AIR Worldwide and Capsicum Re are to develop a silent cyber modelling capability, whereby the two firms will identify which non-cyber lines of business and industries are more likely to be exposed to silent cyber-related losses.

“Silent cyber exposure could exist in some insurance policies when cyber-related risks are not specifically included or excluded in the policy wording,” said Prashant Pai, vice president of cyber offerings at Verisk. “As a result, it’s possible the insurance industry could face higher-than-expected loss ratios when cyber incidents occur if certain cyber-related exposures are not necessarily accounted for during the underwriting process.”

There is a great deal of uncertainty surrounding cyber risks, and it is hoped these models will help the insurance industry more appropriately assess and quantify silent cyber risks.

“Given the rapidly evolving nature of cyber risk, it’s likely that insurance policy wordings will be challenged to keep up, and some forms of silent cyber exposures could always exist,” said global head of cyber at Capsicum Re, Ian Newman. “Our goal is to better advise insurers and reinsurers about the nature of cyber risk and help the industry develop innovative risk-transfer solutions that truly reflect the underlying risk exposure."

The silent cyber models are expected to be available in upcoming versions of ARC and through Capsicum Re’s broking service. AIR currently offers deterministic modelling capabilities for cyber risks, which are available within ARC. AIR has been offering probabilistic modelling capabilities for cyber through bespoke consulting services. Probabilistic modelling is expected to be built into the general availability (GA) version of ARC later this year.

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