Insurers Eyeing Cyber Coverage

Insurers are eagerly monitoring exponential growth in the tiny cyber coverage market but their lack of experience and skills handling hackers and data breaches may keep their ambitions in check.

High profile cases of hackers seizing sensitive customer data from companies, such as U.S. retailer Target Corp or e-commerce company eBay Inc, have executives checking their insurance policies.

Increasingly, corporate risk managers are seeing insurance against cyber crime as necessary budget spending rather than just nice to have.

The insurance broking arm of Marsh & McLennan Companies estimates the U.S cyber insurance market was worth $1 billion last year in gross written premiums and could reach as much as $2 billion this year. The European market is currently a fraction of that, at around $150 million, but is growing by 50 to 100 percent annually, according to Marsh.

Those numbers represent a sliver of the overall insurance market, which is growing at a far more sluggish rate. Premiums are set to grow only 2.8 percent this year in inflation-adjusted terms, according to Munich Re, the world’s biggest reinsurer.

The European cyber coverage market could get a big boost from draft EU data protection rules in the works that would force companies to disclose breaches of customer data to them.

“Companies have become aware that the risk of being hacked is unavoidable,” said Andreas Schlayer, responsible for cyber risk insurance at Munich Re. “People are now more aware that hackers can attack and do great damage to central infrastructure, for example in the energy sector.”

Insurers, which have more experience handling risks like hurricanes and fires, are now rushing to gain expertise in cyber technology.

“It is a difficult risk to price by traditional insurance methods as there currently is not statistically significant actuarial data available,” said Robert Parisi, head of cyber products at insurance brokers Marsh.

Andrew Braunbergon, research director at U.S. cybersecurity advisory company NSS Labs, said that some energy companies have trouble persuading insurers to provide them with cyber coverage as the industry is vulnerable to hacking attacks that could trigger disasters like an explosion in a worst-case scenario.

Pricing on policies for retailers has climbed in the wake of recent high-profile breaches at Target, Neiman Marcus, and other merchants, he added.

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NOAA Super Computer Goes Live

The National Oceanic and Atmospheric Administration has rolled out two new supercomputers that are expected to improve weather forecasts and perhaps help better prepare us for hurricanes.

The two IBM systems, which are identical clones, will be used by NOAA’s National Weather Service to produce forecast data that’s used in the U.S. and around the world.

One of the supercomputers is in Reston, Va.; the other is in Orlando. The NWS can switch between the two in about six minutes.

Each is a 213-teraflop system running a Linux operating system on Intel processors. The federal government is paying about $20 million a year to operate the leased systems.

“These are the systems that are the origin of all the weather forecasts you see,” said Ben Kyger, director of central operations at the National Centers for Environmental Prediction.

NOAA had previously used identical four-year-old 74-teraflop IBM supercomputers that ran on IBM’s AIX operating system and Power 6 chips.

Before it could activate the new systems, the NWS had to ensure that they produced scientifically accurate results. It had been running the old and new systems in parallel for months, comparing their output.

The NWS has a new hurricane model, which is 15% more accurate in day five of a forecast for a storm’s track and intensity. That model is now operational and running on the new systems. That’s important, because the U.S. is expecting a busy hurricane season.

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