Why a cyber insurance backstop is premature
tl;dr There's no evidence market conditions are restricting online economic activity (unlike post-9/11 which necessitated TRIA), and a backstop may reduce incentives for insureds to improve security
https://www.lawfareblog.com/federal-cyber-insurance-backstop-premature
UK Treasury considering a similar policy option, in addition to discussions in the US
https://www.ft.com/content/84221be3-2beb-4710-9970-5bccac2a98ed
Imo the market needs to mature.
Some cyber insurers used harder market of 2021 to start tightening security conditions on policyholders.
This is a *good thing*, why would govt policy seek to unwind this.
Not to mention that investors are willing to take these risks, and the govt should see how far that can go before jumping in.
E.g. Tom Johansmeyer writes about appetite for ILS investors for cyber products
https://hbr.org/2022/03/the-cyber-insurance-market-needs-more-money
As cyber risk is growing, the cyber insurance market has stalled. Insurers are taking bigger losses, seeing tighter margins, and relying more heavily on reinsurance to cover their own risk. The result is that companies are getting less protection for more money. Insurance linked securities (ILS) could help give insurers the breathing room they need to keep growing — and meet customers’ growing needs — by helping insurers hedge against rare, catastrophic events.
Beazley launched a $45m cyber cat bond [1].
HannoverRe just tapped ILS investors for $100m of capital [2].
Coalition secured $300m of capital from private equity to launch an independent reinsurer [3].
It's premature for governments to rush in with backstops while there's so much innovation going on.
[1] https://www.ft.com/content/a945d290-a7f1-427c-84a6-b0b0574f7376
[2] https://www.artemis.bm/news/stone-ridge-retro-cyber-quota-share-hannover-re/
[3] https://www.prnewswire.com/news-releases/coalition-and-bdt-capital-partners-announce-the-launch-of-ferian-re-301648173.html
Daniel Woods