Understanding and predicting human behavior is one of the biggest challenges facing modellers of both pandemics and cyber risk, a new report from CyberCube concludes.
According to the report, which sets out to understand the lessons both pandemic and cyber modellers could learn from each other, the potential for political decisions and the public’s response to affect the duration and severity of both types of events is critical to successful modelling.
Partnership
The report, which includes comments by experts from Munich Re and contributions from pioneering pandemic modelling firm Metabiota, finds that the ways in which modellers represent the complex interactions between human-created risks will be key to building effective models.
Even though pandemics originate from pathogens, the report notes, the challenge is how models can illustrate the range of outcomes based on individual and societal reactions that impact the spread of the disease or cyber threat.
Viruses, contagion, and tail-risk
modelling cyber risk in the age of pandemics, also finds that lack of data is a brake on progress for both types of modellers. Since the start of the twentieth century, there have been fewer than twelve major global pandemics.
There have also been very few significant systemic cyber events, although there have been thousands of cyber incidents since the emergence of the Internet and connected technology. This has not provided a wealth of data to assess the potential impact of such events.
Methodology and data challenges
Oliver Brew, CyberCube’s Head of Client Success, said “It’s clear that lessons can be learnt and applied to cyber risk modelling from understanding how pandemic models have evolved."Even though there are differences between computer and human viruses, parallels are emerging in the modelling
"As the COVID-19 pandemic continues, even though there are differences between computer and human viruses, parallels are emerging in the modelling, the methodologies, and the data challenges.”
He added “There is real value in learning from interdisciplinary teams in how to balance the needs of accuracy and precision in developing models to meet the market needs. At a minimum, the need for a creative, but reality-based imagination to represent forward-looking risks is critical.”
Accumulation risk
Dr. Hjalmar Böhm, Senior Actuary, Epidemic Risk Solutions, a dedicated epidemic risk solutions business unit at Munich Re, said “In both cyber risk and pandemics, there is a need to consider accumulation risk. For example, a pandemic is a key consideration for life insurers and a high mortality event could create a significant economic loss.”
“A solid approach to controlling accumulation risk exposure needs to be the basis for every business model for epidemic risk insurance.”
Pandemic and cyber systems are connected
Nita Madhav, CEO of Metabiota, added “There are parallels with modelling the global spread of a disease and how cyber systems are connected - both are network issues. The impact of mitigation risk and early action can potentially make a difference.”
“Furthermore, you can be asymptomatic with COVID-19; similarly, you may not know if a cyber intruder has already infiltrated your network.”
Conclusion
The report concludes that addressing current limitations in data collection will improve the value and insight these models can provide to the insurance and life insurance markets.
Another common theme is that both cyber risk and pandemics are unencumbered by geographic boundaries.
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