We are chairing a panel with Lloyds, Berkshire Hathaway, General Re, Marsh, and Willis Re on this important topic.
An important topic:
Shows the capacity of the insurance industry to price and cover areas that do not fit the standard definition of an insurable event.
Although the losses are obviously not fortuitous, traditionally one of the key criteria for insurability, we have still seen cover provided in other similar areas such as terrorism. However it feels like there is an even greater challenge here – technology is advancing so quickly and there seems to be a never-ending race to ensure system security stays ahead of attempts to defeat it. There is also a paucity of information on historical losses as well as continued ambiguity about the risk drivers are key concerns.
As to are the potential losses:
- The Equifax loss last year saw the exfiltration of 146m protected data records from the US / UK and Canada
- Direct costs to Equifax were $439m
- Insurance had a limit of 125m and deductible of 10.5m
- Equifax had to find 326m or 40% Operating Income to fund the losses
Scenarios such as this could be risk modellers dream (or nightmare) depending on how comfortable they are with ambiguity!
Although the session is focused on the accumulation threat (Cat), given general understanding we will also cover some background to the asset class and more general modelling and related issues.