Cyber is a ‘great big challenge’ for today’s insurance brokers

True risk custodians shouldn’t ignore it

Cyber is a ‘great big challenge’ for today’s insurance brokers


By Bethan Moorcraft

Insurance brokers can no longer sweep cyber risk aside and leave it for the experts. Cyber liability has become a ubiquitous exposure around the world, threatening all insurance lines with even the slightest hint of intangible, digital assets. It’s a risk that all businesses, regardless of size and sector, carry and therefore a discussion that all commercial insurance brokers should be ready and willing to have.  

The key to successful discussions around cyber is education, education, education. Insurance brokers need to educate themselves in order to be confident when educating their clients. The ability to translate intangible cyber risks into tangible loss exposures is a number one priority as the number of breach incidences continues to rise.

“Brokers are custodians who manage the risks of their clients. Today, a true risk custodian simply cannot ignore cyber. It’s a ubiquitous exposure that’s non-discriminatory of industry or business size, and it’s a risk brokers shouldn’t be ignoring,” said Matt Sherman, senior vice president of specialty reinsurance and programs division, NAS Insurance Services. “Taking complex information around cyber risk and being able to explain it in lay-terms to an insured or a customer is going to be one of the great big challenges brokers will face in the next couple of years.”

Cyber liability insurance is still a relatively immature product. It’s in the early stages of development and uptake, which means the majority of work for insurance brokers revolves around education and risk management. It’s incumbent to get commercial entities up to scratch with their cyber hygiene, standards and governance practices.  

“About 10-years-ago, cyber liability insurance was purchased primarily by large organizations with huge amounts of data and a public brand to protect,” Sherman told Insurance Business. “Big splashy events like the Equifax data breach and the Sony Pictures hack are the things we read about in the news every day, but in the last 5-7 years, we’ve seen data breach infiltrate the small business community in America.

“Large corporations have got their heads around protecting their businesses from cyberattack for a decade or more, but small businesses in the US are only now waking up to the risks they’re facing. Selling cyber to small business clients is about getting the rate right, the limits right, and articulating the product in such a way that they can understand it. Small business owners will easily shy away from a product if they don’t truly understand what they’re buying and how it works.”

NAS Insurance Services has over 40 years of experience as a long-standing Lloyd’s coverholder with financial backing from leading Lloyd’s syndicates. The firm has been writing cyber liability insurance for about 15 years and also provides cyber liability reinsurance solutions to help insurance carriers and program administrators insurance provide bolt-on cyber liability coverage without additional R&D costs, overhead, and assumption of risk.

“A lot of carriers, program administrators and brokers still don’t feel completely comfortable getting into the cyber space,” Sherman said. “They may not have the subject matter or the underwriting expertise, and, most importantly, they may not have the claims expertise to confidently offer cyber. That’s where NAS Insurance comes in. We’re able to offer the product, as well as the support and the services around it. It’s important for insureds to know that no matter who is writing the cyber coverage and providing the services, there’s subject matter expertise every step of the way.”    

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