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Insurers to see limited hit from CrowdStrike disruption, Fitch says

The global insurance and reinsurance industry is likely to avoid any major financial impact from the outage sparked by CrowdStrike's glitchy security software update that disrupted internet services worldwide last week, Fitch Ratings said.

Preliminary estimates suggest that insured losses could be in the range of mid-to-high single-digit billion dollars and most claims would be within the purview of primary insurers, the ratings agency wrote in a report on Monday.

The findings could allay investor concerns over claims and litigation stemming from the disruption. Insurers most exposed to such losses tend to transfer some of their liability to reinsurers.

CrowdStrike's (CRWD.O), opens new tab update crashed computers powered by Microsoft's Windows operating system, restricting several industries such as airlines, banking and healthcare.

"Although standard cyber insurance covers cloud downtime due to security failure, operational failure or system failure of the insured's own operations, it typically does not cover downtime due to non-malicious cyber events at a third-party network service provider," said Loretta Worters, a spokesperson at the Insurance Information Institute.

Fitch, however, said accounting for cyber risk continues to be difficult for the insurance industry.

CrowdStrike event may impact product lines beyond cyber insurance: Guy Carpenter

Experts at the reinsurance broking arm of Marsh McLennan (MMC), Guy Carpenter, have said that while business interruption losses will be in scope for re/insurers, the magnitude of last week’s global IT outage suggests that lines of insurance beyond cyber risk might also be impacted.

After a software update for CrowdStrike Falcon Sensor product caused a mass global IT outage last Friday, there’s been a lot of discussion in the risk transfer industry about the potential fallout, as the event is expected to test the cyber insurance and reinsurance marketplace.

In its analysis of the cyber incident, reinsurance broker Guy Carpenter notes how the event demonstrates a single point of failure for a complex, global IT supply chain.

“Cyber insurers should use this event to evaluate policyholder supply chain dependencies, assess the potential for aggregation across commonly used technologies, and recalibrate risk tolerances accordingly,” says Guy Carpenter.

As highlighted by the broker, cyber insurance provides for broad coverage of business interruption resulting from network outage, and the trigger for this protection includes system failure resulting from non-malicious acts, including human error, which extends to contingent business interruption (CBI) caused by an outage of a vendor on which an insured relies to operate its network.

Insurers Face Business Interruption Claims After Global Tech Outage

Insurers could face a raft of business interruption claims after a worldwide tech outage crippled industries from travel to finance on Friday, insurance industry experts said.

A software update by global cybersecurity firm CrowdStrike appeared to have triggered systems problems that grounded flights, forced some broadcasters off air and left customers without access to services such as healthcare or banking.

“Insurers are bracing for hundreds, if not thousands, of claim notifications from organizations that are impacted by the CrowdStrike event,” said Ryan Griffin, a partner focused on cyber at insurance broker McGill and Partners.

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Insurance Journal

Data shows hurricanes and earthquakes grab headlines but inland counties top disaster list

Floyd County keeps flooding and the federal government keeps coming to the rescue.

In July 2022, at least 40 people died and 300 homes were damaged when the eastern Kentucky county flooded. It was the 13th time in 12 years that the rural county was declared a federal disaster. These are disasters so costly that local governments feel they can’t pay for it all, so the governor asks the president to declare a disaster freeing up federal funds.

“After that flood I had 500 homeless people looking at me, ‘Judge what are we going to do’?” recalled Judge Robbie Williams, administrator for the county of a bit more than 35,000 people. “It’s overwhelming and it’s just a matter of time before it happens again.”

It did. In 2023, Floyd County was declared a disaster again for 14th time, starting in 2011. And Floyd County isn’t even the nation’s most disaster-prone county. Neighboring Johnson County has 15 disasters declared by the Federal Emergency Management Agency since 2011.

When it comes to extreme weather and other so-called natural disasters, people generally look to the hurricane or earthquake-prone coasts and say that’s where the danger is. But that’s not where the highest concentration of federally declared disasters are, according to an atlas of 713 FEMA declared disasters created by Rebuild by Design and New York University. While most people in disasters think about federal government direct financial help to individual victims to pay for lost housing and businesses, the atlas focuses on the $60 billion pot of FEMA aid to governments.

Eight of the nine counties with the most federal declared disasters since 2011 — more than a dozen each — are in Kentucky, with the one in Vermont. These counties have four to five times the number of disaster as the national average of three in the past 13 years.