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With data being a crucial element in the world of insurance, the lack of it can make things troublesome. To help ease the burden for its members when it comes to cyber insurance – where data isn’t particularly abundant – the Lloyd’s Market Association (LMA) has published a comprehensive report examining non-affirmative and affirmative coverage, as well as commonly used exclusions, by class.
The LMA’s “Cyber Risks & Exposures Model Clauses: Class of Business Review” found that malicious and/or non-malicious cyber incidents were excluded in most classes covering physical damage losses. Findings also include “evidence of increasing sophistication” in terms of cyber exposures monitoring and management, amid tighter regulatory supervision.
“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,” said Patrick Davison, the LMA’s manager for property, reinsurance, and delegated underwriting. “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.”
It was also noted that outside the specialist cyber market, less than 3% of conventional contracts underwritten at Lloyd’s last year explicitly included cyber risks.
“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,” commented head of non-marine David Powell. “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.”
