How quantum computing creates new risks, regulatory issues for insurers

Quantum computing stands at the forefront of data processing technology and, although it remains an open question how it will be regulated, some form of guidelines will be needed.

Quantum computers go well beyond a standard binary form of processing information, more closely patterned after the way humans think. Experiments with the technology have even seen quantum computers mimic human behaviours such as jealousy, love, depression, and fear.

And so, think of the dangers associated with the artificially intelligent computer HAL 9000 trying to kill the astronauts aboard the spacecraft in Stanley Kubrick’s film 2001: A Space Odyssey, because their presence is in conflict with his primary mission, which is a secret.

Quantum computing could pose parallel risks, which makes it potentially dangerous to the point of needing close regulatory attention, industry experts say.

“The most sensible thing I’ve heard is that we might regulate it similarly to atomic science,” says George Beattie, head of innovation at CFC. “There’s an international atomic agency that regulates this kind of information to make sure bad actors don’t get their hands on potentially weaponable nuclear secrets. Why not view AI in the same way?”

Feite Kraay, alliance director for IBM, Kyndryl and ServiceNow with KPMG in Canada, says we don’t want a situation like generative AI, which was adopted without considering regulatory, ethical and governance frameworks beforehand.

“I don’t know what [regulations] might look like, but we have the opportunity to establish them now as we move ahead,” Kraay says.

Rules timeframe uncertain

Regulators are already looking at quantum computing.

The Office of the Superintendent of Financial Institutions (OSFI) has asked federally regulated financial institutions for feedback on AI/machine learning adoption and how prepared they are for quantum computing.

The goal of the voluntary questionnaire is to increase understanding of companies’ involvement in AI, inform policy and supervisory work, and assess the state of quantum-readiness.

“The application of quantum computing in the financial sector could bring many advantages relative to conventional computing,” OSFI says. “Potential use cases could range from [artificial intelligence and machine learning] applications to fraud detection and portfolio allocation.

“Adoption of this technology is expected to yield greater efficiencies in time, effort and cost.”

Ontario’s Financial Services Regulatory Authority (FSRA) is also monitoring the impact of new and emerging technologies.

Plus, FSRA is an active member of a quantum readiness working group, and its staff — including FSRA’s chief information officer, chief information security officer and chief risk officer — meet regularly to discuss emerging issues.

This article is adapted from one appearing in the February-March 2024 print edition of Canadian Underwriter. Feature image courtesy of iStock.com/fstop123