Underwriters and brokers urged to focus on supply chain cyber risks

Supply chain risks have been identified as an increasingly important issue within the cyber insurance market in a new report published by the International Underwriting Association (IUA). The report, jointly carried out with cyber risk analytics firm CyberCube, urges underwriters to carefully review customers’ business continuity plans. It offers a checklist of points to investigate when assessing an organisation’s cyber supply chain. The report states that companies of all types are more and more reliant on digital support from third parties, but supply chain perils have so far received far less attention than other major cyber threats such as war risks. It calls for an improved focus on risk management to help insurers, brokers and companies to agree on appropriate levels of cover capable of responding effectively to any claims. Risk and insurance managers across Europe will welcome the IUA’s call for underwriters and brokers to look more closely at their risk management actions, as many feel they have not been rewarded for positive initiatives during the recent market hardening. Thomas Clayton, chair of the IUA’s cyber underwriting group and head of cyber at Zurich Insurance, said: “Most organisations rely on a complex array of external vendors, technologies and suppliers to achieve their business goals. But these relationships come with inherent risks.” “For insurers, there is an urgent need to pay close attention to single points of failure within digital supply chains. Often, theoretically independent supply chains of unrelated businesses can rely on a handful of leading, specialist providers. An outage at one of these providers could disrupt large swaths of industry,” he added. Jon Laux, CyberCube’s VP of analytics, said: “While single points of failure cannot be eliminated from (re)insurers’ portfolios, understanding their concentration is critical to managing risk accumulations and minimising cyber catastrophe loss potential.” “Those organisations and their brokers that can articulate clearly what their supply chain risk is, and measures adopted to mitigate that risk will be in a better position to source cyber insurance cover at the levels required. Overall, any organisation that has a good understanding of their supply chain risk and how this risk may affect their business, will improve their operational resilience and reduce threats to the continuity of trade,” he said. The whitepaper includes a number of case studies that highlight the impact on supply chains of various cyberattacks. Each case study lists a number of key lessons learned and discusses how losses can be modelled for the threat in question. The report also addresses regulatory approaches to cyber modelling and answers points raised by the UK’s Prudential Regulatory Authority’s Insurance Stress Test exercise. It discusses reasons for the diverging approaches of different cyber loss models. Copies of the Supply Chain Risk in the Cyber Insurance Market report can be freely downloaded from the IUA website at www.iua.co.uk/cyber. The IUA’s cyber underwriting group was established in 2014 to provide a forum for underwriters offering specialist cyber risk coverage in the London company market.

Underwriters and brokers urged to focus on supply chain cyber risks

Want to read this article?

Read Next

IASB meets in China to discuss climate reporting

‘Pressure rising’ on developing Asian aging risk: ADB

European business confidence in China plummets

Starr Insurance opens new operation in Korea

International SOS warns of ‘burnout epidemic’

IASB meets in China to discuss climate reporting

‘Pressure rising’ on developing Asian aging risk: ADB

European business confidence in China plummets

Starr Insurance opens new operation in Korea

International SOS warns of ‘burnout epidemic’

Want to read this article?

Read Next

IASB meets in China to discuss climate reporting

‘Pressure rising’ on developing Asian aging risk: ADB

European business confidence in China plummets

Starr Insurance opens new operation in Korea

International SOS warns of ‘burnout epidemic’

Related Articles