Volatile COVID-19 environment opens businesses up to more risk

Volatile COVID-19 environment opens businesses up to more risk | Insurance Business

Volatile COVID-19 environment opens businesses up to more risk

For Maia Espejo, national manager of technology & cyber at Sovereign Insurance, the changes in the cyber insurance marketplace in Canada over the course of 2020 and moving into 2021 have been interesting to watch.

Cyber events are on the rise — The industry loss ratio in cyber insurance increased to close to 500% in the second quarter of 2020 and continues to grow at an alarming pace,” she said. The pandemic has prompted a widespread move to remote work that has created new cybersecurity challenges for many businesses.” 

Find out more: Discover Sovereign’s cyber solutions here.

To meet these rising challenges, Sovereign introduced a comprehensive and competitive modular policy that offers a unique coverage solution for technology and cyber risks.

Whether a virus, a third-party attempt or human error, industries cannot guarantee their security network infrastructure is 100% secure,” Espejo said, adding they work with brokers to deliver comprehensive coverage and risk solutions to help protect the clients bottom line and reputation from unknown and unforeseen risks as their business and technology evolve.”

Our new product offers E&O coverage for technology services companies and non-technology companies all on one form,” Espejo explained. “For cyber, we offer ransomware threat as part of cyber extortion, as well as other enhancements such as rewards expenses, crisis management, payment card loss, social engineering coverage, fund transfer fraud, telecommunications fraud, and bricking coverage.”

Espejo continued: We offer primary and excess coverages to meet the unique needs of Canadian businesses, from agricultural to mining, manufacturing to wholesale and distribution, professional services (tech and non-tech companies), retail to real-estate, entertainment to accommodation, and many other industry sectors.”

The remote working environment has prompted an uptick in phishing scams and ransomware attacks, which, along with business email compromise attacks, were the top cyber threats in 2020 and remain so in 2021. Some businesses had their remote workforce — and their network security — up and running seamlessly, while others were pushed into the environment unprepared and unprotected.

Building a strong corporate culture that includes leading security practices is very important. Sovereign recommends that businesses provide their employees with necessary training through regular training programs and simulations, since employee education is crucial in avoiding cyber incidents and strengthening the companys overall cyber security environment, Espejo said.

Most companies tend to purchase general liability insurance to protect against potential lawsuits or claims resulting from accidents, injuries, or negligence, and most also have professional liability insurance to protect themselves against the cost of errors, malpractice, or negligence in services provided to their customers, whereas cyber insurance is not even considered.

While cyber insurance is viewed as a component of a companys cyber-risk mitigation strategy, the actual number of companies that have it prior to a cyber event is quite low — but would be a lot higher if companies understood the impact on reputation and potential for significant costs that comes with a breach,” said Espejo.

The pandemic has not only heightened the importance of cyber protection, it has also highlighted an already evolving professional liability space. For Reynaldo Batac, national manager of professional liability at Sovereign, theres good reason for the focus on professional liability insurance — specifically directors and officers liability insurance. Over the course of the past 15 months or so, the D&O market has seen a significant change in risk appetite, tolerance and pricing,” he said.

Find out more: Discover Sovereign’s D&O liability insurance solutions here.

Insurers have been exiting industry classes, reducing their limit capacity and recalibrating their premium rates in reaction to an evolving claims environment,” he said. “The professional liability industry is taking similar approaches in pricing and limit management, but not to the same degree as the D&O market.”

A year ago, the COVID-19 pandemic created delays and uncertainties in supply chain and revenue strains due to unforeseen government mandated closures. These abrupt changes caught many companies flat footed in pivoting to a virtual workplace,” Batac noted, and the financial impact of all of these factors increased the propensity and probability of failures causing many companies to have to reevaluate their entire business operations.

D&O products are designed to specifically address the decisions management and executives were forced to make during the uncertainty of the pandemic, and that could have resulted in an alleged or accidental wrongful act. Sovereign is rolling out Sovereign Secure: Management Liability, a more modern modular management liability form that includes options for combined or separate limits for D&O liability, employment practices liability and fiduciary liability, as well as crime - an approach towards management liability that Sovereign did not previously offer.

The rationale behind the product launch is two-fold, Batac said.

Sovereign wanted to offer prospective clients and business partners, who may have not have thought of Sovereign as a traditional market, competitive coverages that matched our underwriting expertise,” he said. It was also important to offer current clients protection that addresses new and emerging risk exposures.

Having an insurance partner with comprehensive wordings, a diversified distribution model, and a dedicated underwriting and claims team is imperative to protecting your business as insurers continue to take harder stances on appetite, limits, and premium expectations,” Batac said.

In such a volatile environment, businesses need to take the risks they now face - both from the external environment and from within - seriously, and take all possible steps to protect against them now and going forward.

Learn more about Sovereign’s revamped cyber insurance and D&O liability insurance by following the links.