Featured Product

    IAIS Report Reviews Supervisory Initiatives on Cyber Risk Underwriting

    December 21, 2020

    IAIS published a report that identifies the challenges affecting cyber-risk underwriting, along with the supervisory considerations for sustainable market development. The report highlights that current cyber-underwriting practices, while serviceable, are not yet optimal, particularly due to issues surrounding the measurement of risk exposures. Additionally, the supervisory intensity (such as frequency of assessment) and specific toolbox development (such as use of stress tests) are proportionate to the relative importance of the cyber-underwriting market, which is generally limited at this time. With a few exceptions, supervisors have not yet issued guidance on cyber-risk underwriting by insurers. Similarly, supervisory reporting on cyber underwriting is not yet widespread and comprehensive, even in jurisdictions with established regulatory reporting.

    Considering the potential scale and pace of the growth of the cyber insurance market and the ubiquitous and significant nature of cyber risk, IAIS has included cyber risk underwriting among the issues presenting opportunities, challenges, and risks related to its mission, with a view to assessing and responding to them in the context of its 2020-2024 Strategic Plan (under High Level Goal 1). As a preparatory step toward developing a strategic approach to how supervisory practices can foster sustainable cyber risk underwriting, in the second half of 2019, IAIS appointed a Cyber Underwriting Small Group (CUSG) of experts from its member supervisors and the Organization for Economic Co-operation and Development (OECDto conduct a stock-take exercise on the development of cyber-underwriting market, the supervisory framework and guidance on cyber-risk underwriting, and the supervisory capacity for monitoring cyber-risk underwriting in different jurisdictions. Cyber Underwriting Small Group was also appointed to prepare this report, to present findings and recommendations for a strategic approach and to identify possible follow-up work for consideration by the IAIS Executive Committee.

    The report highlights that modeling cyber risk as an input for underwriting decisions remains under-developed, but the insurance industry continues to make progress in this area. Furthermore, consistent with the lack of specific supervisory guidelines on cyber-risk underwriting, all the respondents indicated that their existing statutory accounting and capital standards do not provide specific treatment for cyber-underwriting risk. The Cyber Underwriting Small Group recognized that measuring cyber risk is inherently challenging, due to which a proactive supervisory attention is required for cyber-insurance underwriting. To this end, the Group recommended to the IAIS Executive Committee that IAIS pursue a strategic approach focused on facilitating the monitoring, understanding, and assessment of cyber-risk underwriting exposure and impact and on assisting supervisors in building relevant capacity to review cyber-risk underwriting practices and exposure. The approach is aimed to address the following:

    • Non-affirmative cyber exposure—IAIS should play an active role in encouraging supervisors to require improved clarity of policy coverage as regards cyber risk. IAIS should monitor progress in addressing non-affirmative cover by insurers and supervisors and possibly set out further guidance.
    • Heterogeneity in data capture (and facilitating data-sharing initiatives)—IAIS should monitor and analyze initiatives for developing a data taxonomy and will consider the potential for IAIS to facilitate this work. Moreover, IAIS should review current data-sharing initiatives, with a view to identifying effective practices.
    • Supervisory reporting on cyber exposure—IAIS should further review supervisory reporting practices and explore the utility of expanded supervisory reporting on cyber-underwriting exposure. Moreover, consideration should be given to gathering cyber-underwriting data to better understand total exposure as part of the Holistic Framework for Systemic Risk in the Insurance Sector.
    • Risk measurement, including development of stress scenarios—IAIS should review industry and supervisory approaches related to risk measurement, along with initiatives for developing stress scenarios to estimate cyber-underwriting exposure, and consider the potential for an IAIS role in furthering such work.
    • Issues related to policy wording—IAIS should analyze issues related to clarity of policy terms, conditions, and exclusions with a view to encouraging convergence in understanding, although the CUSG concurs with stakeholders that compelled standardization of policy wording should not presently be pursued.
    • Development of cyber awareness and expertise among supervisors—IAIS should undertake initiatives to develop and share good practices on supervision of cyber underwriting.

    Keywords: International, Insurance, Cyber Risk, Cyber Underwriting, Cyber Insurance, Proportionality, Stress Testing, Capital Requirements, Cyber Risk Modeling, IAIS

    Featured Experts
    Related Articles

    US Agencies Issue Regulatory Updates, FDIC Launches Tech Sprint

    The Board of Governors of the Federal Reserve System (FED) published the final rule that amends Regulation I to reduce the quarterly reporting burden for member banks by automating the application process for adjusting their subscriptions to the Federal Reserve Bank capital stock, except in the context of mergers.

    January 13, 2022 WebPage Regulatory News

    EBA Issues Guide on Bank Resolvability, Consults on Transferability

    The European Banking Authority (EBA) published its assessment of risks through the quarterly Risk Dashboard and the results of the Autumn edition of the Risk Assessment Questionnaire (RAQ).

    January 13, 2022 WebPage Regulatory News

    HKMA Extends Repayment for Trade Facilities, Consults on Crypto-Assets

    The Hong Kong Monetary Authority (HKMA) published a circular, along with the reporting form and instructions, for self-assessment, by authorized institutions, of compliance with the Code of Banking Practice 2021.

    January 12, 2022 WebPage Regulatory News

    FCA Registers Securitization Repositories; PRA Issues 2022 Priorities

    The Financial Conduct Authority (FCA) decided to register European DataWarehouse Ltd and SecRep Limited as securitization repositories under the UK Securitization Regulation, with effect from January 17, 2022.

    January 12, 2022 WebPage Regulatory News

    EC Regulation Sets Out Methods for Measuring K-Factors Under IFR

    The European Commission (EC) published the Delegated Regulation 2022/25, which supplements the Investment Firms Regulation (IFR or Regulation 2019/2033) with respect to the regulatory technical standards specifying the methods for measuring the K-factors referred to in Article 15 of the IFR.

    January 11, 2022 WebPage Regulatory News

    BIS Studies How Platform Models Impact Financial Stability & Inclusion

    The Bank of International Settlements (BIS) published a paper that assesses the ways in which platform-based business models can affect financial inclusion, competition, financial stability and consumer protection.

    January 10, 2022 WebPage Regulatory News

    ESAs Publish List of Financial Conglomerates for 2021

    The European Supervisory Authorities (ESAs) published the list of identified financial conglomerates for 2021.

    January 07, 2022 WebPage Regulatory News

    APRA Licenses Two More Banks, Reduces Committed Liquidity Facility

    The Australian Prudential Regulation Authority (APRA) updated the list of authorized deposit-taking institutions, granting license to Barclays Bank PLC and Crédit Agricole Corporate and Investment Bank to operate as foreign authorized deposit-taking institutions under the Banking Act 1959.

    January 07, 2022 WebPage Regulatory News

    EU Issues SII Corrigendum; EIOPA Assesses SII Reporting Exemptions

    EU published, in the Official Journal of the European Union, a corrigendum to the Delegated Regulation 2015/35, which supplements Solvency II Directive (2009/138/EC).

    January 06, 2022 WebPage Regulatory News

    EBA Opines on Impact of De-Risking and Associated AML/CFT Challenges

    The European Banking Authority (EBA) published an Opinion on the scale and impact of de-risking in European Union and the steps that competent authorities should take to tackle unwarranted de-risking.

    January 05, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 7860