Big gaps remain in German cyber market but offering rapidly maturing: SUEDVERS

SUEDVERS, the family-owned broker based in Freiburg with 15 offices across Germany and Austria, is the German representative of the Worldwide Broker Network, sponsor of this year’s European Risk Frontiers survey. Commercial Risk Europe editor Adrian Ladbury asked its cyber experts, Bernd Eriksen and Dr Tilman Golz, how they believe this critical risk needs to be managed and most effectively transferred. Adrian Ladbury (AL): Who do you feel should be responsible for cyber risk within an organisation? SUEDVERS: It is generally agreed that no one person or department should be solely responsible for cyber risks: First of all, it is a technical problem, so the IT department needs to implement an ongoing process that ensures there are no technical security gaps in the IT hardware, software or processes. The next step should be an emergency plan set up by the risk management department together with the IT department, the product division and the legal department. Finally, the department responsible for training should make sure continuous instructions for the company’s staff are in place and understood. AL: How should insurers and brokers help risk managers prevent cyber risk? SUEDVERS: The primary job for insurers and brokers is the coverage of risks, but prevention and mitigation of risks is increasingly being offered by insurers, brokers and third party specialists. This can range from risk identification to the establishment of emergency plans that take into account all potential risk scenarios. The latter is usually necessary to obtain a quote for the cyber insurance. AL: What proportion of cyber risk is covered in your view? SUEDVERS: If you are asking what percentage of German companies have some form of cyber coverage, we would estimate 2 out of 10. But as to how much of the risks are covered, it is impossible to estimate because, at least in Germany, the cyber insurance wordings are very different. This is not only in the scope of cover but also with regards to the deductibles and the insured (sub) limits. Another variable is the duration of liability regarding the loss of profits insurance within the cyber policy. AL: Where are the coverage gaps that you believe need to be filled? SUEDVERS: An important consideration is the fragmented nature of worldwide cover, especially regarding the IT service provider. Clients with operations or subsidiaries abroad should know that cyber risks are transnational and so they need to have a transnational service provider. In addition, there is often a very restrictive definition of the insured subsidiaries. Furthermore, some insurers don’t provide retroactive cover for cyber liability and within the cyber first party insurance there still are several gaps such as low sub-limits and short durations of liability for loss of profits insurance, or no cover for damages caused by so-called called “fake-president” emails. A huge problem is that there are many different triggers, especially regarding the definition for cyber attacks. Finally, most dangerous and largely concealed, are extensive obligations for the insured to prove that IT is up-to-date. AL: Have there been any significant improvements in cyber insurance? SUEDVERS: Because of the competition, which grows stronger every day, the cyber concept opens up to wordings developed by brokers. Consequently, more and more gaps shall be filled. One area the insurers have already improved is the cover for cyber blackmail that was added recently by almost every insurer in the German market. AL: Is there adequate capacity currently and is this fairly priced? SUEDVERS: Compared to the limits provided for D&O insurance, capacity for cyber policies is much too low. Many insurers restrict their limit in the region of €5m and only a few offer €10m, the maximum limit may be €15m. Furthermore, there are only a few insurers that underwrite cyber risks in excess. The differences in premiums between the insurers are declining. But, in absolute terms, if you consider premiums relative to insured limits, especially when compared with D&O insurance, it is still quite high. AL: Should governments create cyber pools to help foster the growth of a more vibrant cyber insurance market? SUEDVERS: Aside from possible legal problems for such a pool in Germany, this would not be necessary. The competition in our market for cyber insurance is getting stronger every day. As a broker, we are looking forward to introducing our own cyber-wording next year.

Big gaps remain in German cyber market but offering rapidly maturing: SUEDVERS

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