Insurers face stretched balance sheets from cyber aggregation
The interconnectivity of devices and Internet of Things (IoT) can adversely impact insurers’ balance sheets and portfolios due to the nature of cyber risk aggregation.
This is according to Matt Webb, global head of cyber at Hiscox, who spoke to Intelligent Insurer about how this space is creating new challenges around modelling these aggregated exposures.
He refers to it as ‘the ripple effect’, where a single point of failure in key technological infrastructures has the potentially to initiate a chain of events.
The impact is often felt by a number of other companies, some of them quite high profile, which can lead to stretched balance sheets.
Cloud providers such as Amazon are a big area of focus for Hiscox, as their services are used by over 100,000 different companies. Services providers such as these are then used in the modelling of aggregated exposures.
Webb suggested that even if insurers do not write specific cyber insurance, they will have a big exposure to cyber-related losses within their existing line of business.
He stated that insurers have a responsibility to know what cyber exposure they are running across all lines of business and to ensure that it flows into their aggregation modelling.
For a wider view of aggregated cyber risk, along with research into how prepared firms actually are against cyber-attacks, click here.
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