New bespoke approach needed for cyber cover

Like others across Europe, German risk managers have complained that they don’t want to be sold cyber insurance as a separate line, and would prefer to see it included within their existing coverage. Taking part in our European Risk Frontiers survey, Christian Böhm of Freudenberg Group said: “Cyber risk is totally different for each company. Companies are organised in different ways. Some have all their systems combined into one while others have a decentralised approach. I wonder why cyber insurance cannot be added to existing lines of insurance. Why is it not possible to bring all such risks into property damage, business interruption and liability policies?” Adding: “The other problem is that for some of the more valuable assets – such as patents, our crown jewels – there does not appear to be any coverage right now. I suspect that this is because there is currently no means to calculate these risks. But for us, and many other companies, this is the critical part.” Matthias Beck, head of insurance and risk management at industrial assembly materials and tools firm Wuerth Group, agreed. He called for far more clarity and consistency from the market when it comes to cyber. “We have bought cyber coverage from a liability perspective, but I fully agree with Christian. The wordings are really difficult to analyse because it is not clear what is covered and what is not. You have to keep going back on each point and clarify the coverage. This is certainly one area where the insurers need to be more customer-friendly. They need to look at what we actually need and create wordings in a more transparent way, where you are able to identify covered cases much easier than with the existing wordings,” he said. GVNW president Alexander Mahnke fully supported his colleagues. “I agree with Matthias. Cyber is so all encompassing it really does not make sense for procurement to be buying this coverage on a commodity basis. This needs clarification. The insurers do not seem to know at what point a property or liability policy responds. This is also one area where added services such as advertising, business continuity, business interruption and the like are needed,” he said. “But again, we have to be fair here. The market has actually reacted very quickly to this new area. It does need to be carefully looked at and customised. You need to ask questions and whether this really is the answer for all companies,” continued Mr Mahnke. He also pointed to the important role played by regulations in this sphere. He stressed that cyber is actually a risk management and business continuity matter first and insurance issue second. “Look at the US where 46 of the 50 states have mandatory requirements for data breach notification, and of course we have the General Data Protection Regulations (GDPR) coming in Europe in 2018. Our own government is interested to see whether the insurance market is able to provide adequate support and we need to be part of that effort. If you decide not to go down the cyber insurance route then at the very least you need a good back up plan and secure system. This is all about contingency planning and risk management first and insurance second.” For this reason, risk managers clearly have a big role to play, not just in terms of buying insurance, said Mr Böhm. “I do believe that risk managers have an important role to play here. It is natural for IT professionals and managers to tell you that their system is fully secure and they have it all under control. But cyber risks develop very quickly and I bet you would find that many good IT professionals and departments are not actually on top of this. There needs to be greater awareness of the potential risk and the need for a robust response. Risk management needs to be involved, playing a major role in this exercise,” he concluded.

New bespoke approach needed for cyber cover

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