Risk modelling and analytics firm RMS has expanded its range of cyber models to include scenarios where cyber-attacks can cause physical damage to property.
Building upon the existing suite of cyber models which focus on attacks against IT systems, RMS believes this will allow property re/insurance to manager this growing risk for the first time.
RMS suggests that cyber attacks intended to inflict physical damage are on the rise, and have emerged faster than insurers’ ability to update policies.
Five new risk scenarios have been identified, including cyber-induced fires in commercial office buildings; triggered fire in industrial processing plants; triggered explosion on oil rigs; cyber-enabled marine cargo theft from a port; and regional power grid outages.
This poses a systemic threats across portfolio as there are potentially multiple lines of business affected, the firm says.
“It is now a peril that can cause losses in traditional property insurance policies which are either ambiguous or silent about whether they will pay out for cyber-triggered losses,” RMS said in a press release.
Andrew Coburn, senior vice president of emerging risks at RMS, added: “In the past two years, we have seen attacks that have damaged industrial plants, shut down building control systems, and caused power grid failures – all achieved by hackers targeting control systems that are linked to the internet.
“Insurers have begun to understand the risk of cyber-attacks on information technology (IT) systems, for example financial theft, data extraction and cyber-extortion. But with the rise of the Internet of Things, more devices are connected to computer networks which opens up new vulnerabilities for hackers to exploit. They can target operational technology, and thus the essential fabric of any business – even its bricks and mortar.”
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RMS, Cyber, Risk Modelling, Property, London, UK