How Catastrophe Modeling Can Be Applied to Cyber Risk
Scott Stransky, assistant vice president and principal scientist at AIR Worldwide
Tomas Girnius, PhD, manager and principal scientist at AIR Worldwide
One may wonder how a company proficient in building models to estimate losses from hurricanes and other natural disasters can use their techniques to build a similar model for estimating losses from cyberattacks.
Hurricane Andrew spawned the catastrophe-modeling industry. Although catastrophe models existed prior to that storm in 1992, they were not used by decision makers, nor were they used to their full potential. When the storm struck south Florida, AIR issued modeled loss estimates on the order of $13 billion, a figure that the insurance industry scoffed at for being far too high. As the claims for Andrew started to pile up, 11 insurers went out of business, and the rest of the industry began to see the value in running models. The “Hurricane Andrew of Cyber” has yet...