Reducing exposure to silent cyber may release fresh capacity, says Insurance Europe

EU insurers say that reducing exposure to non-affirmative cyber may free up capacity to write affirmative cyber cover. But according to Insurance Europe, challenges to the insurability of cyber risks are likely to remain because of the potential for risk accumulation and the speed at which the threat landscape is evolving. In its response to a consultation by the European Insurance and Occupational Pensions Authority (Eiopa) on a draft supervisory statement on the management of non-affirmative cyber exposures, Insurance Europe says EU insurers and insurance associations are increasingly taking actions to reduce the industry’s exposure to non-affirmative cyber risks. This is also known as silent cover, or risks that are neither expressly covered nor excluded from property and liability insurance policies. Insurance Europe says “challenges to the insurability of cyber risks are likely to remain, due to the high potential for risk accumulation and the speed at which the threat landscape is evolving”. But the association says it supports Eiopa’s proposal to develop high-level principles for the management of non-affirmative cyber exposures. Insurance Europe notes that in some markets, initiatives are ongoing at association level to examine the coverage provided by cyber policies and compare the policy wording with the intended coverage. In other markets, non-binding model clauses for cyber policies have been developed and/or are in the process of being renewed. Insurance Europe says that non-binding model clauses have been developed in Germany to affirmatively exclude or include cyber and blackout events from marine and transport insurance policies. In the UK, Lloyd’s mandated in 2019 that cyber coverage is either included in, or excluded from, (re)insurance policies. This change was implemented using a phased approach, with the fourth and final stage completed in July 2021. Insurance Europe says the work of Lloyd’s is consistent with the approach taken by the UK’s Prudential Regulation Authority, which published a Supervisory Statement in 2017 on underwriting cyber risk. It requires Solvency II firms to robustly assess and actively manage their insurance products with specific consideration of non-affirmative cyber risk exposures. Firms are expected to introduce measures that reduce the unintended exposure to this risk through various mechanisms, such as introducing wording exclusions, premium adjustments and cover limits. Insurance Europe also explained that the French insurance association is working on a mapping the different approaches companies are taking to address their non-affirmative cyber cover. This follows a press release issued by the French supervisor, the ACPR, in 2019, highlighting areas of improvement for companies in tackling silent cyber risk. In term of challenges, Insurance Europe says that addressing and managing non-affirmative cyber risk requires the expertise of dedicated cyber risk engineers. It adds that in terms of opportunities, addressing, managing and reducing exposure to non-affirmative cyber risk may result in an increase in capacity available to offer affirmative cyber risk coverage.

Reducing exposure to silent cyber may release fresh capacity, says Insurance Europe

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