Mahnke calls for premium reduction if cyber cover removed from other lines

If insurers want to remove cyber coverage from other lines of business in favour of standalone, all-encompassing cyber insurance, they must offer premium reductions to clients for the loss of protection, Alexander Mahnke, president of the GVNW, told delegates at our recent Risk Frontiers event. Following substantial losses from silent or non-affirmative cyber exposures, particularly as a result of the NotPetya ransomware attack last year, insurers are taking steps to either exclude cyber risk from other lines or business or ensure they are taken into account during the underwriting process. During a panel debate, Sarah Stephens, head of cyber/technology errors and omissions at JLT Specialty, explained that the cyber market is growing very quickly and it is not clear at this point where some of the silent or non-affirmative coverages offered in other lines of business will eventually end up. “The question is whether cyber is going to continue to be a peril covered non-affirmatively in, for example, property or professional indemnity polices, or will it be a specialty coverage line?” she asked, at the ‘Coverage Certainty: In Search of Nirvana’ conference. Ms Stephens noted that major insurers are already looking across their global books to quantify their non-affirmative cyber exposure. “They are then taking steps to either embed cyber underwriting into the non-cyber policy process, draft exclusions that are being proposed right now at renewals or, and this is extremely unlikely, finding they have no non-affirmative cyber exposure on their books,” she added. The broker said this will deliver more clarity on what cyber risks are covered where in the coming years, but suggested the standalone route may increasingly appeal to insurers, given their recent loss experience. “Things like the non-cyber market paying out several billions in NotPetya losses will have an impact on what things looks like,” she predicted. NotPetya has cost the insurance industry more than $3bn in claims. But only 10% to 15% of this was covered by the cyber market, explained Ms Stephens. The other losses came from extensions or silent cover in lines such as property, errors and emissions, or kidnap and ransom, she added. However, Mr Mahnke, CEO, insurance at Siemens Financial Services GmbH, said if insurers remove cyber cover from other insurance lines, buyers will expect some premium reduction. “I think other lines providing cyber cover is a very important topic. Some insurers only seem to be realising this is the case and telling us clients that this is a problem. I don’t think it is a problem, it is a good thing. We know we have cyber coverage within other insurance lines and if we want to remove this in favour of an all-risk cyber policy then that also means we would have to exclude it in other lines of business. But that doesn’t work without premium reductions,” he said. Later in the debate, brokers stressed that business interruption (BI) cyber claims remain a problem area and agreed that insureds need upfront help from their intermediaries to ensure cyber cover responds as they expect. Céline Verhaegen, senior client adviser at Marsh, said BI cyber claims tend to cause most problems for clients. “These claims can take quite a long time to be settled, with clients facing quite a lot of difficulties to provide the necessary information in order for an insurer to quantify the BI loss. This is an area where I think improvements can be made,” she said. Adding: “I think that lots of discussion about coverage or claims can be avoided if we take the time to clarify the scope of coverage with the client and make sure we are focusing on their specific risk area. We need to organise training, with risk scenarios adapted to the client’s business. We need to make sure they fully understand the scope of coverage and don’t have expectations that won’t be met.” JLT’s Ms Stephens agreed: “Whether policies respond how insureds expect them to is totally dependent, in my experience, on how much time and effort the broker spends with the risk manager to make sure they are buying what they think they are buying. There are probably around 150 different cyber policy forms on a base level. Customising cover so you get what you think you are getting is difficult the first time round and requires some investment of your time.”

Mahnke calls for premium reduction if cyber cover removed from other lines

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