Engineering underwriters are underestimating cyber risks even though digital trends such as the Internet of Things and cloud computing have a direct impact on the sector.
This is the assessment of the International Association of Engineering Insurers (IMIA), which called for increased dialogue between underwriters, brokers and risk managers to improve understanding and awareness of cyber threats in the engineering risk landscape.
Alexander Schmidl, chair of a specialist working group formed by the IMIA, said that engineering underwriters must address the issue of cyber on all covers they write.
“The perception that cyber events do not cause physical damage is being challenged; such damage from cyber risks is a reality and is an issue for all lines of engineering insurance,” Schmidl said.
“Keeping pace with cyber trends is key if they (underwriters) are to remain current in assessing and carrying related risk,” he added. “Continuous learning will qualify insurers to be long-term risk partners for the industry and its increasingly complex risks.”
Schmidl’s group reviewed engineering covers and found an underestimation of potential loss scenarios based on cyber interconnectivity among industrial control systems.
Schmidl warned that ignoring cyber risk will create a significant and more complicated issue for technical insurers in the future.
“Engineering insurance carriers have to decide how to manage the growing risk from the various threat sources,” he said. “Failing to do this will not allow for the creation of an adequate long-term cyber risk business model with an appropriate risk return.”
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