Is the reinsurance industry conducting enough research to understand future cyber risk, asks Drew Bartkiewicz
As businesses large and small become increasingly Internet and technology dependent, the insurance industry should take note of the disturbing clouds on the horizon for unforeseen cyber risks.
The first step in predicting this cyber storm’s path is to understand where the disturbance has already inflicted serious damage to business.
The art of insurance is to hedge capital against predicted business risks. It requires the knowledge to understand where risk intersects with opportunity.
Cyber risk provides significant opportunity for insurers, offset only by the responsibility to calculate what such risks really mean for modern businesses.
Technology-manifested disasters such as data spills, data leaks, and network outages are part of a new class of risk whose effects may be no less severe than those of a natural disaster. New concepts like cloud computing and social networks can turn a once isolated cyber event into a major incident, which few reinsurance markets have yet realised.
For example, in August, a glitch blamed on a software provider and the Federal Aviation Administration impacted more than 650 flights, costing the airline industry millions.
Not surprisingly, it raised the question: where does human error end and technology error begin?
Business and society are irreversibly technology-dependent, whether we like it or not – but is the reinsurance industry conducting enough research to understand future cyber risk? Is there a perfect storm of technology dependence and business risk that has yet to be manifested?
The insurance industry needs to research emerging subjects such as cyber law, data privacy, network security, and Web 2.0. Markets that have their head in the sand on these emerging risks may find themselves with major claims they never expected.
That outcome would perhaps make this the cyber storm one that few predicted and even fewer could avoid.
Drew Bartkiewicz is vice president for cyber and new media markets for The Hartford.