Cyber

We have gathered the most exciting highlights from the digital advice innovation landscape as well as the latest news related to balance sheet risk. Overall, the news indicates positive ground for the growth of automatic financial advisers although the industry has been surprised by the large player's withdrawal from the emerging digital advice offering. On the balance sheet risk side, cyber risk is gaining prominence as an operational risk, while the IFRS 17 is increasingly viewed as a catalyst for business model innovation for the insurers. Additionally, the use of machine learning is penetrating accounting industry, though it is not expected to cause disruption in terms of massive unemployment.

The minimal criterion of success is an absence of failure. However, when it comes to information security breaches, it is safe to claim that this criterion is far from being met. A few prominent scandals in recent years demonstrate the scope and impact of such risks on the financial industry, influencing the EIOPA to include a cyber security questionnaire in its Cyber Risk Assessment Package. Gauging cyber risk is a challenging endeavour, marked by the sensitive character of the underlying data and a lack of established academic research within the field. However, Kidbrooke Advisory has formulated its take on the cyber risk assessment.

European Insurance and Occupational Pensions Authority (EIOPA) will this year run their fourth Union-wide stress test exercise. The overall objective is to assess the resilience of the European insurance industry against unfavorable market events. However, an interesting difference from earlier exercises is that EIOPA will include a separate analysis on cyber risk this year.

Cyber risk is steadily becoming one of the largest typ of risk of the financial industry. At the same time, modelling cyber risk becomes increasingly harder as the range of cyber threats widen.