Abstract
The expansion of the cyber insurance market is constantly under the threat of an accumulation event that would simultaneously affect a large number of policyholders. Very few experiences exist on such catastrophes, apart from worldwide cyber attacks like Wannacry and NotPetya in 2017 (in a context where cyber insurance coverage was lower).
Nevertheless, the very nature of cyber risk makes the occurrence of such events plausible in the future. There is therefore a need for stress-testing in order to be sure that a portfolio can resist to such a crisis.
In this perspective, the EIOPA recently published methodological guidelines specific to cyber. One of the most concerning scenarios is the potential vulnerability of a cloud outage catastrophe, that is the failure of a cloud provider whose solution is shared by a significant part of the portfolio.
In the present work, we propose a way to model and calibrate such kind of cloud outage scenario. We also provide a way to measure the level of diversification of a cyber insurance portfolio, and how this diversification may protect against such events. A by-product of our methodology is to provide guidelines to underwriters to help reducing the vulnerability of a portfolio to these cloud outage scenarios.
Keywords: Cyber insurance, stress scenarios, cloud outage, portfolio optimization.
Sector: Insurance
Expertise: Cyber Insurance
Authors: Olivier Lopez, Daniel Nkameni
Publisher: Detralytics
Date: August 21, 2024
Language: English
Pages: 31
Reference : Detra Note 2024-3
About the authors
Olivier Lopez
Olivier is a professor at ENSAE in Paris (FR) and also co-director of the Master 2 in Statistics, Finance and Actuarial Sciences. He is a Qualified Actuary and has a compelling academic background developed in prominent universities.
At Detralytics, Olivier coaches young talents, provides cutting-edge training, fosters innovation and oversees R&D projects.
Daniel Nkameni
Daniel is part of the Talent Accelerator Program (TAP) at Detralytics. He is an associate actuary at the Institute of Actuaries of France. He has developed expertise in various areas of non-life insurance. His skills also extend to team and project management. As a TAP consultant at Detralytics, Daniel plays a key role in Research and Development (R&D), particularly in the context of his doctoral thesis focused on parametric insurance.
In addition to his work as an Actuarial Consultant at Detralytics, Daniel is currently working on a PhD thesis in parametric insurance applied to climate and cyber risks, in partnership with the CREST-ENSAE research laboratory.
