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
    News

    BIS Innovation Hub Sets Out Work Program for 2021

    BIS Innovation Hub published the work program for 2021, with focus on suptech and regtech, next-generation financial market infrastructure, central bank digital currencies, open finance, green finance, and cyber security.

    January 22, 2021 WebPage Regulatory News
    News

    EC Plans to Consult on Crisis Management and EDIS Framework Revisions

    In an article published by SRB, Mairead McGuinness, the European Commissioner for Financial Services, Financial Stability, and Capital Markets Union, discussed the progress and next steps toward completion of the Banking Union.

    January 21, 2021 WebPage Regulatory News
    News

    EBA Finalizes Remuneration Standards for Investment Firms in EU

    EBA finalized the two sets of draft regulatory technical standards on the identification of material risk-takers and on the classes of instruments used for remuneration under the Investment Firms Directive (IFD).

    January 21, 2021 WebPage Regulatory News
    News

    ECA Recommends Actions to Enhance Resolution Planning for Banks

    EC published, in the Official Journal of the European Union, a notification that the European Court of Auditors (ECA) has published a special report on resolution planning in the Single Resolution Mechanism.

    January 20, 2021 WebPage Regulatory News
    News

    BoE Publishes Key Elements of the 2021 Stress Testing for Banks in UK

    BoE published a scenario against which it will be stress testing banks in 2021, in addition to setting out the key elements of the 2021 stress test, guidance on the 2021 stress test, and the variable paths for the 2021 stress test.

    January 20, 2021 WebPage Regulatory News
    News

    PRA Proposes Rules on Identity Verification of Depositor Protection

    PRA published a consultation paper (CP3/21) proposes rules regarding the timing of identity verification required for eligibility of depositor protection under the Financial Services Compensation Scheme (FSCS).

    January 20, 2021 WebPage Regulatory News
    News

    FSB Publishes Work Program for 2021

    FSB published the work program for 2021, which reflects a strategic shift in priorities in the COVID-19 environment.

    January 20, 2021 WebPage Regulatory News
    News

    FCA Issues Update on Move to New Data Collection Platform

    FCA announced that 50% firms have started using the new data collection platform RegData, which is slated to replace the existing platform known Gabriel.

    January 20, 2021 WebPage Regulatory News
    News

    Bundesbank Publishes Derivation Rules for Reporting by Banks

    Bundesbank published Version 5.0 of the derivation rules for completeness check at the form level, with respect to the data quality of the European harmonized reporting system.

    January 19, 2021 WebPage Regulatory News
    News

    FED Revises Capital Planning and Stress Testing Requirements for Banks

    FED finalized a rule that updates capital planning requirements to reflect the new framework from 2019 that sorts large banks into categories, with requirements that are tailored to the risks of each category.

    January 19, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6488