A recent survey by the reinsurance arm of brokerage Willis Towers Watson, Willis Re, reveals that over the coming year the risk of “silent cyber” exposure has the potential to increase, although uncertainty remains across the risk transfer industry.
Silent cyber refers to potential cyber-related losses from an insurance policy not specifically designed to protect against cyber risk, and Willis Re’s latest survey on the issue underlines an expectation that this threat will grow in the months ahead.
Head of Global Cyber Risk at Willis Towers Watson, Anthony Dagostino, commented; “Buyers of insurance have to consider the exposure that they have in relation to the rising prominence of cyber-related incidents. The results of the survey have reinforced the need for a holistic cyber risk insurance strategy and tailored insurance policies to address the risk adequately.”
A silent cyber loss could come from a cyber-attack on an industrial plant’s control system that results in a boiler explosion, which leads to widespread property damage and also business interruption losses, explains Willis Re.
The reinsurance broker continues to explain that although a policy payout will depend on contract wordings and occurrences, silent cyber threats, like the example above, “can push up loss ratios” on policies that aren’t actually designed to protect against the growing threat of cyber risks.
The survey reveals that over the next 12 months roughly 50% of respondents feel the risk of a silent cyber loss from either property or other liability was higher than 1-in-100, with around 25% viewing the risk as greater than 1-in-10. Willis Re states that this underlines the uncertainty across the insurance and reinsurance industry regarding the potential for silent cyber losses.
Mark Synnott, Global Cyber Practice Leader, Willis Re, added; “The degree of concern over silent cyber exposure has confirmed the importance of the existing support we are giving to clients to help them better manage their known and unknown cyber exposures.
“Over the last two years, our PRISM-Re modelling tool has allowed us to help underwriters and reinsurance buyers manage their entire cyber portfolio more effectively by identifying contagion risks, monitoring shifts in risk profiles and tracking their risk-adjusted pricing. The results of our survey will help us calibrate PRISM-Re to accommodate silent as well as known cyber exposures.”