Time intensive bespoke cover key to cyber solutions, says leading broker

Speaking at an event last week, Peter Hacker, group chief innovation officer at Ed Broking Group Ltd, also said that cyber risk is systemic, can be subject to spikes and is potentially both high severity and high frequency. A large-scale cyber attack could have a greater global impact than an earthquake, for example, he told attendees at an Ed Cyber Academy event in London. Due to the systemic nature of the risk, cyber is a board-level issue and should not simply be considered an IT problem, said Mr Hacker, who also is a founding partner of Distinction Global, a unit of the Cybercrime Research Institute GmbH in Cologne. Decision-makers within companies "cannot afford to be blindfolded" about the threat cyber risk poses to both their tangible and intangible assets, said Mr Hacker.hideBoard members need to be shown that they have a fiduciary duty to consider their companies' cyber risk profile and take mitigating action, he explained. Recent events have highlighted the need for insurance coverages to be tailored and bespoke to the risks individual companies face, added the broker. But building such coverages can take time, he said. Earlier this month Tesco Bank, a unit of UK Supermarket giant Tesco, conceded that some customer accounts had been subject to "online criminal activity in some cases resulting in money being withdrawn fraudulently". The bank has not revealed the form of the cyber attack, but it refunded about £2.5m to around 9,000 customers. It is possible to buy cyber coverage to cover the costs of repaying victims of theft, said Mr Hacker, but this would not automatically be covered by standard policies or by other policies that contain elements of cyber coverage. He added that to structure a bespoke policy "from the ground-up" can take three to four months. Currently the vast majority of cyber policies are based upon named perils, while very few offer all-risk protection, he said. Buyers must consider whether they need first or third party coverages, or both, said Mr Hacker. Cyber policies have developed over recent times, he said. For example, it is now possible to buy coverage for consequential damages - such as pollution and physical damage if an oil platform is blown up as a result of a cyber attack. Typically, environmental liability policies would exclude cyber, Mr Hacker said. But finding a sustainable insurance solution at an affordable price is tricky, he added. He believes that once a large glut of cyber claims has hit, the systemic nature of the threat means that a "sustainable model", likely involving capital market and governmen support, will need to be created. The upcoming EU General Data Protection regulation, which takes effect in 2018, will result in a "material take up" of cyber coverage in Europe, said Mr Hacker. He said that brokers and insurers must work to explain the value of coverage and demonstrate to potential buyers what their exposures are. "We need to be much more proactive and need to help to increase awareness and shape concepts," he said. One way to do this is for the industry to work more closely together and share information, he noted. He said that there are three main reasons that buyers give for not taking out cyber coverage. Firstly, they do not believe they are exposed. Secondly, some buyers do not believe that insurance is a sustainable solution that will pay out in the case of a claim. This, he said, is where the industry needs to demonstrate the need for - and it's ability to underwrite - bespoke coverage to fit those buyers' specific risk profiles. Thirdly, the insurance industry has poorly explained why cyber insurance is necessary, said Mr Hacker.

Time intensive bespoke cover key to cyber solutions, says leading broker

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