ILS for cloud outage can be a game-changer for cyber insurance: Parametrix

Cyber insurance’s growth and capacity have historically been stymied by concerns over large accumulation risks, particularly cloud outages. MGA and Lloyd’s coverholder Parametrix now identifies ILS risk transfer as a potential game-changer.

In an era of digital transformation, where businesses are increasingly dependent on the cloud, catastrophic cloud outages have emerged as a significant concern for the insurance sector. Sharon Haran (pictured), chief commercial officer at Parametrix, provides insights into this evolving landscape.

“You don’t need Amazon Web Services to go down to generate a massive loss to the industry.” Sharon Haran, Parametrix“Industry players are showing increasing interest in crystallising and understanding their cloud outage exposure. There’s more willingness to learn about modelling and getting the expertise to address this emerging risk,” Haran shared with Intelligent Insurer at the Monte Carlo Rendez-Vous.

“Insurance-linked securities (ILS) investors are recognising the real necessity for risk transfer solutions specific to cloud outages. Their openness to discussing cloud outage ILS is totally different from what it was three years ago,” he added.

Haran highlighted a nuanced shift in re/insurers’ approach to cyber cat exposures. While the market has “significantly softened” and there’s a growing appetite from re/insurers to take on cyber risk, caution remains, especially around systemic risks such as cloud outages.

“Many insurers are trying to put weather exclusions and extending waiting periods to mitigate their exposure to cloud outages. Some are even considering classifying the cloud as critical infrastructure, thereby excluding it from cyber insurance coverage,” he explained.