Cyber cover moving in right direction but room for improvement remains

Cyber cover has improved, according to Nordic risk managers, and there is enough capacity for the needs of those taking part in our European Risk Frontiers survey. However, there is still room for improvement, which requires insurers to do their bit but also risk managers to better understand their risks and articulate their needs. Most Nordic risk managers we spoke to have only dipped their toes in the water when it comes to buying cyber insurance, or still do not purchase protection. But the majority feel the market is going in the right direction. “We don’t have very high cyber coverage currently, but it is adequate for us. It is an area I have looked into and coverage has developed. I know other Finnish firms that have recently bought more coverage than previously. The market has developed positively,” said Tapio Huovinen, director of risk management at renewable wood biomass company UPM. He said understanding needs to improve on both the insurance and insureds’ side to deliver the data needed to further boost the market. “As insurers get more experienced on the claims side, it will make it easier for them to develop terms and conditions and more accurately price the risk. Insurers want to keep cyber risk separate until they get better data, so this is one reason why they are keen on standalone coverage,” he said. Lennart Edström, vice-president – group risk management at AB Electrolux, said he can secure adequate cyber capacity, but wants to see more of that capacity integrated into existing insurance programmes, rather than sold on a standalone basis. “I will say this till the day I die. The insurance market can do this but wants to sell standalone cover so they can get more premium, but that is not serving us buyers. We have seen some improvement on this, but not enough. I am talking about doing this for companies in the manufacturing sector, such as ours. For some other types of businesses, cyber risk is so large and new that it needs its own line of coverage – data protection for banks, for example. But not in production, where cyber risks are integrated with property and liability etc,” said the Swede. He does, however, understand insurers’ caution over cyber, which sees them put sub-limits on some cyber elements. He said risk managers should get carriers used to covering the risk and then gradually increase the sub-limits until they are where they want them to be. Alexander Hansén, group insurance manager at multinational retail firm H & M Hennes & Mauritz AB, said his firm finds enough capacity in the cyber market currently and has not felt the need for higher limits or wider coverages. But it is “highly important” risk managers carry out thorough risk-mapping exercises and know what exposures they need covering before approaching the market, he said. This is vital because cyber cover differs greatly between insurers and is not as homogenous as traditional lines, said Mr Hansén. This can make life difficult for buyers. Melinda Johansen, general manager of group risk management at Denmark-based engineering group FLSmidth & Co, said her firm does not buy cyber cover currently because it does not match its needs. “We had three different workshops last year to try and find where we are weakest when it comes to cyber. We looked at insurance possibilities as mitigation options and nothing fits with where we might need it most,” she said. Fellow survey participant Anders Esbjörnsson, director of group insurance at construction firm NCC Group, has considered what is on offer and feels there are restrictions, particularly following the introduction of the GDPR. His company has set up a working group – involving risk management, group security, insurance, compliance, the IT department and its broker – to conduct a cyber-risk gap analysis. Mr Esbjörnsson believes this is a vital step, and said if other companies carry out such analysis it will help the insurance market understand the risk exposure and evolve cover.

Cyber cover moving in right direction but room for improvement remains

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