Demand grows for multinational cyber insurance programmes

Increasing awareness of cyber risk and tougher data protection laws are driving demand for multinational cyber insurance programmes, according to Chubb. Europe and Australia are both introducing stricter data protection laws in 2018, including notification requirements for data breaches. Canada recently published proposed regulations for mandatory reporting of privacy breaches under its Personal Information Protection and Electronic Documents Act. Similar rules already exist in the US and have been an important driver of cyber insurance. Rising data protection regulation outside the US and increased awareness of potential business interruption losses from cyberattacks are leading to increased demand for multinational cyber insurance programmes, according to Suresh Krishnan, head of Chubb’s Global Accounts Division in Europe. Some European companies are looking to buy global cyber insurance programmes to, in part, address the forthcoming EU General Data Protection Regulation (GDPR), due to be implemented in May 2018, said Mr Krishnan. The new rules are also seeing more US companies buy global programmes covering EU exposures, he explained. “We are seeing more interest as companies in Europe look to address corporate governance requirements to ensure that they have robust protections for data held in the EU, but also worldwide. And with the GDPR we will see more demand,” said Mr Krishnan. Demand outside the US is being driven primarily by buyers in Europe, although Chubb is also seeing growing interest in cyber insurance within Asia and Latin America, he continued. “Chubb’s multinational cyber insurance capabilities have been growing and we now have a robust team in Asia, where we are seeing more demand. In Latin America, the journey has begun for cyber insurance,” he explained. Cyber is just one of a growing list of specialty lines to be written under multinational programmes, explained Mr Krishnan. “We have seen multinational programmes expand into specialty lines. Historically, programmes concentrated on the core property and casualty lines, before adding financial lines and directors and officers. Now we see multinational programmes in the core specialty space for cyber, business travel, environmental and terrorism, as well as surety,” he said. Mr Krishnan reminded insurance buyers that they should play a prominent role in building global programmes and where appropriate, take the lead. “It’s a tripartite effort, with the client and the broker doing their part along with the multinational insurer, to make sure cross-border solutions meet expectations,” he said. The payment of claims is the best place to start when building multinational programmes, according to Mr Krishnan. “Clients understandably want a view on compliance. And the broker and insurer can lead this thought process, but we have learned that multinational programmes are best seen from the perspective of where clients have insurable interests that they would like insured and where claims would be paid. Once we establish that, we can build the programme from there,” he said. Tax and regulatory compliance has been a growing area of focus for multinational insurance programmes for many years, and most recently with increased scrutiny from tax authorities. For example, the Organisation for Economic Co-operation and Development’s Base Erosion and Profit Shifting (BEPS) initiative has increased the focus on captives, risk financing and premium allocation for multinational insurance programmes. The issues raised by BEPS and national tax authorities are not new and can be dealt with when there are appropriate levels of transparency and substance to transactions, according to Mr Krishnan. “From a tax perspective, genuine, real, commercial substance is critical for a cross-border insurance transactions involving captives. Additionally, there must be a clear commercial rationale with the appropriate controls, corporate governance and transfer pricing mechanisms,” he said.

Demand grows for multinational cyber insurance programmes

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