Quantum computing – a threat before an opportunity
The development of quantum computing (QC) capacity is progressing rapidly. With that comes new threats to data security which from the insurer’s perspective, will likely outpace any benefits for the foreseeable future.
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Quantum computing, a technology able to solve problems too complex for classical computers, is becoming a reality: first models are already on the market.1 Insurers and other financial service providers will benefit from the accelerated processing power, high-speed data pattern recognition and elevated machine learning that QC promises. For insurers, QC opens unprecedented opportunities for simulation and modelling. The expectation is that risk pricing, for example, will be possible in real time, and that optimisation calculations for underwriting and investments will also be very swift.2
However, a fully-fledged quantum leap is still a few years off. And worryingly, before companies can profit from broad commercial application, QC will likely mature as a threat to existing IT-security protocols – particularly as a yet unseen force that can hack standard encryption keys used in online communications and data transfer.
The quantum promise
Conventional computing is based on “bits” that represent either a zero or a one. This current means of storing and processing data is boosted by QC’s “qubit”, which can be a zero, a one, or a superposition of both at the same time. Any additional qubit raises computing processing power potential exponentially. At present, quantum processor capacity has reached 127 qubits, and expectations are high that processor technology will progress further.3 In the mid-term, a hybrid operating model – a combination of conventional and augmented quantum QC-inspired algorithms – will likely be used for specific industry applications.
There is much interest in QC, but significant hurdles remain to its adoption in existing commercial environments. One challenge is quantum computers’ need for stable, ultra-low temperatures and, thus, high energy supply.4 Furthermore, companies that intend to use QC could face talent shortages, with the new associated skill sets in high demand.
The quantum threat
Nevertheless, QC’s potential benefits have captured the interest of those striving for efficiency and lower costs. QC features prominently on military and intelligence research agendas also. The prospect of strategic first-mover advantage in QC is spurring global competition and plays an important role in geopolitical rivalries.5 In some cases, quantum lab programs are being funded, and generously so, by national governments. Knowledge advances gained in such off-limit environments will likely be kept under wraps. For this reason, QC will likely be deployed for national interests before large-scale application in business become the norm.
Deeper knowledge of QC will be of particular value in defending against quantum threats. Scenarios suggest that public key cryptography now used to protect online communication confidentiality and integrity could soon be at risk.6 The quantum challenge to modern encryption is also a threat to financial market stability.7 As the spectre of state-backed cyber-attacks rises, insurers and other industry players run the risk of being hacked and thus becoming victims of QC before they profit from it.
Further Information
References
1 “IBM Quantum System One,” IBM Research; “Azure Quantum,” Microsoft Azure; “Quantum Computing Service - Amazon Bracket,” Amazon Web Services.
2 Deodoro, J. et al, “Quantum Computing and the Financial System: Spooky Action at a Distance?”, IMF Working Paper 71, 2021.
3 “IBM unleashes the Eagle, the world‘s most powerful quantum processor,” New Atlas, 16 November 2021.
4 Some quantum hardware technologies, especially photonics, won‘t require ultra-low temperatures and high energy supply. And even for superconducting devices which do, they are still estimated to favorably compare to the energy consumption of classical computers, as they need much less time – and thus energy – than the latter solving the same problem (e.g. simulating molecules, calculating derivatives price).
5 “Threat Horizon 2024: The disintegration of trust,” ISF, 2022.
6 “In a quantum future, our economy needs to be protected. A cyber security expert explains why,” World Economic Forum, 10 November 2021.
7 Deodoro, J. et al, “Quantum Computing and the Financial System: Spooky Action at a Distance?”, IMF Working Paper 71, 2021.