Airmic: policyholders continue to face cyber coverage gaps

Policyholders still face inconsistent responses from their insurers, inadvertent loss of intended coverage and programme gaps when it comes to cyber insurance, according to UK risk management association Airmic.

The observations were made as part of a white paper produced by Airmic in partnership with specialist insurance broker Paragon, Silent Cyber: Can you hear it?

The paper suggests that with events such as the WannaCry ransomware attack classified as a cyber catastrophe event, silent cyber issues have developed into coverage disputes.

Because cyber risk is now a pervasive threat to all operating entities, the paper says, it impacts practically every line of commercial insurance. However, it remains unaddressed in many lines of insurance”

“The lack of clarity in some standard property and casualty policies can lead to confusion or misunderstanding about coverage for cyber risks.”

“Simultaneously, an insurer covering a loss it had not contemplated can jeopardise its credit rating and/or financial solvency. We refer to these potential cyber exposures as ‘silent’ cyber or ‘non-affirmative’ cyber.”

The white paper, available in full on the Airmic website, leads with an overview of the current environment, including policy options for buyers, as well as potential arguments for insurers denying cover.

The document then describes the market response to silent cyber, including exclusions on directors’ and officers’ liability and on and crime insurance products, property and marine affirmative covers, standalone cyber policies, providing options for insurance buyers.

“Insurers and regulators are taking action to address the risk of silent cyber,” said Lyndsey Bauer, partner at Paragon and author of the paper. “Policy language is evolving and that is impacting coverage. Besides being untested, the drafted language could also overreach.”

“Policyholders face the challenges of getting inconsistent responses from their insurers, inadvertent loss of intended coverage and programme gaps,” Bauer continued.

“Finally, insureds should prepare for renewal – they should develop a strategy, identify renewal priorities, approach the market with C-suite support and always review feedback.”