Systemic cyber risk too big for private market: Ferma
Federation of European Risk Management Associations calls for collaboration following the launch of an industry paper jointly released by Ferma alongside other industry participants, including Lloyd’s, Marsh, Axa and Munich Re
The insurance industry needs to collaborate with the public sector to create risk-sharing models, European risk managers’ association says
Cyber war and systemic cyber risks are too large to be absorbed by the private market, the European body representing risk managers said.
Philippe Cotelle, vice-president of the Federation of European Risk Management Associations (Ferma), called for more public-private co-operation on solutions for dealing with systemic cyber and cyber war risks.
He added the industry needs to work with public authorities to create test scenarios to help create risk-sharing models between the public and private sectors.
“Clearly [cyber war and systemic cyber] are too large to be just absorbed by the private market and there is a real threat the cyber insurance product [might] not be able to face catastrophic losses and we want to avoid that kind of uncertainty,” he said.
Speaking to journalists, Cotelle said: “We don’t have the luxury of decades of testing the different coverages across different jurisdictions, so we really need [public authorities] to agree on some test scenarios, [so we can] evaluate and identify more precisely the different boundaries [around] risk sharing among all the different parties.”
This was echoed by Martin Kreuzer, senior risk manager for cyber risks at Munich Re, who said there were limits to what data modelling could do to manage systemic risks.
“We strongly advocate [for the improvement of] risk assessment, risk quantification and understanding of the underlying exposure. Having said this, that kind of risk modelling… reaches its limits,” he said.
“As we all know, neither insurance nor reinsurance alone can absorb this whole bunch of risks, especially risks that [can’t] be modelled, but also [can’t] be transferred, like cyber war or a catastrophic cyber event that might have a global impact,” he said.
Their comments came following the launch of an industry paper jointly released by Ferma alongside other industry participants, including Lloyd’s, Marsh, Axa and Munich Re.
The paper calls for greater collaboration across the spectrum of cyber insurance issues, from policy wordings to underwriting practices and claims processes.
It also argues for the creation of a standardised baseline questionnaire to be used by underwriters, as well as broader sharing of cyber claims data.
