CrowdOut event could cause $1.5bn in losses to cyber market
The cyber insurance market could face a preliminary bill of up to $1.5 billion from the CrowdOut event, cyber risk analytics firm CyberCube said today.
CyberCube, which has operations in Bermuda and is backed by HSCM Bermuda, said it estimated preliminary insured losses from the July 19 CrowdOut event for the standalone cyber insurance market at between $400 million and $1.5 billion.
Cyber insurers with large corporate exposures are likely to be hit the hardest, the company said.
"The faulty CrowdStrike Falcon Sensor update and subsequent outage - the CrowdOut Event - would represent a loss ratio impact of roughly 3-10% on global cyber premiums of $15bn today," the company said.
"This scale of loss could make the CrowdOut event the largest single insured loss event in the history of the affirmative cyber insurance industry over the past 20 years," it said but added: "At the same time, an event of this scale does not come close to the extreme scenarios currently being modelled by cyber insurers and reinsurers."
Based on its current estimates, the company said the evebt represented a loss somewhere between the 1-in-2 and the 1-in-6 year industry loss return periods, according to the company’s cyber catastrophe model and industry exposure database.
It said its models showed "far more destructive scenarios" that can reach loss ratios of 234% in more extreme events at 1-in-200 year return periods.
"As such, the CrowdOut event is a major event for the cyber insurance market but does not come close to the destructive potential that leading insurers are holding capital against," it said.
CyberCube cautioned its estimates are provisional and said the event is still unfolding, with a relatively significant percentage of systems yet to be restored.
CyberCube said cyber insurers with large corporate exposures are likely to see disproportionate losses.
"Each insurance carrier’s claims experience depends on some pivotal criteria relating to the characteristics of their specific portfolio including coverage for non-malicious system failure, contingent business interruption (CBI), and the makeup of insureds in that portfolio," it said. "While each insurance portfolio will substantively differ in these respects and as such it would not be accurate to apply cyber insurance market share allocations to reach an individual carrier’s loss potential, we expect carriers to see disproportionate losses in portfolios that have significant large corporate exposures."
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