The EastWest Institute (EWI) today released a new report: Cyber Insurance and Systemic Market Risk—developed to provide a framework to better understand and address the systemic nature of cyber risk and the challenges it presents to the burgeoning cyber insurance industry. The report features an overview of the current state of the cyber insurance market along with proposals to help the market mature in a healthy, stable manner while promoting increased cybersecurity.
The report outlines a definition of systemic cyber risk and the mechanisms behind the probability of contagion, emphasizing the role of the insurance industry, risk management firms and governments to ensure sufficient insurance capacity in the event of a cataclysmic cyber incident that impacts markets and consumer confidence globally.
Four recommendations to enhance the ability of the cyber insurance market to support cyber resilience efforts, guard against systemic risk and mitigate losses include the following:
- Enhance cyber insurance underwriting ability
- Promote a strong and healthy market with positive impacts on society
- Increase transparency and uniformity in underwriting language
- Establish a government backstop to increase capacity to handle a major, multi-market loss
The report is a product of the EastWest Institute’s Global Cooperation in Cyberspace program, and was authored by Davis Hake, Andreas Kuehn, Abagail Lawson and Bruce McConnell, with expert input provided by Arceo.ai, Marsh & McLennan Companies and Microsoft.