2022 cyber event could result in major losses of policyholder surplus
Cyber insurance market premiums globally are on pace to grow to $14 billion by 2022.
Three of the top cyber insurance providers’ gross losses could range from 15% to 119% of their estimated 2022 policyholder surplus in a single-event cyber catastrophe event, according to a report published by A.M. Best, “Cyber Insurance Market: Stress Testing the Future.”
The report, using data analysis from Guidewire Software Inc., extrapolates market trends to test and estimate the impact of future cyber attacks on the industry’s capitalization and ratings.
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Stress testing cyber scenarios
In the test, five typical policy profiles were created, each with specific attributes such as policy limits and line of business minimums. Data was applied to the modeled cyber portfolios of the top 20 insurance carriers to model their gross loss potential in two scenarios: cloud service provider interruption and mass vulnerability.
In the first scenario, numerous cloud-based customer servers fail, leading to widespread service and business interruptions. In the second, a common software application is compromised on a global scale.
In addition to the two event scenarios, annual gross losses that could occur over a 12-month period as a result of all events were assessed. At the 1-in-200 event level, five companies incurred gross losses ranging from 11% to 233% of their 2022 policyholder surplus.
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Supporting a burgeoning market
Cyber insurance market premiums globally are on pace to grow to $14 billion by 2022, and the report’s goal was to provide clarity on the potential impact of this growth on insurers and to provide risk management guidance to support the market.
“Advanced analytics and risk modeling are imperative for effective underwriting, pricing, and accumulation to ultimately drive a sustainable cyber insurance marketplace,” George Ng, chief data officer for Guidewire, said in a statement.
A full copy of the special report can be found on A.M. Best’s website.
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