Cyber offering must evolve into new risks: Guy Carpenter
Diversification is essential for evolving the cyber insurance market, yet expanding the cyber remit beyond data confidentiality and further into areas such as operational technology risk, data availability and integrity demands a common cyber risk currency, according to Morley Speed, managing director, and Carolyn Morley, chairman, global casualty, Guy Carpenter.
“Confidentiality and data breach have been the focus of the US cyber market for a number of years, primarily due to regulatory requirements,” Speed said.
“While business interruption-related cyber cover is more prevalent in the international arena, the implementation of the EU General Data Protection Regulation and plans for a new UK Data Protection Bill will drive greater focus on data confidentiality, especially given the provisions in the legislation for fines of up to 4 percent of global revenue.
“The industry needs to expand further into risk areas such as operational technology (OT), which is a major issue for sectors such as manufacturing and an area where we are seeing an uptick in customer demand.
“While data breach can be packaged due to the growing credibility of per-risk modelling capabilities and the fact that such attacks tend to be company-specific, OT risks, particularly in an ‘Industry 4.0’ environment, have a much greater systemic potential.”
Using the analogy of property catastrophe, Morley explained that an efficient market provides significant capacity based on a common currency of risk.
“This identifies the impact of a given ‘event’ on risks within an exposure zone, taking into account their resilience. This currency is embedded in contract wordings, modelling, rating and capital allocation throughout the insurance and reinsurance value chain,” she said.
Speed added that such currency is crucial to understanding the intrinsic value of data.
“Current cover can protect against data reconstruction costs, but often that does not cover the true ‘nebulous’ value of the data. If it has been compromised, the information may be worthless,” he concluded.
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