US Treasury officials announced the launch of a new government program that aims to expand research and develop new catastrophe modeling and underwriting methodologies focused on cyber risk and terrorism.
The program, revealed Thursday, is a joint effort between Treasury’s Federal Insurance Office (FIO) and the the U.S. National Science Foundation (NSF) and is targeted “stimulating” research that would support insurance against terrorism and catastrophic cyber risks.
“Both terrorism events and catastrophic cyber incidents (whether terrorism related or not) present serious risks that share many common modeling and underwriting challenges,” a NSF letter announcing the program states.
The program has three goals, official said: help insurers to estimate risk with greater certainty; contributing to the potential expansion of reinsurance and capital markets to help support cyber and terrorism risks; and “informing” the terrorism and catastrophic cyber risks in government programs.
According to the NSF a initial key focus of the new initiative will by on modeling high impact events.
“The lack of historic event data limits the ability of insurers to predict future risk based upon past loss experience.,” the NSF said. “In addition, both terrorism and catastrophic cyber risk present the potential for high losses because such events are commonly intentional and designed to maximize damage, resulting in significant potential insurer liability with impacts that can spread far beyond the initial target including cascading losses across broad geographic areas and business sectors.”
