CyberGuide - Information Security and Cyber Risk Management

Cyber-loss modeling: prevention over prediction?

By Rebecca Gainsburg, Advisen

Prevention is the next step to modeling cyber losses, as underwriters increase their reliance on data-driven models for accurate assessments of cyber risk, according to experts speaking at Advisen’s Cyber Risk Insights Conference, held virtually on Oct. 19-21.

Insurers that are merely quantifying the likelihood of major cyber loss events should “wonder where they’ll be in three years,” in comparison to managing general agents’ focus on preventing cyber events from happening with a proactive technology approach, said Scott Hammesfahr, solutions consultant at Guidewire Cyence.

“Our eyes aren’t closed waiting for the dice to roll. When something happens, you can prevent the 1-in-100 [event] from happening by taking the right actions,” Hammesfahr continued.

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The aggregation and proliferation of cyberattacks, especially supply-chain losses, are only expected to get worse. Surprise is a key element to these attacks, meaning people need to be constantly on the lookout for the next big event – even when one is occurring, according to the panelists.

The panelists reported seeing insurers dig deeper for a better understanding of cyber risk with an enterprise-level view across their entire portfolio.

“Clients are now starting to ask, and want to understand, which markers or which combination of markers are truly most predictive of loss based off of their own claims experience,” said Bethany Vohlers, vice president of Verisk Cyber Solutions. “It’s an industry-wide effort, to want to push for that data.”

Data-driven models can be helpful even after a loss has occurred. As cyberattacks evolve, it’s helpful for reinsurers to see that insurers adapt in response.

“Even if you had a loss experience, if you can apply modeling data and say that you have a new underwriting strategy, add it to your portfolio with the new modeling data,” said Ho-Tay Ma, vice president of professional liability at PartnerRe. “That is very helpful for a reinsurer to support different capacity.”

Data Journalist Rebecca Gainsburg can be reached at [email protected].