a clear definition for “systemic risk.” Chubb defines it as a cyber incident causing widespread harm due to shared elements or commonalities, emphasizing the impact on multiple entities in a single act.
Challenges Faced:
The cyber insurance market faces three key challenges: lack of coverage clarity, inadequate pricing, and insufficient tracking of exposure. Chubb tackled these issues by offering a clear definition of systemic events, transparent pricing, and collaboration with modeling firms for consistent exposure focus.
Coverage and Exclusions:
Chubb’s policy covers widespread events, excluding war or infrastructure impairments. This clear-cut approach ensures businesses are covered in the absence of war or infrastructure-related causes, with defined terms preventing ambiguity.
Implications for Reinsurance:
Kessler delved into the implications for reinsurance, emphasizing the need for an evolution toward an event excess of loss basis. This approach, similar to models in other catastrophic events, increases reinsurers’ returns and enhances the overall efficiency of the cyber insurance market.
Marketplace Reaction:
Introduced almost two years ago, Chubb’s policy language has gained support. Clients appreciate the clarity, enabling more informed risk management decisions. The flexibility allows businesses to tailor coverage to their needs, opting for catastrophic coverages while self-insuring less concerning exposures.
Broader Adoption of Chubb’s Approach:
As a major player in global cyber insurance, Chubb advocates for the broad adoption of its approach. The company aims to break through barriers, leveraging decades of underwriting experience, data, and insights to develop solutions. A more uniform approach could benefit both buyers and reinsurers.
In summary, Michael Kessler’s insights underscore the need for a clear definition of systemic risk in the cyber insurance landscape. Chubb’s proactive approach, emphasizing clarity, transparency, and adaptability, serves as a model for the industry’s future, promising meaningful protections and efficiency in navigating the growing risks of cyber threats.
Source: A Better Way to Define and Insure Systemic Cyber Events
Other News: World Dodged 100 Potentially Catastrophic Hacks Over Past 6 Years: CyberCube (Opens in a new browser tab)