A mechanism by which the public authority takes on the catastrophic share of a risk that the private market cannot absorb.
The public backstop is a last-resort mechanism by which the state steps in to cover the share of a risk that exceeds the capacity of the private market. It addresses fundamental risks, too correlated and too massive for mutualisation, of which terrorism offers the clearest precedent with the British Pool Re, the American TRIA programme or the French GAREAT. An identical debate has opened for catastrophic cyber and hybrid war, the idea of a public backstop having been raised as far as the American national cybersecurity strategy. But such a backstop runs into the same obstacle as the exclusion it would complete, because the triggering event must be defined, which again runs into attribution and characterisation. Too broad, it subsidises imprudence and creates moral hazard; too narrow, it leaves without relief the victims of unattributable attacks.
Just as GAREAT pools terrorism risk with a public guarantee above a certain threshold, a cyber public backstop would intervene after the most devastating attacks that insurers cannot bear alone.
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