8 October 2014 Insurance

Aon likens cyber risk to time bomb

If the industry is to remain sustainable and support clients it must find ways of staying relevant as traditional risks increase and non-traditional risks present new threats.

This is according to Lambros Lambrou, chief executive officer for Aon Risk Solutions in Australia.

“Many of the risks that businesses list as their most pressing are uninsurable within current policy structures, which is both disappointing and cause for real concern,” he said.

He added that the industry is very sophisticated in handling smaller risk where there is a wealth of data and experience but when something goes wrong, it is likely to be catastrophic.

“However, when something goes wrong outside established “comfort zones”, while it may be less frequent, it is more likely to be catastrophic. And the truth is that the risk industry has struggled to develop strategies relevant to clients’ needs in the catastrophic risk space,” said Lambrou.

Part of the problem, he suggests, was that the industry looks to the past as a guide. But this practice can lead to a failure to innovate as required to address new or changing risks which fall outside of what is routinely offered.

Stephen Cross, chairman of Aon Global Risk Consulting and Aon Centre for Innovation & Analytics in Dublin, said that cyber risk is a prime example of a new and changing risk requiring innovation.

“Cyber risk is to our industry what asbestos was to the building industry, a ticking time bomb just waiting to explode,” Cross said. “Insurers and brokers alike should take a long hard look at the traditional distribution model we’ve lived with for years. Peer-to-peer lending, peer-to-peer sharing of risk and even crowd-sourcing of insurance policies and capital could change the way we do business forever.”

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