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Artificial Bugs for Enhanced Cybersecurity

 |  July 10, 2024

By: Hans Gersbach & Fikri Pitsuwan (CEPR)

Most people are aware that cyberattacks occur, but few realize that the number of such attacks has doubled since 2019, before the onset of the COVID-19 pandemic (Jamilov et al. 2023). This increase has gone largely unnoticed because the direct losses reported after the attacks have not been particularly significant. However, this situation may soon change, as the risks of extreme losses are rising in tandem with the increase in attacks, particularly in the financial sector. Currently, one-fifth of all cyberattacks target this sector, and this share is expected to rise in the short term (IMF 2024).

So far, cyber incidents in the financial sector have not been systemic. However, the interconnectedness of the sector’s financial and technological aspects puts its stability at high risk (Glasserman and Young 2016). These risks vary depending on the type of interconnectedness. At the technological level, for instance, a disruption of critical services can occur, leading to a broader lack of trust in the entire system.

A ransomware attack on the Industrial and Commercial Bank of China, for example, impacted the US Treasury market by disrupting trade (Financial Times 2023). Such global effects are exacerbated by two additional problems: the current level of reporting in the financial sector is insufficient, and existing solutions for insurability do not account for rapidly changing risks. Insurers struggle to keep pace with the continuous advent of new risks, and designing efficient boundaries for insurability remains a recurring challenge…