Cyber‑Catastrophe Insurance

Cyber crime exists and hurts financially, partly because it is difficult to insure. One Long Finance proposal is Cyber Reinsurance (Cyber Re). The proposal originated in frustration at widespread inaction by authorities to cyber-enabled thefts on the carbon markets, though an earlier version was proposed during Y2K/Millennium Bug preparations.

Why don’t we have a public-private Cyber Reinsurance scheme (or extend an existing scheme e.g. Pool Re) where government helps the insurance industry fund the extreme losses of cyber-risk? As an example, government takes responsibility for business interruption risks above a point, say £100m. Below that point normal insurers write cyber policies which help spread information and best practice and bear the risks up to £X million on any single incident, or £Y million on combined incidents.

It is likely that the business interruption model might be most appropriate. A good example of business interruption or “loss of earnings cover” is The Strike Club, originally for industrial dispute insurance but now providing a wide range of business interruption insurance to shippers, fleets, ports and facilities. In a simple business interruption model, the client states in advance how much a day’s outage will cost and this both sets the premium and the claims, e.g. a day’s outage costs £5m, the retention is the first 2 days, followed by payments for the next 10 days, for a premium of £500,000. When claims are made the estimated day’s outage costs must be reasonable, but otherwise the model is simple.

Related Reports

2018: Cyber-Catastrophe Insurance-Linked Securities On Smart Ledgers

2015: Promoting UK Cyber Prosperity: Public-Private Cyber-Catastrophe Reinsurance

http://cyber-cat-ils.longfinance.net/ shows you a live cyber index as well as a demonstration of how the polling 'triggers' a live ILS

Related Articles

• 28 July 2015: Promoting UK Cyber Prosperity: Public-Private Cyber-Catastrophe Reinsurance. Long Finance report prepared by Z/Yen Group in collaboration with APM Group.
• 22 April 2014: Why The City Needs Realistic Cyber Insurance. Michael Mainelli, Financial Times, Pearson plc.
• January 2013: Learn From Insurance: Cyber Bore, Michael Mainelli, Journal of Risk Finance, Vol.14 (No.1), Emerald Group Publishing, pp.100-102.
• December 2012: Cyber's Empty Space, Michael Mainelli, Financial World, IFS School of Finance, page 39.
• 16 July 2012: Cyber Solutions: Technology Or Finance?, Michael Mainelli, Secure Thinking, BT.

Related Events

• 18 January 2016: "Promoting UK Cyber-Prosperity Through Economics", presentation by Michael Mainelli at Gresham College, London.
• 3 September 2014: "How Governments & Industries Can Jointly Address Cyber Risks: The Case For Cyber Reinsurance", presentation by Michael Mainelli 32 International Symposium On Economic Crime, University Of Cambridge.
• 26 February 2014: "Cyber Reinsurance", presentation by Michael Mainelli at Royal Society, BT, ICT KTN's conference "Policy & Strategy In A Global Cyber World", London.
• 23 October 2012: CSFI Round-table, "Cyber Threats To Financial Services", London.

In the Media

• The Post (31 July 2015): "Pool Re Boss Raises Prospect Of Separate Cyber Reinsurance Scheme"
• Business Insurance (31 July 2015): "Report Urges Public-Private Cyber-Catastrophe Reinsurance Scheme"
• Canadian Underwriter (31 July 2015): "Public, Private Cyber Catastrophe Reinsurance Scheme Would Add Clarity To U.K.'s Cyber Insurance Market, Encourage Take-Up: Report"
• Share Radio (31 July 2015): Michael Mainelli interviewed on Morning Money.
• Insurance Journal (31 July 2015): "Public-Private Catastrophe Scheme In UK Would Help Mitigate Cyber-9/11: Study", by Lisa Howard.
• Out-Law.com (30 July 2015): "Public-Private Cyber Reinsurance Scheme Called For By Think Tank"
• Business Insurance (29 July 2015): "Cyber Catastrophe Reinsurance Plan Would Improve UK Resilience"
• SC Magazine (28 July 2015): "Can Cyber-Catastrophes Be Insured Against?", by Tony Morbin.
• ComputerWeekly (28 July 2015): "UK Cyber Insurance Report Recommends Reinsurance Scheme"
• Artemis (28 July 2015): "Cyber Catastrophe Bonds & A Public-Private Sector Solution"
• ComputerWeekly (23 July 2015): "Is Big Data Leakage The New Asbestosis: Uninsurable? If So ...", by Philip Virgo.