2017 Survey of Cyber Insurance Market Trends

October 2017

PartnerRe and Advisen are proud to release a white paper that features the results of a comprehensive survey of the evolution of the market for cyber insurance, both first- and third-party coverage, and the factors and trends impacting that evolution. The 14-page paper also highlights how players view key events and issues such as the impact of the general data protection regulation (GDPR) on the take-up rate for cyber liability insurance, the Dyn DDOS attack, and the WannaCry ransomware attack.

This story is an excerpt of the original. The content originally appeared in Advisen Media White Papers.

PartnerRe | Advisen Ltd. October 2017. 2017 Survey of Cyber Insurance Market Trends [White Paper].

Social Engineering Scams Prompt Coverage Litigation, Crime Policy Changes

Recent court decisions have offered conflicting views on whether and how crime insurance policies should respond to social engineering scams, reflecting an ongoing industry discussion on how best to handle this rising tide of crime.

In late July, the United States District Court for the Southern District of New York ruled that the “funds transfer fraud” provision in a crime policy issued to Medidata Solutions by Federal Insurance, a Chubb subsidiary, would cover the loss of funds due to spoof emails directing a wire transfer. In a similar case decided Aug. 1, American Tooling Center v. Travelers, the United States District Court for the Eastern District determined that the “computer fraud” provision of a Travelers policy would not cover a similar social engineering scam.

Erin Ayers, Ransomware attacks jump 50 percent, but accidental breaches a ‘major problem’ (August 3, 2017), available with subscription at Advisen Cyber Front Page News.

Willis Towers Watson Uses 40 Underwriters to Build $600 Million Cyber Insurance Tower

Willis Towers Watson has put together a $600 million stand-alone cyber insurance tower—likely the largest of its kind in history.

Peter Foster, executive vice president with the FINEX Cyber practice, said the tower includes 60 policies from 40 underwriters, which means about half of the available cyber insurance carriers in the marketplace participated.

“This indicates the kind of demand there is for cyber insurance, driven by the need to satisfy regulators and corporate boards,” Foster said. “With new carriers coming in, as well as those who have been in the marketplace, more limits are available. Cyber is a growth area.”

Chad Hemenway, Willis Towers Watson uses 40 underwriters to build $600 million cyber insurance tower (April 24, 2017), available with subscription at Advisen Cyber Front Page News.

Cyber Insurers and Brokers Seek Harmony on Crafting Coverage

With cyber risk as the hottest topic during the Risk and Insurance Management Society’s (RIMS) annual conference here, a common theme emerged: Now is the time for collaboration and innovation among brokers and insurers, but the best way to achieve that is yet to be determined.

However, the steps taken to achieve broad cyber coverage at the right price with the right players represent an area of collegial disagreement among many industry participants. How many carriers should be on a tower and at what limits? What’s the current capacity ceiling? How broad is too broad in coverage terms?

Building upon the 2016 RIMS event—when the main topic of conversation addressed the strides cyber insurers needed to make to meet organizational needs of buyers—this year’s talks reflect the fact business interruption (both contingent and direct), cyber-related property damage, bodily injury, and reputational harm are all risks for which the growing cyber insurance marketplace has developed solutions.

Erin Ayers, Cyber insurers and brokers seek harmony on crafting coverage (April 27, 2017), available with subscription at Advisen Cyber Front Page News.

Insurers See Growth Potential for Cyber in Personal Lines Market

As interest in cyber coverage from commercial organizations ramps up and concerns grow over the security of internet-connected devices, the insurance industry hopes to expand the market to individuals facing cyber risk.

While identity theft products have existed in personal lines for many years, several insurers have recently introduced coverage that responds to cyber extortion, breach notification costs, financial fraud, personal cyber liability, and cyber bullying. NAS Insurance, American International Group (AIG), and Hartford Steam Boiler (HSB) are among those companies targeting personal lines customers as potential buyers of cyber insurance. The industry may find itself boosted by the vulnerability-riddled smart devices, ransomware demands aimed at individuals and consumer privacy concerns.

Erin Ayers, Insurers see growth potential for cyber in personal lines market (April 10, 2017), available with subscription at Advisen Cyber Front Page News.

Silent Cyber Coverage: The Reckoning

If the headline sounds like a title to a horror movie, that may be appropriate because according to panelists here at Advisen’s Cyber Risk Insights Conference, detecting “silent” cyber coverage risks is a nightmare.

Due to an increasingly complex interconnected world, the potential for a cataclysmic cyber event cascading across multiple lines of coverage casts a shadow over the industry.

The issue is “far more of a concern than affirmative cyber [coverage] we underwrite and price,” said Brad Gow, senior vice president at Endurance. “We’re talking about legacy lines of business drafted far before this was a concern. With the Internet of Things, the attack surface grows exponentially.”

Chad Hemenway, Silent cyber coverage: The reckoning (February 24, 2017), available with subscription at Advisen Cyber Front Page News.

Cyber in Property Policies, Drones, and Labor Laws Areas to Watch for Insurance Buyers

Insurance coverage for cyber-related property damage, new regulations for drones, and upcoming changes to federal labor laws topped the list of concerns for insurance buyers as experts from Marsh discussed the broker’s recent midyear report.

The potential for property damage to occur as a result of a cyber attack has been at the forefront of insurance discussions and Marsh’s property practice leader Duncan Ellis reported during a webinar this week that a few insurers now provide some element of coverage. He cited FM Global and Zurich incorporating cyber as a peril in their property policies, and noted that AIG recently released a broader cyber policy to address property damage, bodily injury, and business interruption. Marsh clients have shown increased interest in cyber coverage as part of their property program, according to Ellis.

Erin Ayers, Cyber in property policies, drones, and labor laws areas to watch for insurance buyers (August 16, 2016), available with subscription at Advisen Professional Front Page News.

Cyber Ransom: It’s Covered, For Now

SAN FRANCISCO—Ransomware may be the hot-button issue within the cyber landscape and, for the time being, ransom paid to hackers is covered by insurers.

From Advisen’s Cyber Risk Insights Conference here earlier this month, Samantha Riley, partner at Nicolaides Fink Thorpe Michaelides, said she has handled a “huge uptick” in claims on behalf of insurance carriers, who are paying out the claims under cyber extortion coverage.

Confirming Riley’s observation, Mickey Estey, senior vice president of E&O, cyber and media at RT ProExec of RT Specialty, said insurers have paid in the past with “not a lot of dispute.”

Chad Hemenway, Cyber ransom: It’s covered, for now (March 15, 2016), available with subscription at Advisen Cyber Front Page News.