The year 2020 brought a rapid change in the nature of cyber risk. As many global employees were forced to work from home due to national and state-level coronavirus shutdowns, cyber insurers saw a radical increase in cyber exposure. Ransomware activity, in particular, has seen a significant uptick, in addition to familiar threats such as data exfiltration and data breaches targeting health care, the public sector, and NGOs.
Last year reminded the industry of the very real potential for systemic risks and losses arising from a cyberattack, as well as the issues surrounding “silent” cyber cover. Models and other risk analysis tools continue to be critical for the cyber insurance and reinsurance markets in their ongoing development and ability to manage risk.
So RMS® has announced new updates to RMS Cyber Solutions Version 5.0 to reflect the latest view of the cyber risk landscape, including the new RMS Cyber Solutions Underwriting application. This application will allow users to efficiently price and select cyber risks without the need for large sets of historical in-house claims data. In addition, RMS rolled out the latest iteration of the RMS Cyber Solutions Portfolio Management application, which helps carriers to understand the extent of previously unquantifiable cyber risks on their portfolio(s). The tool helps users to understand cyber portfolio profitability and the levels of risk they run across the Exceedance Probability (EP) curve. This can be leveraged to drive strategies for the growth of their book of business, reinsurance purchases, and portfolio optimization.
RMS Cyber Solutions 5.0 incorporates the latest data and a multitude of scientific approaches to provide relevant and reliable cyber insights for cyber underwriters and portfolio managers. With its new model engine, Version 5.0 resolves output to finer granularity so users can “slice and dice” data to understand the various drivers of risk that could affect their portfolios.
To date, the task of pricing risks has been driven by prior claims experience. However, cyber is a new and ever-changing risk with limited experience, which must be taken into account. The RMS Cyber Solutions Underwriting application addresses the challenge of modeling cyber risks by leveraging a multitude of scientific methods and integrating large datasets from the RMS Cyber Incident Database (CID). The CID includes 100,000 data breach events, threat intelligence, dark web scanning, vulnerability management, and outside-in/cyber-hygiene scorers.
The combination of the new RMS pricing engine and portfolio management application is designed to drive consistency between a customer’s underwriting and portfolio management workflows. The RMS solution models a carrier’s entire cyber risk, accounting for attritional and single-risk large claims and catastrophe losses. This ensures that pricing considers loadings for the catastrophe risk. For example, these tools will help to identify the amount that must be added to average annual loss to cover catastrophic events, beyond one-off cyber events or even large (non-catastrophic) events.
Matt Harrison, director, product management, cyber, at RMS said: “Digital disruptions present new challenges for insurers as cyber incidents become more frequent, sophisticated, and financially damaging. While demand for cyber insurance continues to grow rapidly, insurers need solutions that support their strategies to allocate risk capital confidently and efficiently. The RMS approach to modeling cyber risk draws from over 30 years of RMS experience with modeling catastrophes, providing customers with a comprehensive and reliable way to manage cyber risk. Our experience teaches us that cyber insurers need transparency and to validate a model to comfortably use it for critical decision-making. Further, it is insufficient to only tell a customer how much risk they’re running; they need to understand the drivers of that risk to be able to make business decisions about it. RMS has made significant investments in the enhancement of our cyber modeling to meet these needs.”