LONDON, February 10th, 2025 – Lockton Re, the reinsurance business of the world’s largest privately held independent insurance broker, today launches a new report - Cyber risk pools and Public Private Partnerships – time to dive in?, as the question remains that if a very unlikely, but potentially very significant, cyber event occurs, how should the insurance industry and governments address this challenge?
Oliver Brew, Cyber Practice Leader, International, Lockton Re, said,” There is an emerging consensus of what the challenge to be addressed is, and the need for partnership between industry and government. Understandably, major questions exist about the nature and mechanics of how it could operate. Given the still limited adoption of cyber insurance by small and medium-sized businesses, a government supported cyber risk pool would encourage increased adoption and build resilience. In the context of cyber insurance, a catastrophe is conceivable in the coming years which could far exceed the private insurance market.”
This Lockton Re report outlines examples where governments have stepped in to support communities in times of extreme need and, in many cases, have contributed more to the financial recovery following a shock event than the private insurance market. This is particularly evident where insurance purchasing may be limited, or coverage restricted. There are several operational, successful PPP schemes upon which lessons can be drawn. They are typically developed in the shadow of a major disaster which has prompted rapid intervention, for example Flood Re, Pool Re, the Australian Reinsurance Pool Corporation and the US Terrorism Risk Insurance Program.
Brian Lewis, Cyber Practice Leader, North America, Lockton Re said, “While the concept of a backstop is contentious in some quarters, and execution of the details complex, the merits of working through the thorny challenges from idea to fulfilment make it worthwhile. Proactive development of a risk pool allows orderly engagement with the process, rather than a chaotic and urgent response after a catastrophe.”
With the potential for massive, though unlikely, events increasing due to the critical reliance on technology, a backstop provides part of an effective partnership between the private cyber (re)insurance market, and respective key governmental bodies.
Oliver Brew concludes, “There are legitimate concerns which have been expressed about the principle of a backstop, as well as the many complexities and practicalities of enacting one. A government-backed cyber risk pool arrangement in isolation is not a panacea. However, in conjunction with other measures including ongoing improvements to security standards, it can form a major support in building societal resilience and closing the cyber protection gap.”
Read the report here (opens a new window)