Artemis Live - Insurance-linked securities (ILS), catastrophe bonds (cat bonds), reinsurance 123: Capital "has to be rewarded" in cyber risk: Matt Harrison, Moody's RMS interview
May 3, 2023
25:06
When it comes to underwriting cyber risks, capital, whether traditional insurance and reinsurance, or alternative from the insurance-linked securities (ILS) market, "has to be rewarded", Matt Harrison from risk modelling and analytics specialist Moody’s RMS, told us in our latest Artemis Live interview in April 2023.
As Director of Product Management for Cyber at Moody’s RMS, Harrison sets the strategy on building their cyber risk focused modelling products and analytical solutions.
He also spends his time helping insurance-linked securities investors and funds to understand cyber risk as a class of risk to expand their allocations to.
Harrison explained that, when it comes to building models for cyber risk, Moody's RMS is taking a targeted approach.
"I'm not going to build this huge comprehensive suite of stuff and waste my time, I really want to be targeted about that.
"Really from a from a model perspective, we try and divide the world into like perils. I think sometimes we hear this language about scenarios and scenarios are very bespoke things. We've got to think much more holistically, or otherwise we're not covering the whole risk spectrum.
"So we think about cloud outages, data breach, malware, and ransomware, things like DDoS so attacks against networks and in each of those, we want to build a model that really tries to describe the physics of the system, if that if that's a sensible way of describing it," he told us.
Later in the interview, Harrison also highlighted the need for capital to be adequately rewarded for taking on cyber exposures. "
One of the problems for the insurance and reinsurance industry is, there is a limited amount of diversification within cyber. There's only so much diversification that you can find, and therefore that capital has to work harder, it has to be rewarded," Harrison said. "I think that's why the demand is so high for capital to come in, to really drive it. But the way that we see it is that it has to pay a risk premium, because of that diversification."
Listen to the full podcast episode for many more insights on cyber risk and cyber risk models from Moody's RMS' Matt Harrison.
As Director of Product Management for Cyber at Moody’s RMS, Harrison sets the strategy on building their cyber risk focused modelling products and analytical solutions.
He also spends his time helping insurance-linked securities investors and funds to understand cyber risk as a class of risk to expand their allocations to.
Harrison explained that, when it comes to building models for cyber risk, Moody's RMS is taking a targeted approach.
"I'm not going to build this huge comprehensive suite of stuff and waste my time, I really want to be targeted about that.
"Really from a from a model perspective, we try and divide the world into like perils. I think sometimes we hear this language about scenarios and scenarios are very bespoke things. We've got to think much more holistically, or otherwise we're not covering the whole risk spectrum.
"So we think about cloud outages, data breach, malware, and ransomware, things like DDoS so attacks against networks and in each of those, we want to build a model that really tries to describe the physics of the system, if that if that's a sensible way of describing it," he told us.
Later in the interview, Harrison also highlighted the need for capital to be adequately rewarded for taking on cyber exposures. "
One of the problems for the insurance and reinsurance industry is, there is a limited amount of diversification within cyber. There's only so much diversification that you can find, and therefore that capital has to work harder, it has to be rewarded," Harrison said. "I think that's why the demand is so high for capital to come in, to really drive it. But the way that we see it is that it has to pay a risk premium, because of that diversification."
Listen to the full podcast episode for many more insights on cyber risk and cyber risk models from Moody's RMS' Matt Harrison.