‘Silent’ cyber… you’ve most likely heard about it, and full-service global reinsurance broker Capsicum Re sure has – partnering with catastrophe modeling firm AIR Worldwide to take on the risk.
Verisk business AIR Worldwide continually collects data for its cyber risk models, and teaming up with Capsicum Re promises the benefit of unique insights to identify and evaluate silent cyber exposures. The joint effort is aimed at enhancing the cover sector’s modeling of such perils.
In addition, the brokerage has adopted AIR Worldwide’s cyber risk modeling and analytics platform called ARC, which includes a wide range of cyber scenarios and models.
“Given the rapidly evolving nature of cyber risk, it’s likely that insurance policy wordings will be challenged to keep up, and some forms of silent cyber exposures could always exist,” noted Ian Newman, global head of cyber at Capsicum Re. “Our goal is to better advise insurers and reinsurers about the nature of cyber risk and help the industry develop innovative risk-transfer solutions that truly reflect the underlying risk exposure.
“We’re excited to work with AIR to improve our industry’s ability to understand and manage silent cyber risks.”
Scott Stransky, assistant vice president and director of emerging risks modeling at AIR Worldwide, concurs and believes the models to be developed in collaboration with Capsicum Re can aid in assessing and quantifying silent cyber exposures appropriately.
Explaining the silent but deadly threat, Verisk vice president of cyber offerings Prashant Pai said: “Silent cyber exposure could exist in some insurance policies when cyber-related risks are not specifically included or excluded in the policy wording. As a result, it’s possible the insurance industry could face higher-than-expected loss ratios when cyber incidents occur if certain cyber-related exposures are not necessarily accounted for during the underwriting process.”
Meanwhile equally optimistic about what the partnership will bring is Capsicum Re actuary Justyna Pikinska.
“Silent cyber is an area of growing concern, and the market is actively researching different ways to quantify it,” commented Pikinska. “It’s widely discussed by the actuarial community, and we see a significant uptick in requests for specialized models to be developed – both deterministic and stochastic.
“We have a great opportunity with AIR to develop a reliable probabilistic model to assess the volatility around the mean and quantify the probability of extreme cyber events.”