THE IMPACT of cyber attacks on the physical assets of businesses around the globe is leading experts to suggest that property insurance may provide better coverage than cyber-specific policies.
Speaking at last month’s Risk Management Society Canada conference in Toronto, an international cyber team leader at U.K.- based MGA CFC Underwriting said her team takes the perspective that well-established and well-capitalized property insurers should respond to cyber incidents.
“Every day we get asked if physical damage will be covered by a cyber policy,” Lindsey Nelson said. “Our answer is, overwhelmingly: No. We take the stance that the property market should step up and address these exposures.”
She said the cyber market hasn’t reached the same maturity as traditional insurers, so if large infrastructure or utility companies come under cyber attack it could result in losses which cyber insurers would not be able to absorb.
“The insured value of assets and properties (could be) in the billions so one loss (of) $10bn is going to wipe out the entire cyber insurance market,” Ms. Nelson said. “At this point, it is not fit to address these exposures.”
She said it is not just a question of capacity but also one of experience.
“You want someone who has property loss adjusting experience to deal with that and address it,” Ms. Nelson said. “It’s a bit of an aggregation issue of who can respond. If something happens to your infrastructure or there is physical damage.”
She cited a 2014 incident in which a Malaysian airliner disappeared en route to China.
At the time airline officials said there was a 5% chance the incident was cyber-related, but recently increased that likelihood to 25%.
“The point is that we are still debating whether it was a cyber event or not,” Ms. Nelson said. “If that was covered under a cyber policy we would still be talking about whether the coverage was triggered because we would be talking about how it was caused and not what happened.
Instead, the airline’s property coverage was triggered and the claim was paid out.