Amrae says French insurers lack clear position on denial of cyber cover due to war

Amrae says insurers are failing to deliver clear answers to mounting concern among French risk managers about the potential denial of cyber claims due to war exclusions.

The French risk and insurance management association wants carriers to accept the burden of proof for cyber war as they do in other European countries. It warns that failure to address this issue could severally hamper the development of the cyber insurance market in France.

The fears about possible denials of coverage by cyber insurers is grounded in part of the French Insurance Code that was approved back in the 1930s. It stipulates that when it comes to war exclusions, it is up to the insured and not the underwriter to prove that a loss was not caused by an act of war, and is therefore covered by the policy.

Amrae and its members fear that cyber insurers may invoke this piece of legislation to deny coverage if they think a cyberattack was state sponsored and part of a wider conflict. It is notoriously difficult to determine whether states are behind a hacking group.

“It may happen that we will see very targeted attacks against essential infrastructure, or to some sectors of the French economy, and that the insurer will be able to invoke that clause to deny coverage, as the losses will be excluded,” Amrae president Oliver Wild said during a press conference in Paris.

The French association has raised the subject with the insurance market and the authorities, but any solution remains out of sight.

Wild said it looked as if progress was being made in recent weeks, as an amendment to the Insurance Code was tabled in the French Parliament. However, this was withdrawn almost immediately with the dissolution of Parliament by President Emmanuel Macron after the European elections. It is unclear what will happen next.

“Awareness about this subject is now strong, especially among brokers and risk managers, so we can expect some movement,” pointed out Wild.

However, he said that the position of French insurers “is not necessarily clear”.

Sources said that insurance officials have taken different stances to Amrae’s request to change the burden of proof. A firm decision for or against the change is yet to be taken by insurance market representatives, they added.

Wild said it is important that the discussion moves forward, or the survival of the French cyber market could be at stake.

“The current scenario could be damning for cyber insurance in France as we are the only country in Europe that is in this situation,” he said. “Companies may be tempted to place their programmes in other European jurisdictions, which could kill the local market.”

The debate over war exclusions comes at a time when, according to Wild, the cyber market looks better for French buyers.

He noted that there have been “significant decreases” in premium prices and that capacity is recovering. Meanwhile, small and medium companies are increasingly looking to transfer their exposures to the insurance industry, he said.

But Wild added that the current price reductions follow a long, hard market period, and that several insurance companies left the cyber market in recent years.

“Such volatility was not enjoyed by risk managers,” he said. “The disengagement of some insurers was shocking.”

He added that capacity is coming back into the market as companies have improved their cyber risk management capabilities and invested in cybersecurity.

“Cyber remains a complex issue, but one where maturity has evolved,” Wild pointed out.