Authors: Justyna Pikinska Simon Heather Sioned Bentley
We are pleased to share with you a paper on utilizing counterfactual analysis, prepared by the Gallagher Re Cyber team in conjunction with CyberCube.
This paper explains how counterfactual analysis, can help (re)insurers overcome the challenges of identifying cyber risk in their portfolios and provides a framework to assist in the analysis process.
Key takeaways:
- Counterfactual analysis can show how cyber-attacks may have been quantifiably worse if circumstances had evolved differently.
- They are especially useful in the cyber insurance market, whose short historical catalogue contains only a few notable events. Moreover, due to the dynamic nature of this risk, no two events are ever the same — so counterfactuals can help explore alternative event characteristics, narratives, and losses.
- Gallagher Re has worked with CyberCube on several example counterfactuals, which can produce significant variation in losses. Plausible changes to event characteristics can increase insured industry losses from tens or hundreds of millions, to multiple billions.
- Cyber carriers can use counterfactual analyses to deepen their understanding of cyber threats, improve their cyber models, stress test their portfolios, and produce a fully evidenced view of risk.
- The ability to analyze historical events in the context of current technological and threat conditions will be a vital tool for insurers in differentiating themselves from their peers and maintaining or gaining vital underwriting capacity.
For more information, please reach out to our Cyber team.
