A ‘digital nuclear bomb’: cyber experts assess the potential impact of the Russia-Ukraine conflict

25-05-2022

A ‘digital nuclear bomb’: cyber experts assess the potential impact of the Russia-Ukraine conflict

Russia’s invasion of Ukraine has changed the landscape when it comes to cyber threats. A panel of experts at the Bermuda Risk Summit examined the implications of this for the world of risk transfer.

Patrick Bousfield, senior broker at Lockton Re (Bermuda), said that Bermuda is perfectly positioned to solve the coverage gap in cyber by providing bespoke, large solutions to a global marketplace.

“Cyber attacks can be used as a tool of warfare, and we have to consider that when we look at the modelling.” Yosha DeLong, Mosaic Insurance

“Throughout the insurance value chain, there is an ocean of cyber demand, a swimming pool of insurance capacity, a hot tub of reinsurance capacity, and a shot glass of retro capacity,” he said.

“The cyber re/insurance market has remained as a P&C industry talking point due in part to the continued push of digitisation in the global economy and the quixotic objective laid before a burgeoning cyber re/insurance market: to solve the insurance implications of Industrial revolution 4.0.

“Cyber attackers are so sophisticated that they can even mimic the attacking styles of others.” Noel Pearman, AXA XL

“As an outbranch of a largely regulatory third party breach cover, the cyber re/insurance market has struggled to grow at the exponential rate of demand. Reinsurance carriers have attempted to keep pace with a rapidly evolving peril, with traditional, static solutions.

“Reinsurance axioms of geographic diversity and segmentation have been challenged by a global peril with myriad common single points of failure.

“The cost could very well be a $20–$40-billion loss, wiping out the market many times over.” Ari Chatterjee, Envelop Risk

“The reinsurance value chain is predicated on spreading risk across disaggregated counterparties, but with large, pseudo all-risk cyber policies (with multiple heads of cover, both third and first party), traditional methods of risk transfer have been stunted.


“Exponential growth in demand is hampered by admirable, but linear, increases in reinsurance/retro aggregate supply. This demand/supply gap has only been increased with the hardening of the original cyber market.

“We’re stuck in a 300-year-old paradigm and think about risk as it is on a certain day.” Patrick Bousfield, Lockton Re (Bermuda)

“All is not lost: the reinsurance market has experienced similar contractions of appetite/capacity in the past. Insurance product diversification, reinsurance/retro solutions focused on exposure segmentation, industry segregation, and a pivot from aggregate products to claims/occurrence solutions are accessible pathways to success,” he concluded.

Russia-Ukraine, conflict, cyber, Risk, Insurance, Reinsurance, Bermuda, Patrick Bousfield Lockton Re, Bermuda, Global Risk, digital, Yosha DeLong Mosaic

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