Tag Archives: Cambridge University Centre of Risk Studies

Mapping 500 Trillion Dollars of Insured Exposure

RMS has just completed a two-year exercise documenting all the different types of insurance that are available in the market and a classification system for all the assets that they protect. This is published as a data definitions document v1.0 as a standardized schema for insurance companies to have a consistent method of evaluating their exposure.

This project, in collaboration with research partners Centre for Risk Studies at University of Cambridge, and a steering committee of RMS clients, involved extensive interviews with 130 industry specialists and consultation with 38 insurance, analyst, and modeling organizations.

The project will enable insurance companies to monitor and report their exposure across many different classes of insurance, which globally today covers an estimated US$554 trillion of total insured value. The data standard will improve interchanges of data between market players to refine risk transfer to reinsurers and other risk partners, reporting to regulators, and exchanging information for risk co-share, delegated authority, and bordereau activities.

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Managing Cyber Catastrophes With Catastrophe Models

My colleague Andrew Coburn recently co-authored an article on Cyber Risk with Simon Ruffle and Sarah Pryor, both researchers at Cambridge University Centre of Risk Studies.

This is a timely article considering the cyber attacks in the past year on big U.S. corporations. TargetHome DepotJPMorgan and, most recently, Sony Pictures have all had to deal with unauthorized security breaches.

This isn’t the first time Sony has experienced a virtual assault. In 2011, the PlayStation Network suffered one of the biggest security breaches in recent memory, which is reported to have cost the company in excess of $171 million.

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Cyber attacks can be costly and insurers are hesitant to offer commercial cyber attack coverage because the risk is not well understood.

Andrew and his co-authors contend that insurers are not concerned with individual loss events, such as the targeted security penetrations we’ve seen recently on Sony and JP Morgan. It’s whether individual loss events are manageable across a whole portfolio of policies.

The biggest challenge in evaluating cyber risk is its inherent systemic complexity and interconnectivity. The internet, the technology companies that run on it, and the enterprises they serve are inextricably intertwined; shocks to one part of a network can quickly cascade and affect the rest of the whole system.

Can catastrophe-modelling methodologies provide the solution? Read the full article in The Actuary here.