The enterprise risk management (ERM) approach is being broadly implemented in most of the insurance industry. Driven by both internal considerations and the need to comply with regulatory requirements, it has led to the more careful consideration of individual risks. Every insurance company is exposed to cyber risk as a component of the overall operational risk. This exposure is often greater than recognized by insurance company management. Almost without exception, it would benefit from better analysis that requires proper analytical tools and data.

A growing number of insurance companies are underwriting cyber risk insurance. This could increase, often very significantly, their potential exposure to cyber risk. In some cases, cyber risk portfolios are diversified only to a limited degree, and the insurance mechanism of risk-pooling produces only minimal benefits. To assure proper diversification, control risk aggregation and take into account all portfolio effects, cyber risk has to be better understood and more extensively analyzed.

Of equal importance is proper risk analysis in pricing cyber risk insurance. If the analysis is not adequately performed, premiums for cyber liability and other types of cyber insurance may be set at levels below profitability. Only proper cyber risk analysis could lead to risk-based pricing of cyber insurance. Some insurance companies face enormous challenges in this area due to the lack of cybersecurity expertise and the gross inadequacy of analytical tools they use. This gap explains Navigation Advisorsí concentration on:

  • Advanced tools for analyzing cyber risk, quantifying cyber risk exposure, and expressing risk exposure in terms of probability distributions of potential financial losses
  • Corporate risk governance and its impact on cyber risk exposure
  • Quantification, in dollar terms, of individual components of potential losses from data breaches and other cyber events
  • Threat intelligence, advanced persistent threats and insider threat analysis
  • Cyber insurance/reinsurance pricing approaches that are data-driven and significantly more risk-sensitive than the methodologies currently used by most of the industry

While cyber risk is a critical area of concentration, Navigation Advisors also has strong expertise in broader fields that include:

  • Advanced predictive analytics and probabilistic forecasting
  • Catastrophe modeling and risk analysis
  • ILS portfolio management and optimization
  • Insurance RBC and ERM
  • Cutting-edge data science research based on AI and actuarial approaches

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