Cyber Risk Modelling for Systemic Malware Losses

This technical report presents a new accumulation model developed to estimate potential systemic losses in the cyber insurance industry due to significant malware events. Created through a collaboration between Beazley, Munich Re, and Gallagher Re, the model aims to enhance understanding of systemic cyber-risk. The report outlines the model's construction, which applies three distinct malware scenarios to a synthetic portfolio representative of the cyber insurance market. It emphasizes the need for transparency and accessibility, allowing any interested party to utilize the model without specialized technology. The report also discusses the challenges of parameterization, the importance of realistic claims experience, and the model's sensitivity to parameter choices. Key conclusions highlight that while systemic cyber-risk is complex, it is feasible to construct a simple yet effective model. The findings aim to facilitate discussions on potential systemic insured losses and improve the overall understanding of malware threats within the cyber insurance landscape.