Driving Effective Cyber Insurance and Investment Decisions with Cyber Risk Quantification

Cyber Risk MetricStream
4 min read


Quick: How much car insurance will you need to pay next year?

You might not know the exact amount, but you can probably estimate based on a few factors:

  • Your past driving record
  • How long you’ve been driving
  • The cost of your vehicle
  • How much you plan to drive
  • If you take liability as well as collision insurance

All of these inputs, or factors, create risk. Less experienced drivers are more likely to have accidents, and therefore pay more. If you have a record of speeding, you’ll be classified as riskier than someone who hasn’t.

Car insurance, home insurance and even credit insurance are familiar concepts and easy to grasp.

But what about cyber insurance? How do you estimate how much you need? Is it worth the cost? And does it replace cyber risk management?

Of course, cyber insurance is insurance, so it’s modeled on risk. And like car insurance, it focuses on covering the costs of a theft or an accident – or in the case of cyber, a data breach or incident. Cyber insurance typically covers the costs of notification, remediation, data recovery, and more, depending on the scope of the policy.

But cyber insurance isn’t a replacement for cyber risk management. It doesn’t cover pre-existing conditions – for example, if an organization knew of a cyber vulnerability and didn’t correct it, it won’t be covered. It doesn’t address costs arising from inadequate cyber security processes or employee error – a top source of data breaches.

Quantifying Cyber Risk for Cyber Insurance Decisions

What’s more, cybersecurity incidents and data breaches are increasing at an alarming rate across industries, particularly in the post-pandemic era. Considering just ransomware, there has been a 105% increase in ransomware attacks in 2021 as compared to 2020, according to SonicWall.

As the number of cybersecurity incidents continues to climb, cyber claims are also on the rise, driving up insurance premiums. According to Bloomberg, insurers have doubled the cost of annual premiums being charged to organizations in the past year. Today, organizations are paying more for the same level of protection or even lower.

Given the high-frequency, high-impact nature of cyber threats, how do you estimate how much coverage you need? And once you have coverage, how can you know when you are approaching your limits?

To find the answer to this question, organizations need to accurately understand their risk exposure and return on investment. Though of course insurers have their own application processes, it’s hugely helpful to understand and quantify cyber risks in monetary terms -- i.e., express the actual loss that an organization could face in financial values. This process helps decision-makers understand their cyber risk exposure, prioritize the risks, and make informed cybersecurity investment decisions. Understanding the dollar amount of risk will bring clarity to the board and executive management in answering questions such as:

  • How much budget should be allocated to cybersecurity?
  • What risks should be covered in cyber insurance?
  • How much premium should be paid?
  • Is the cybersecurity investment worth it?
  • How much investment is good enough?

Expressing key risk metrics, such as value at risk, risk exposure, expected loss, and impact, in financial or monetary terms makes it easy to prioritize risks based on their potential financial impact – as well as estimate the need for insurance coverage.

These factors help drive an informed decision. Businesses can decide whether to pass the risk (by purchasing cyber insurance), forgo the risk (when the required investment is more than the financial impact of the risk), or take actions based on their risk appetite.

Leveraging risk quantification can enable organizations to optimize the utilization of resources by driving investments in the right technologies at the right time, based on the risk priorities.

Learn how MetricStream helped a U.S. Telco Giant Make Cybersecurity Decisions 60% Faster by Quantifying the Dollar Impact of Cyber Risks

Strengthening Cyber Resilience

All in all, cyber insurance is a valuable tool in the fight against cyber risk, but in no way replaces solid cyber risk planning. With businesses increasingly storing and managing data online and embracing automation, a lot is at stake. To manage the risks of today’s hyper-connected and digitized business environment and strengthen cyber resilience, organizations need to implement a comprehensive cyber risk management program, enriched with cyber risk quantification and continuous control monitoring capabilities.

To learn about MetricStream Advanced Cyber Risk Quantification, click here. To request a personalized demo, click here.

Pat McParland

Patricia McParland AVP – Marketing

Pat McParland is AVP of Product Marketing at MetricStream. She is responsible for creating product messaging, product go-to-market plans, and analyzing market trends for MetricStream's cyber compliance and third party risk product lines. Pat has more than 25 years of financial data and technology marketing experience at Fortune 1000 brands as well as startups and has led product and marketing teams at Dow Jones and Dun & Bradstreet. She has a BA from the College of William and Mary and lives in Summit, New Jersey.