Capsicum Re urges re/insurers to ‘redefine boundaries’ on cyber war

Attributing cyber losses is a real challenge for re/insurers, especially in relation to war, according to Capsicum Re, a specialist reinsurance broker.

This is because the risk landscape has evolved, and the historically well-defined line between excluded acts of war and covered perils has become blurred in the context of cyber, said Ian Newman, global head of cyber at Capsicum Re.

But a definitive line must be drawn between insurable cyber losses and uninsurable acts of war, the firm argued, citing the 2017 NotPetya cyber-attacks, which were allegedly carried out by state actors targeting Ukraine. In the wake of these attacks the debate surrounding the issues of silent, non-affirmative, embedded, and assumed cyber exposures has “reached fever pitch”, with the reinsurer stating “it is perhaps the single most widely discussed topic in the Property & Casualty marketplace”.

“NotPetya’s fallout has raised unresolved questions about what constitutes an ‘act of war’ in the context of cyber-attacks," it added.

In a white paper discussion published by the firm, Capsicum Re argued that “weaponised non-physical assets, for example covert, coded intelligence networks, and internet infrastructure, such as cloud service providers and their associated server farms, could and should be included as legitimate ‘military targets’”.

“We would also not exclude their use from the ‘common activities’ of warfare,” the firm added.

However, the paper recognised that “the impacts of cyber-attacks may not be among those that have traditionally been associated with the characteristics of war” typically defined as extreme violence, destruction, bodily injury, and mortality.

But Newman said: “Cyber is a peril, not just a class of business.”

Supporting this stance, the paper said the reinsurance firm “advocates for a renewed focus on ‘cyber as a peril’”, and goes onto urge the sector to consider where in the insurance universe cyber can, could, or should be covered.

Newman added: “As a market it is our duty to redefine the boundaries to ensure that we are able to continue to provide certainty of cover to our clients.”

In a challenge to the status quo, the paper said: “Cyber-insurance markets are yet to clarify what they offer by often failing to adequately include or exclude cover for war; we suggest that the reinsurance market has an opportunity to determine what the exclusion and coverage should look like.”

The white paper is titled: ‘Cry Cyber and let slip the dogs of War: Exploring the issues of attribution in the context of War and Cyber’. It was published by Capsicum Re in partnership with Gallagher and can be downloaded from  https://www.capsicumre.com/

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Reinsurer urges market to ‘redefine boundaries’ on cyber war
The historically well-defined line between excluded acts of war and covered perils has become blurred in the context of cyber.