Property insurers have role to play in cyber coverage: RIMS Canada Conference

The cyber market is too new to handle both tangible and intangible losses, said one speaker

Property insurance providers should step up when it comes to covering the physical damages produced by cyber beaches, according to Lindsey Nelson, international cyber team leader at CFC Underwriting.

“It’s absolutely ridiculous that the property market will hide behind that electronic attack exclusion that they have on their policies,” said Nelson while speaking at RIMS Canada’s annual conference in Toronto on Monday during a panel discussion regarding the effects of cyber breaches on businesses’ equipment and systems.

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“You’re forcing your clients to buy an entirely different form of insurance to address those exposures whereas a more simple solution would be to remove the exclusion, understand it, embrace it and include it in your property policies,” she added.

One issue in the expectation that cyber policies cover physical losses is that the cyber insurance market is growing but is still new in comparison to the property market, according to Nelson. Therefore, cyber insurers cannot respond to businesses’ physical equipment needs in addition to intangible losses such as reputation damage.

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Large companies, especially those in the infrastructure and energy fields, have insured assets and property to the value of billions. A loss of $10 billion, for example, as a consequence of a cyber breach, is “going to wipe out the entire cyber insurance market that isn’t, at this point in time, equipped to address these exposures,” Nelson said.

Another argument for the heavier involvement of property insurers is that customers who experience tangible losses would want to work with someone who has property loss adjustment experience as opposed to a data breach coach, she said.

The idea that property insurers could include coverage for cyber breaches into their policies is currently a discussion in the industry, said Jacqueline Detablan, vice president of financial lines at AIG, who also spoke on the panel.

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“I would like to think that cyber would be treated as an additional peril under the various types of insurance policies out there but it is going to take a big movement for everyone to see that,” said Detablan.

However, Detablan added that she understands the property market’s hesitancy in embracing cyber breach coverage as cyber losses can affect one company in multiple locations whereas, with more typical property events like an earthquake, the losses are restricted to a particular geographic area.



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