Carriers exposed to large enterprises most likely to face losses from IT outage: Parametrix CEO

Insurance carriers that have greater exposure to large enterprises are more likely to face the brunt of the losses stemming

from the CrowdStrike linked IT outage, says Parametrix Insurance CEO, Jonathan Hatzor.

According to the organisation, the event is expected to withdraw an insured loss range of $540 million to $1.08 billion.

The outage took place on July 19, and was caused by a security organisation called CrowdStrike, which sent out a corrupted software update to its huge number of customers. As per Microsoft, CrowdStrike’s update reportedly

affected 8.5 million Windows devices.

Reinsurance News spoke to Hatzor about the event, to which he explained that carriers exposed more towards larger enterprises are more likely to face losses.

“This is for two main reasons. One, small companies were able to recover fast. It was a very manual recovery, so the amount of employees was a big factor in your ability to recover. If you have 50 employees and 50 computers, this is probably something that you can recover within four hours.”

He continued: “For enterprises, it was a different game. We actively monitor the service delivery of around 6000 tech businesses. It was very obvious to us that cloud-native tech businesses had less of an impact, compared to more legacy companies that are dependent on Windows computers, and a

lot of their employees using Windows computers. In the tech segment Apple is very much a favourite, and in the cloud, Linux is very much the favourite, compared to Microsoft.

“So, we have carriers that are very much focusing on SMEs, and they are not going to see a major impact. And that’s something that we see the data can support. But the loss is very significant for the Fortune 500, so carriers that are focusing on this segment may experience much more significant losses.”

Switching attention towards reinsurers, Hatzor explained how the IT outage may impact that particular market.

“The cyber insurance market matured in the last year or so. We started to move from quota share to excess of loss, but still, the majority of programs are quota shares.

So reinsurers will experience losses exactly like we would expect carriers to. They share first dollar, first loss,” he said.

Interestingly, Hatzor noted that for excess of loss arrangements in the market, he is not too sure whether the outage is going to hit them, especially for the carriers that are more exposed to SMEs.

“From the research and also from other data that we see about these specific segments, we see less of an impact on smaller companies. It’s not something that will be material enough to hit the 120% loss ratio, excess of loss and above. And definitely from the point that we’re sitting right now, we don’t believe it will trigger any of the ILS transactions that we saw at the end of last year and this year,” he added.