Article Synopsis :
Cyber-attacks represent a real and growing threat to the reputation and financial stability of insurers. Cyber-security is becoming a top priority for not only senior management teams, but boards as well. Cyber coverage is increasingly sold, and bought by, insurers worldwide.
In “Digital Due Diligence: Four Questions to Evaluate Cyber Insurance Coverage,” Hunton & Williams gives insurance executives four questions to think about in the evaluation of cyber coverage, from mainly the buyer perspective (though the information is relevant to cyber coverage sellers as well):
1. What did we say about our business in the cyber insurance application, or at renewal?
At the initial application, companies often fail to disclose complete information about their business, making it difficult for insurers to tailor adequate coverage. At renewal, companies often neglect to fill gaps between current and past coverage needs.
2. Do we have the right ‘triggers’?
Focus on triggers, such as 1) Employee slip-up events, 2) Coverage during the discovery or occurrence of the breach, and 3) Coverage for costs associated with the breach
3. What are our gaps in coverage for cyber risk, and how do other policies or endorsements fix those gaps?
Cyber policies do not exist in isolation. Analyze other existing insurance/risk management contracts to see if/how they cover emerging threats. Review this gap-identification process every year, if not on an ongoing basis.
4. Do we have the right advocates?
It’s essential to have the right advocates, typically brokers and coverage counsel. Rely on brokers to identify and propose the right solutions and rely on coverage counsel to work along side brokers to ensure the best coverage package possible.
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Digital Insurer's CommentsThis article is written for insurance buyers, but our audience is almost entirely insurance sellers, so our viewpoint is from the seller perspective.
The risk of cyber attack increases with every new device added not only to a specific corporate environment, but the Internet overall. As a result, cyber coverage is one of the—if not the—fastest growing lines of business in the industry today. The bad news is cyber risks are hard to quantify, much less underwrite, and loss cost histories are speculative at best. Another challenge is many insureds (who haven’t yet suffered a cyber event) still don’t think they need cyber coverage, or expect it to be bundled free with other policies.
As breaches grow more spectacular and frequent, is cyber coverage a golden revenue-generating opportunity? Or is cyber the next asbestos or mold, a hazard to be everywhere excluded and firewalled from your book? These are C-level questions, requiring board-level endorsement.
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