In a recent conference presented by the Volatility and Risk Institute at the NYU Stern School of Business and the Treasury’s Federal Insurance Office (FIO), Graham Steele, assistant secretary for financial institutions at the Treasury Department addressed the concept of the US government providing a financial backstop for cyber insurers.

“We will remain focused on the policy options for some kind of public-private sector collaboration or other federal response that cabins catastrophic risk alongside the existing and expanding commercial cyber insurance market,” said Steele.

This concern has brought to light the insurance industry’s realization that a catastrophic cyber event could lead to damages exceeding their financial capabilities, prompting a discussion on the necessity for government intervention.

Why it matters: The significance of this issue lies in its reflection of the changing nature of cyber threats and their potential to disrupt entire economies. This acknowledgment marks a significant shift in the approach to managing cyber risks and suggests a necessity for a collaborative strategy involving both the private sector and government agencies.

• Insurers and brokers warn that a major cyberattack could have consequences that exceed the financial limits of the insurance industry, suggesting the need for a broader safety net.

• The concept of a government-led backstop is not new, but it has gained significant momentum. This plan involves government intervention to mitigate financial losses beyond the capacity of private insurers.

• The Treasury Department, the Office of the National Cyber Director, and the Cybersecurity and Infrastructure Security Agency have been actively involved in discussions about this issue. A meeting is scheduled in April with government officials and insurance industry leaders to discuss the specifics of this proposed program.

• The situation highlights a significant national security concern and has broad implications for businesses, especially in the technology sector. It emphasizes the need for enhanced cybersecurity measures and preparedness strategies to protect against such large-scale cyber threats.

Go Deeper –> Federal Cyber Insurance Backstop Is Warranted With Focus on Catastrophic Risk – Insurance Journal

Cyber Insurers Warn Catastrophic Hacks Will Require Government Help – WSJ