Bespoke approach to cyber ILS will help parties get comfortable: CyberCube’s Baker

Cyber risk is often touted as a potential area of participation for the insurance-linked securities (ILS) space, but owing to its nature, it might be wise to adopt a more bespoke approach to begin with, according to Brittany Baker, Director of Technical Sales at CyberCube.

We spoke with CyberCube’s Baker recently as part of our series of showcase sponsor video interviews for the April 22nd Artemis ILS NYC conference, held in New York City.

During the discussion, she explained that while CyberCube is a leading expert in cyber risk modelling, it would be naïve to say the firm has a definitive vision for the cyber ILS market at this point.

“I think there’s a lot of room to continue figuring out how to best bridge the gap between the investors and the traditional insurance industry still,” said Baker.

As an example of the work that’s required, Baker said that when thinking about structuring a cyber ILS transaction using a parametric trigger, outage based cyber perils are the only clear use case she can see at this time.

When it comes to malware or widespread data loss, “there isn’t such a clear path to having reporting functions that both sides can agree upon at this point,” she said.

Adding, “And, so, I think, just due to the nature of that, perhaps it is starting in a way that’s more bespoke backed by models like CyberCube, but leaving open to the possibility of moving towards more standardized traditional vehicles in the future.

“I think starting this way will allow parties to agree on areas where they both feel comfortable, and use models to really agree upon event definitions from the actual peril scenarios, through the blast zones of an event and on to the actual severity impacts.”

From what Baker has heard, a main reason transactions have failed to come to fruition over the past 6-12 months has been even just agreeing on the definition of the event, which highlights the complexity of the risk and the need for comfort across the chain.

“So, that feels like a place where we start and potentially as we develop and really agree on the analytics and the data underlying it, as we get more of it, potentially moving on to a more traditional space,” said Baker.

Hear more on how re/insurers are embracing insurance-linked securities at the upcoming Artemis ILS NYC 2022 conference in New York on April 22nd (get your ticket today).

For details and to register for the conference, visit the event website: www.artemis.bm/ils-nyc-2022/.

The full video interview is embedded below and can also be viewed in full, along with previous Artemis Live video interviews here.

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You can also listen in audio to our interviews by subscribing to the Artemis Live podcast here.