Cyber-attacks threaten power grids
Recent reports highlighted the growing threat of cyber-attacks and data breaches to the energy sector, and underscore the growing need for protection, according to rating agency AM Best.
A technical alert released by the US Department of Homeland Security (DHS) and Federal Bureau of Investigation on March 15, 2018, identified Russian government actions that have targeted US government entities and other organisations in the energy sector, as well as other critical infrastructure sectors. In addition, earlier in February, Microsoft and Marsh & McLellan described energy-sector executives’ concerns and fears with regard to the potential business interruptions and infrastructure damage resulting from cyber-attacks.
Coverage for cyber exposures has often been included in traditional and liability re/insurance, but has not always been clearly defined, and the level and scope of coverage is often difficult to ascertain, AM Best said. Moreover, there is the potential for much larger-than-expected claims, especially in relation to property damage.
An attack such as the one that turned off the lights in Ukraine in December 2015 could bring vital US sectors to their knees. In that incident, numerous substations were switched off, resulting in power outages that impacted nearly a quarter of million customers.
In the US, the lack of adequate protection against cyber vulnerability can be attributed in part to the complexity of the power system itself. Further compounding this situation is the added level of complexity with regard to regulated versus nonregulated companies, project finance arrangements, and ownership structures.
Specialty groups in the energy/utility sector have, for some time, been exploring avenues to leverage their industry knowledge into areas of profitable—but conservative and controlled—growth in cyber. Specialty insurance covers high-hazard insurance, non-standard general insurance, niche market segments, bespoke underwriting, and excess and surplus lines insurance.
Several of the specialty insurers that AM Best rates have teamed up with insurance industry leaders such as AEGIS and Aon, or Energy Insurance Mutual and the Beazley Group to develop cyber-specific products, or have teamed up with peer groups such as Energy Insurance Mutual and Nuclear Electric Insurance Limited, or have developed cyber products for members on their own, providing customized and energy industry-specific cyber security coverage ranging from $15 million to $50 million.
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