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Optimize Risk Transfer

Updated: Feb 25

X-Analytics can help you optimize risk transfer. Check out the X-Analytics Risk Transfer Analyzer.




What is Risk Transfer?

Risk transfer refers to a risk management technique in which risk is transferred to a third party. In the case of cyber risk, one party assumes the liability of another party. This could be done by way of a cyber insurance policy or contract language.


Why Transfer Risk?

Transferring risk removes liability from your business and puts it elsewhere. As an example, you can transfer some of the financial impact of a cyber incident from your balance sheet to a cyber insurance policy. This risk management technique can be highly effective during worst-case (or black swan) incidents.


Does Risk Transfer Include Limitations?

All risk transfer mechanisms come with limitations, and you need to be aware of such limitation to ensure you do not have an over reliance on your transfer mechanism. In the case of cyber insurance, below is a list of some common limitations:

  • Gaps in Coverage: If you don't have a transfer mechanism for a certain type of incident, then you have no ability to transfer. As an example, your cyber insurance policy may not cover ransomware extortion or theft of intellectual property. Therefore, those impacts are non-transferable.

  • Limit: Your transfer mechanism will only cover up to limit. In other words, the limit is the maximum reimbursement you will get from your transfer mechanism. If your transferable impact is $300m and your limit is $100m, then you will only be reimbursed $100m.

  • Retention: Some transfer mechanisms include a retention or deductible. In either case, this is the amount you are expected to pay when using the transfer mechanism post incident. Retentions and deductibles basically limit your ability from transferring the most probable incidents.

  • Waiting Period: Like a retention, the waiting period is another way to limit your ability from transferring the most probable incidents. As an example, your business interruption policy may have a weighting period of 8 hours, which means that you cannot transfer the impact of any incident that is 8 hours or less.

  • Max Duration Cap: A maximum duration cap is a delineation line of where your transfer mechanism stops even if you have not yet hit your limit. This limitation is common with business interruption and ransomware transfer mechanisms.

There are other limitations that are covered in the terms and conditions of your transfer mechanism.


How Do I Use X-Analytics to Optimize Risk Transfer?

The X-Analytics Risk Transfer Analyzer is easy-to-use. After you have created your X-Analytics profile, including the risk transfer section, you will have immediate access to the Risk Transfer Analyzer.

Go to the Report Center and select Risk Transfer Analyzer.


Within the Risk Transfer Analyzer, you will notice that you have two main choices. 1. The risk transfer summary includes an analysis of your cyber insurance. 2. The risk transfer simulator gives you the ability to compare and contrast renewal quotes from your cyber insurance broker.



Option 1. The Risk Transfer Financial Simulator

The Risk Transfer Financial Simulator provides a way for you to understand the total impact (of any cyber incident). You just need to select the loss category and the corresponding duration or size.

In the above image, you can clearly see estimated total impact, insurable impact, and revised impact. If you need to increase insurance impact, then work with your broker to modify coverage, limit, retention, or other.

Option 2. The Transfer Benefit Graph

The Estimated Impact of Transfer on Cyber Exposure graph illustrates your risk transfer benefit based on identified patterns between historical data, your unique business profile, and the macro cyber economic condition.


In the above image, you can see "uninsured cyber exposure" being compared to "insurance adjusted cyber exposure". The greater the difference, then the better the benefit. If you need to increase benefit, then work with your broker to modify coverage, limit, retention, or other.

Option 3. Risk Transfer Simulator.

The Risk Transfer Simulator gives you a way to simulate your current cyber insurance policy with a renewal quote before purchase. This way, you can see if a flat or revised premium is worth the benefit when you consider other factors.


After you enter your quote details, hit simulate and instantly see your results.


In the above image, you can see the estimated benefit between "current policy" being compared to "simulated policy". If you see a positive difference, then you are optimizing risk transfer. If you need to increase benefit, then work with your broker to modify coverage, limit, retention, or other.


In Summary

Risk transfer refers to a risk management technique in which risk is transferred to a third party. Transferring risk removes liability from your business and puts it elsewhere. All risk transfer mechanisms come with limitations, and you need to be aware of such limitation to ensure you do not have an over reliance on your transfer mechanism. The X-Analytics Risk Transfer Analyzer is easy-to-use and will help you understand the limitations in your transfer mechanism so you can optimize risk transfer.

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