Risk innovation of the year by a re/insurer: Argo Group
Information security is a rapidly changing and important operational risk requiring particular focus from risk teams.
At specialty re/insurer Argo, the risk team saw that cyber exposures were increasing from external threats, and they needed to measure and mitigate them.
Insuring against cyber risk is one important element of Argo’s overall response to managing cyber events, but insurance buyers are concerned about potential for gaps in coverage, given the dynamic nature of cyber exposures and untested state of cyber insurance policies.
Another issue is that cyber exposures can arise from many different sources including fraud, staff mistakes or dishonesty, outsourcing and technology. Claims for such events can affect a range of corporate insurance policies, not just cyber cover.
In response to this challenge, Argo decided a joined-up enterprise-wide risk view was required.
Argo realised an opportunity existed to align risk financing and capital modelling to inform risk management options. Using existing operational risk scenario analysis and leveraging the internal model, Argo produced in-depth analysis of its cyber exposures.
In May 2018, Argo began to evaluate a range of risk transfer options to ensure coverage terms were aligned to Argo’s view of its risk.
Capital modelling was used to evaluate the cost/benefit across a range of insurance programme structures.
The outcome was that Argo placed a new $10m aggregate excess-of-loss operational risk programme in October 2018 providing an umbrella across cyber, employment practice and crime covers.
The judges praised the good use of scenario analysis and quantitative modelling to assess aggregate operational risk cover.