1 CONFIDENTIAL ©2015 AIR WORLDWIDE New Approaches for Managing Cyber Risk

2 CONFIDENTIAL ©2015 AIR WORLDWIDE Agenda Overview of the cyber market AIR modeling framework Data partners Cyber data standards Roadmap AIR Model for Cyber Risk

3 CONFIDENTIAL ©2015 AIR WORLDWIDE The Worldwide Cyber Insurance Market Is Growing Rapidly -“Cyber is a new risk and it is a concern, Lloyd’s is at the heart of cyber attacks, providing coverage right now. It’s going to grow dramatically ” Inga Beale, CEO, Lloyd’s of London, Oct Sources: Betterley Report / Advisen -“Cyber Insurance: Maybe next year turns into I need it now” Betterley Report, June “Former U.S. Homeland Security Secretary Tom Ridge has teamed with reinsurance brokerage Guy Carpenter & Co. L.L.C. to offer a cyber security and insurance product” Business Insurance, Oct. 2014

4 CONFIDENTIAL ©2015 AIR WORLDWIDE -Direct losses when intellectual property is stolen, data destroyed, or operations interrupted -Indirect losses when data proprietary to its clients is compromised -Reputational losses -Physical damage What Exposes Organizations to Cyber Risk? A Breach Is One Critical Type of Hazard In the office At offsite data storage sites In the “cloud”

5 CONFIDENTIAL ©2015 AIR WORLDWIDE -What is typically covered? Legal fees Forensics Notification and call center Credit monitoring Public relations fees -Limits Low, in the low millions -Exclusions -Evaluation strategy Driven by industry, company size, etc. Companies offer network analyses Facts About Cyber Coverage

6 CONFIDENTIAL ©2015 AIR WORLDWIDE AIR’s Stochastic Modeling Framework Can Be Applied to Cyber Policy Conditions Exposure Information Damage Estimation Loss Calculation Policy Conditions Limit Deductible VULNERABILITY FINANCIAL Intensity Calculation Event Generation HAZARD

7 CONFIDENTIAL ©2015 AIR WORLDWIDE -Has developed a database of over 16,000 historical worldwide cyber incidents -Based in Richmond, Virginia -Publically disclosed clients include AIG and Willis Risk Based Security (RBS) Selected as Incident Data Provider

8 CONFIDENTIAL ©2015 AIR WORLDWIDE Risk Based Security Data Examples

9 CONFIDENTIAL ©2015 AIR WORLDWIDE -Analyzes public traffic on the Internet to unobtrusively give scores to companies -Based in Cambridge, Massachusetts -Founded by several MIT graduates -Publically disclosed clients include AIG and Liberty BitSight Collaboration will Give the AIR Model Several Key Benefits

10 CONFIDENTIAL ©2015 AIR WORLDWIDE AIR’s Collaboration with BitSight Will Provide Many Benefits to Clients

11 CONFIDENTIAL ©2015 AIR WORLDWIDE

12 CONFIDENTIAL ©2015 AIR WORLDWIDE The Verisk Enterprise Offers AIR Unique Resources, Information, and Data ISO Cyber Program Argus Cyber Forum Information Sharing and Analysis Centers Maplecroft

13 CONFIDENTIAL ©2015 AIR WORLDWIDE AIR Categorizes Risks by Exposure Type

14 CONFIDENTIAL ©2015 AIR WORLDWIDE Cyber Insurance Record Company Information Insurance Coverages Data Assets / Storage Transfer

15 CONFIDENTIAL ©2015 AIR WORLDWIDE Minimum Data Required to Run Model: Industry, Revenue, and Insurance Information Revenue Insurance Industry

16 CONFIDENTIAL ©2015 AIR WORLDWIDE Company Information—Detailed Industry Recovery Plans Demographics Revenue Security

17 CONFIDENTIAL ©2015 AIR WORLDWIDE Multiple Insurance Coverages Will be Supported Security Breach Expense Security Breach Liability Business Interruption Fines Replacement of Electronic Data Website Publishing Liability Programming Errors and Omissions Extortion Public Relations Physical Insurance Coverages

18 CONFIDENTIAL ©2015 AIR WORLDWIDE Data Are the Basis of Potential Cyber Losses Type Country of Origin Number and Value Asset / Storage Record Transfer Record

19 CONFIDENTIAL ©2015 AIR WORLDWIDE Storage Can Lead to Aggregation Risks TypeSecurity OS Type Cloud

20 CONFIDENTIAL ©2015 AIR WORLDWIDE Transferring Data Introduces Additional Vulnerabilities TypeSecurity Service / Vendor Type Cloud

21 CONFIDENTIAL ©2015 AIR WORLDWIDE DataTypeRecord ValueCountry of OriginOwnership Credit Card??? PII?US? Annual RevenueTotal% from Internet% Domestic% Foreign 1,300,000,000??? DataTypeRecord ValueCountry of OriginOwnership Credit Card$225US3 rd Party PII$99US1 st Party Company RevenueTotal% from Internet% Domestic% Foreign 1,300,000,00017%72%28% -Most refined results are obtained when every field of an exposure record is correctly filled in -But what if we have only some of the information that completely describes an exposure? -AIR’s Cyber Model will populate “unknown” fields with values derived from our planned Cyber Industry Exposure Database Developing a Cyber IED Will Allow the Model to Account for “Unknowns”

22 CONFIDENTIAL ©2015 AIR WORLDWIDE Distribution of Limits by Coverage Mock-up of Cyber Exposure Aggregation and Accumulation in Touchstone Distribution of Records by Industry Distribution of Employees by Age Band Distribution of Revenue by Geography

23 CONFIDENTIAL ©2015 AIR WORLDWIDE Studies Provide Data for Our Prototype Model NetDiligence Symantec

24 CONFIDENTIAL ©2015 AIR WORLDWIDE The “Hurricane Andrew” of Cyber Is Coming

25 CONFIDENTIAL ©2015 AIR WORLDWIDE Aggregation Is More than the Cloud

26 CONFIDENTIAL ©2015 AIR WORLDWIDE AIR’s Prototype Cyber Framework and Its Roadmap Catalog Frequency of attack data from sample VERIS breach database Stochastically generated breach events Signed with RBS to get a comprehensive dataset Creating a 100K catalog using all available data Exposure Over 400 companies in our sample exposure database Getting Internet footprint data from BitSight Open data standards schema released and implemented in Touchstone Building a cyber industry exposure database Vulnerability 10 key basic risk factors, including company industry and encryption Signed with BitSight Relative vulnerabilities between industry, company size, etc. BitSight score as real-time secondary features in model Loss Loss per record information from Symantec, accounting for risk features Framework calibrated to the reported loss from the 2013 Target breach Partnering with insurance companies to receive cyber loss data Modelling of loss aggregation scenarios Model Results and reports available through consulting studies Deterministic and probabilistic results Will be in Touchstone in the future