Can economic tools protect a nation from sophisticated cyber-crime?
In short: As criminals become more sophisticated, our digital vulnerability grows. Alderman Professor Michael Mainelli suggests that the solution to protecting our networked world might not be purely technical, but economic. By applying the principles of insurance and policy performance bonds, we might build a more resilient and prosperous digital economy.
In an era of almost universal networked connectivity, our reliance on digital products and services has created new vulnerabilities. Modern attacks are increasingly network-borne, targeting both software and stored information. To address this growing cyber-risk, Alderman Professor Michael Mainelli explores how the tools of public and private economics could play a vital role in securing the UK's digital future. This vulnerability arises because technology now pervades every professional and personal area of our lives. As we become more digitally integrated, the potential impact of these network-borne attacks grows.
One primary mechanism involves making cyber-risk a 'normal' insurable risk. This would involve helping insurers insure themselves so they can, in turn, insure others. To bolster UK cyber-prosperity, Mainelli suggests a state-sponsored 'Cyber Re' model that avoids direct government underwriting. This strategy aims to integrate cyber-risk into standard economic frameworks. Such a mechanism could help foster greater national prosperity through digital stability.
Beyond traditional insurance, policy performance guarantees could offer another layer of protection. These guarantees might assure businesses of a government's commitment to security while helping to underpin the broader cyber insurance market. By deploying these economic tools, free market economies may find new ways to handle the complex security risks inherent in cyberspace. These instruments could help democratic nations manage the multifaceted security challenges found in cyberspace. This approach offers a perspective that bridges technical, social, and security concerns.
This economic approach is part of a broader inquiry into how money and government finance function within 'Long Finance'—a collaborative initiative by Gresham College, the City of London Corporation, and Z/Yen to understand when a financial system is truly working. This research builds upon previous reports regarding public and private reinsurance for cyber catastrophes. It seeks to answer fundamental questions regarding the inherent risks and economics of the digital realm.
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Sources
- Summary by Intellect · source: Promoting UK Cyber-Prosperity Through Economics - Alderman Professor Michael Mainelli
- Also: Promoting UK Cyber-Prosperity Through Economics
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