NYU Stern Researcher Questions Why Cyber Insurance Rates Keep Falling Amid Claims of Accelerating AI Cyber Risk
Key Takeaways
- •Global cyber insurance rates declined approximately 4% in Q2, the twelfth consecutive quarter of falling premiums.
- •An NYU Stern researcher argued the sustained decline is a market signal implying observers should not overemphasize the Hugging Face incident.
- •Insurance premiums aggregate the money-backed judgments of many actors, making them harder to dismiss than stated expert opinion.
- •Economist Tyler Cowen featured the exchange under 'Questions that are all too rarely asked' and said he expects cyber insurance prices to rise somewhat.
A researcher at NYU Stern, @NateWitkin, has questioned why cyber insurance rates continue to fall if AI-driven cyber risk is truly accelerating:
"Insurance rates for cyber risk declined by about 4% globally in Q2 of this year, and that's actually the 12th consecutive quarter in which they've declined. This is very valuable signal that implies that at a minimum you shouldn't overindex on the Hugging Face incident."
"This is a plea for level headedness, but I think it would be helpful for safety folks to engage with these numbers just 'cause this is an avenue of criticism from folks like me and to an extent folks like Tyler."
"Why are these numbers not moving? Is it because people are underestimating capabilities? Are they not taking the problem even as close to as seriously as they should or is it something else?"
The argument draws on a well-established idea in economics and risk analysis: market prices, including insurance premiums, aggregate the dispersed judgments of many actors who put money behind their beliefs, and are therefore often treated as a signal that is harder to dismiss than stated expert opinion. Sustained premium declines across twelve consecutive quarters suggest that insurers, whose profitability depends on accurately pricing losses, have so far not seen claims experience that would justify charging more for cyber risk, even as concerns about AI-enabled attacks have intensified.
Tyler Cowen, writing at Marginal Revolution, filed the exchange under "Questions that are all too rarely asked." He adds that he is happy to admit the answers here are far from obvious, and that he himself is expecting prices to rise somewhat.
He also notes that there are a remarkable number of ways, seen among other places on Twitter, to rephrase and rationalize the statement: "I have the most remarkable and important and true macro risk story in the world to tell you. Unfortunately, it does not correlate with any observed asset market prices."
