LMA report finds widespread use of cyber exclusions in many classes
Malicious and/or non-malicious cyber incidents are excluded in most classes of business covering physical damage losses, according to a report by the Lloyd’s Market Association (LMA) called ‘Cyber Risks & Exposures Model Clauses: Class of Business Review’, which reviews by class non-affirmative and affirmative coverage and commonly used exclusions.
In most classes covering physical damage losses, malicious and/or non-malicious cyber incidents were found to be excluded although there were examples of limited write-backs for existing perils, the report found.
In non-marine liability classes, including professional lines, cover is provided for a wide range of legal liabilities, however they arise, with few exclusions. In the specialist cyber market, where Lloyd’s is a world leader, cyber exposures are addressed by specialist cyber underwriters. Outside the specialist cyber market, less than three per cent of conventional contracts underwritten at Lloyd’s in 2017 explicitly included cyber risks
The LMA report also found evidence of increasing sophistication in the monitoring and management of cyber exposures - in part, a result of heightened regulatory supervision.
Patrick Davison, manager, property, reinsurance and delegated underwriting at the LMA, said: “When considering the impact of potential cyber exposures, underwriters need to focus on the potential changes to frequency, severity, and systemic risk that cyber exposure may cause. Unfortunately, the current lack of data and loss experience in many classes makes assessment difficult. The market is using a variety of mechanisms to cope, and many are now providing cover with affirmative language to protect insureds against this challenging new peril.”
David Powell, the LMA’s head of non-marine, said: “This review is intended to help the Lloyd’s managing agency community’s knowledge of where and how cyber risk is being dealt with in their own specialist areas, as well as in other classes in the market. The LMA is committed to helping managing agencies better understand the cyber perils they face and providing research and analysis to assist in the development of new models and wordings. This is particularly important against the backdrop of increasing regulatory oversight from the Prudential Regulation Authority.”
Join us at Intelligent Automation in Insurance - April 26th 2018, London: Book now.
More of today's news
MGAA sets up dedicated group to target innovation in MGA sector
TMK forms strategic alliance with Australian insurtech Evari
LMA report finds widespread use of cyber exclusions in many classes
Alesco poaches Willis broker to chair construction unit
XL Catlin first to bind political risk policy on London Market PPL
Castel makes Weald Risk a standalone business
Lloyd’s coverholder offers parametric insurance to Spain’s olive farmers
