Cyber: Clearly a board level topic

VZ Insurance Services is the Swiss member of the Worldwide Broker Network (WBN), sponsor of this year’s European Risk Frontiers survey. We spoke to Oliver Hedinger, the firm’s managing director, and Marco Meili, senior expert cyber and special lines, for their views on the fast-evolving cyber risk landscape and insurance market. CRE: Who do you feel should be responsible for cyber risk within an organisation? VZ: Cyber Risk has traditionally been dealt with by IT departments. However, because of the potential impact on the business, both in respect of own damage and disruption, as well as the threat of being held liable for breach of privacy rights, cyber risks should clearly be a management board topic. A top-down approach involving various departments should be the way to ensure a comprehensive method of analysing risks, reducing the exposure and transferring the remaining risk that cannot be held within the organisation to an insurer under a suitable cyber risk policy. CRE: How should insurers and brokers help risk managers prevent cyber risk? VZ: Our responsibility as a broker is to ask our clients the right questions, to dig deep and ask further questions, in order to help our clients uncover what may still be unknown risks. The goal is that they understand how a cyber incident can affect their business and what their responsibilities are. It is then our job to explain which of these risks and consequential impacts can be addressed in a cyber risk policy, what costs are covered and what are not, how a cyber risk policy can help with reputational losses or even with cyber extortion. The insurers’s role is to keep up with developments in the virtual world, to tailor their policies to address new risks and gain experience in dealing with claims and how they can be avoided. Knowledge and experience are additional important benefits that clients can expect from their insurers when buying a cyber risk policy. CRE: What proportion of cyber risk is covered in your view? VZ: The number of companies with a cyber risk policy is still very small – probably below 5%. However, the number is sharply rising as the interest in insurance protection grows with every article in the newspapers about cyber attacks on Swiss companies. Furthermore, the new EU General Data Protection Regulations and the current adaption of the Swiss Federal act of data protection to EU-Standards will certainly stimulate the sale of cyber insurance policies. Many clients already have small cyber insurance components in their property damage or liability policies. These components, however, barely cover the big risks though. CRE: Have there been any significant improvements in cyber coverage? VZ: Because of numerous market players in the Swiss market and thus increased competition, insurers are very inventive and are offering new coverage extensions such as financial loss at the customer because of software development errors caused by the policyholder. Furthermore, some insurers have introduced simplified underwriting procedures for small and medium-sized companies. CRE: Is there adequate cyber capacity currently and is this fairly priced? VZ: Insurers are keen to be part of the cyber risk insurance boom. Hence there is enough capacity in the market. When cyber insurance was introduced in Switzerland a few years ago, premiums were on the expensive side. However, in the past two or three years premiums have decreased substantially. How the premium levels will react once there are some big and high publicity claims in Switzerland remains to be seen. CRE: Should governments create cyber pools as with terror and natural catastrophe to help foster the growth of a more vibrant cyber insurance market? VZ: Yes, government should create cyber pools, not in terms of capacity but rather in a way to provide platforms or sharing systems for close business groups. This would help them to understand better their exposure to cyber risk and share their lessons learnt from cyber attacks, prevention measures and response experience. This would be similar to how we exchange our knowledge in terms of cyber risk and insurance within the WBN network across the world. Therefore, a strongly regulated pool seems not to be necessary except maybe for businesses that provide the public with essential services such as the energy sector, public transportation or the health sector.

Cyber: Clearly a board level topic

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