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A.M. Best Applauds Relevance of Lloyd's/Cyence Cyber Exposure Report

July 20, 2017

A.M. Best commented in its own special report that a recent joint cyber exposure report by Lloyd's and Cyence that aims to provide cyber insurance providers with plausible and realistic scenarios to evaluate their cyber risk accumulations represents a positive step forward in developing consistency in the measurement of cyber exposure.

In its Best's Special Report, “A.M. Best Comments on Lloyds-Cyence Cyber Catastrophe Report,” A.M. Best states that the Lloyd’s-Ceyence report is timely, as the development of tools that support insurers’ ability to understand and manage the aggregation of cyber risk across their portfolios is vital. A.M. Best expects companies underwriting cyber insurance to provide detailed and credible assessments of potential loss accumulations as the materiality of the companies’ exposures relative to capital grows.

In the joint report, Lloyd's, one of the largest writers of cyber insurance, and Cyence, a cyber risk analytics firm, brought together expertise in cyber security, economic risk modeling, and cyber insurance. Cyence also undertook a process to generate event scenarios, challenge assumptions, and produce loss estimates. In its loss scenarios, insured losses as a percentage of overall economic losses ranged from 7 percent to 17 percent. While these insured portions are relatively low, cyber exposures will become more critical to A.M. Best's rating process as cyber insurance premiums and limits rise. Ultimately, A.M. Best believes this type of collaboration by cyber modelers and insurers, with each focusing on some of the many other aspects and scenarios of this difficult risk, is a positive step forward for the cyber insurance market.

Copyright © 2017 A.M. Best Company, Inc. and/or its affiliates ALL RIGHTS RESERVED

For more on this topic, read the articles "New Research Examines Cyber Threats and Costs to Industry Sectors," "Systemic Cyber Attacks Likely in 2017, According to AIG Cyber Risk Study," "More Than a Quarter of US Firms Not Planning To Buy Cyber Insurance," "Ransomware Attacks Quadrupled in 2016 and Are Expected To Double in 2017," and "Cyber Crime in Switzerland: Sharp Upturn with New Threats".

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