What Makes High-Performance Teams Standout
The success or failure of a business depends upon the composition of the team members and how motivated they are. For making the High-Performance Teams standout and deliver their best of the performances, a leader should pay attention to the following key factors: Definition and Articulation of the Vision to the Team Members: This is […]
Role of Public Administration in the Modern State
The critical role of public administration as defined by John Rohr (a leading scholar of the US Constitution and its relation to public administration and civil servants) is governing the society. The authors have also argued that a government can exist without a legislature, even without a judiciary but never without administration. The government will […]
Understanding Team – What is a Team?
Let us first go through a simple real life situation. John was working as a key accounts head with a leading advertising firm. He had four members reporting to him. Unfortunately he always under estimated his team members and fought with them constantly. He could never trust them and always thought they were incapable of […]
Disadvantages of Using the Value at Risk (VaR) Model
The value at risk (VaR) model has several advantages, which is why it is used widely in different parts of the world. However, the model also has some very distinct disadvantages. The existence of these disadvantages does not mean that the model should not be used. It is still one of the best tools at […]
Effective Writing for Results
While writing to a friend, colleague, client, or a business partner, the content must be clear, concise, persuasive, accurate, and confident. Read on to know some tips for making the letter/memo/presentation worthwhile. Avoid being verbose: Choose shorter words and sentences. For e.g. “I wanted to bring to your notice that the meeting has been cancelled”. […]
The global business environment has turned increasingly digital in the pasts few years. It is very common for businesses across the world to conduct most of their business online. This includes transacting with customers, employees, suppliers, and even the government. It is for this reason that the role of computers has drastically increased within the business environment. However, this rapid adaptation of cyber techniques, which was accelerated by the coronavirus pandemic also carries several risks.
In this article, we will have a closer look at some of the cyber risks and how they affect the reinsurance business.
Before we begin discussing further, it is very important for us to clearly quantify what is meant by cyber risk. This is because of the fact that computers have proliferated in our lives. As a result, they impact businesses in multiple ways.
It is important to have a clear idea about the type of business disruptions that could be caused in order to understand the quantum of cyber risks. Some of the prominent examples of cyber risks have been mentioned below:
It is common for companies to store personal and financial data related to their customers, suppliers, and other such entities as part of their regular day-to-day operations. This makes these companies vulnerable to financial liabilities in case this data gets stolen from their servers.
In the past few years, mega-corporations such as Facebook and Marriott have found themselves liable for financial losses because of the loss of data from their servers.
The flight schedules of all the airplanes as well as the customer data are stored on computers. In such cases, technology disruption can cause business operations to come to a grinding halt. There have been instances in the past where cyber failures have created situations leading to the grounding of airplanes which has led to financial losses.
Insurance and reinsurance can only protect companies from losses once the accurate amount of money at risk is determined. However, in the case of cyber risks, it is difficult to come up with an accurate estimation of the risk involved. This is because generally insurance and reinsurance companies turn to empirical data for risk modeling.
If a larger set of past data is used, then the research is considered to be more thorough. However, in case of cyber risks, such data is not available. Hence, it is not possible to predict cyber risk using traditional means.
Reinsurance companies have developed their own new methodologies to help them ascertain cyber risks. However, a lot of these methodologies remain untested because they have only been around for a short period of time.
Ceding insurance companies cover cyber risks in various forms. An elementary level of risk is covered within the regular contracts. At the same time, a separate cyber risk contract needs to be created in order to cover the more detailed risks.
It is important to note that ceding insurance companies are less sure about the probable losses that may arise because of this risk. As a result, most of this risk gets passed on to reinsurance companies.
Studies conducted by industry bodies have shown that almost 40% of the premiums collected to mitigate cyber risks are passed on to the reinsurance company. This is in stark contrast with about 10% of the insurance premium that ceding insurers pass on to reinsurance companies in the case of other lines of business. This effectively translates into the fact that cyber reinsurance is likely to be the growth engine of reinsurance companies in the future. Hence, the cyber risk management business is very important to reinsurance companies across the globe.
The fact of the matter is that cyber reinsurance is both a risky as well as a profitable venture. The ability to profitably provide cyber reinsurance coverage will be the differentiating factor in the future.
Your email address will not be published. Required fields are marked *
