German risk managers worried about cyber as coverage disputes emerge

German risk managers are concerned about the depth and breadth of cyber insurance currently on offer and the recent trend towards reducing limits and tighter conditions. Members of the German risk and insurance management association – GVNW – who gathered for its annual Cyber and Financial Lines Conference in Cologne last week, are also watching developments closely in high-profile cases where companies are facing denial of cyber risk cover on the basis of war exclusions. US snack food company Mondelez is suing Zurich for $100m after its claim for cleaning up a huge NotPetya ransomware infection was rejected for being "an act of war", and therefore not covered under its property policy. NotPetya was allegedly carried out by the Russian Government and on that basis could be defined as an act of war. The Russians deny any involvement. Meanwhile, US pharmaceutical company Merck is in dispute with insurers over losses it sustained during the 2017 NotPetya attack. Commercial Risk Europe understands the company has instigated legal proceedings in the US against its property insurers, which have denied the claim after citing a war clause. Such cases obviously grab the headlines. But the German risk managers are equally concerned about the broader trend towards lower capacity and more restrictive terms, as insurers and reinsurers try to weed out so-called silent cyber coverage from standard property, liability and business interruption policies. This kind of approach will inevitably lead to conflict and mistrust in the market, which is never a good thing, they said. “I cannot comment on any specific cases as I do not know the details,” Alexander Mahnke, president of the GVNW, told Commercial Risk Europe in Cologne last week. “But as an association, whenever we see conflict between insureds and insurers we are concerned that this could lead to a growing lack of trust in new solutions and the wider market. You have to say that, whatever business you are in, it is never a good idea to go into a risk that you do not fully understand and then try to draw back using exclusions. This is the wrong way around,” continued Mr Mahnke. “We see capacity shrinking in cyber and the wider question is: will this be the same in other lines of business? We currently do not see any signs of that, but we are on watch,” commented GVNW committee member Christian Böhm, managing director (insurance) at global technology group, Freudenberg. Reiner Siebert, newly appointed co-CEO of GVNW, and former managing director of Lufthansa's in-house broker Delvag, broadened the discussion to whether standalone cyber coverage is really the answer for large corporations. “This is not really a new thing. We have seen some fairly large claims in recent years. But, what is new for the insurers is that they have to clarify this situation. They can’t pull the cover out of existing lines and then deliver inadequate capacity. Some parts of the market just do not have enough capacity to cover the claims. The standalone product is not the answer,” he said. However, the German risk managers agreed that for smaller companies that buy coverage on a commoditised basis, standalone cyber policies are probably adequate and make sense.

German risk managers worried about cyber as coverage disputes emerge

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