Exposure Analysis and ILS Product Structuring

Based on Parametrix proprietary technology, we provide reliable, transparent tools to help re/insurers mitigate losses due to cloud outages. We are able to map existing exposures, run relevant scenarios against portfolios, monitor exposure in real-time, and structure ILS solutions.

What happens when the cloud goes down?

Increasing reliance on cloud vendors such as Amazon Web Services, MS Azure, and Google Cloud Platform leaves companies world-wide vulnerable to business interruption caused by cloud service outages.

Re/insurers are exposed to this risk through business interruption coverage granted under cyber insurance policies, which may include non-physical damage losses. The potential for an accumulation event is significant, and requires a capital loading.

Solutions For Re\insurers:
Exposure Analysis and ILS Product Structuring

Cloud Outage Portfolio and Exposure Analysis

Parametrix will analyze and identify key cloud downtime exposures and risk accumulation within cyber portfolios through explicit quantification and assessment of insured value by:

  • Cloud Vendor (AWS, Azure, and GCP),
  • Geographic Region, and
  • Cloud Services

We stress-test portfolios by applying realistic disaster scenarios
(RDS) and deducing the corresponding loss potential.

Structuring an ILS Hedge

We employ the Parametrix stochastic model for cloud outage risks to derive the loss distribution of risk carriers ‘cyber portfolios. This analysis provides a granular, risk-based overview of key metrics incliuding VaR, TVaR, frequency measures such as attachment probability, and others as applied to the categories of exposure such as Cloud Vendor, Region, and Service associated with the reinsurer’s portfolio. We are then able to design and structure suitable hedging solutions to:

  • Mitigate the impact of key accumulation exposures
  • Reduce the overall tail-risk profile of portfolios through complex inter-cloud vendor and inter-service structures

Monitoring and Calculation Agent

The first-of-its-kind cloud outage monitoring system developed by Parametrix allows us to monitor all three major cloud vendors globally. As calculation agent, we use this technology to monitor the cloud vendors, regions, and services relevant to specific ILS transactions, and to calculate Loss payouts based on the specific associated trigger mechanisms. The system provides investors and re/insurers alike with a real-time view of the underlying risk.

For more information, download our latest white paper "Cloud-in-a-Box: Securitizing Cloud Outage Risks"