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Oli is a Consultant at Oxbow Partners and Analyst on our Market Intelligence product.Contact Oliver
June 13, 2020 Oliver Stratton
COVID-19 and the ensuing lockdown caused the ‘work-from-home’ segment of the UK labour market to increase from 5% to 45% within a matter of weeks. This changed the risk profile of many companies, requiring (re)insurers to build new insights quickly.
Kovrr presents a solution. The platform can be used to provide actionable insights at the point of underwriting, decreasing the need for pre-bind interaction with clients. It does this by analysing a company’s security controls and use of commercial software and third-party services to determine the robustness of its cyber policy and vulnerability to cyber-attack.
For existing portfolios, Kovrr can determine exposure by running loss simulations from a catalogue of over 100,000 scenarios, which vary from regional cloud provider outages to global ransomware attacks. Kovrr uses proprietary data sources and damage functions to calculate aggregate exposures which can be summarised through yearly loss tables and exceedance probability curves. (Not an actuary? Here’s a link to Wikipedia for exceedance probability.)
In a recent use case, a reinsurer wanted to quantify the silent cyber exposure in its P&C portfolio which included aviation, credit, D&O, engineering, marine, offshore energy, professional indemnity and property. Kovrr’s solution estimated cyber exposure at 136% higher than previous forecasts. This allowed the reinsurer to share perspectives on these risks during negotiation of retrocession agreements and meet board and regulatory compliance requirements.
Founded in 2017, Kovrr currently operates in Israel, Asia, Europe, US and Latin America. The company has been accepted in the fourth cohort of the Lloyd’s Lab where they hope to work closely with industry leaders to advance their models and support cyber underwriting and exposure management in the Lloyd’s market.
Cyber risk has been a ‘hot topic’ in insurance for quite a while now, but COVID-19 will likely see its growth accelerate even faster.
As companies have switched to remote working arrangements to continue functioning during the COVID-19 pandemic, they have unwillingly opened themselves up to greater cyber risk. It is a change that will likely extend beyond the easing of restrictions, so this will have a long-term material impact on (re)insurers’ exposures in cyber and other product classes (‘silent cyber’).
While (re)insurers may be able to predict the post-COVID-19 risk landscape with reasonable accuracy in some product classes, cyber will prove challenging due to the specialist and complex capabilities required. Partnering with specialist vendors such as Kovrr which can provide these capabilities can help.