Cyber insurance exclusions now testing outer limits of corporate utility

The ever-increasing expansion of policy exclusions in cyber insurance runs the risk of reducing rump coverage below the threshold of corporate utility, corporate risk managers are now grumbling.

“The cyber insurance market is evolving in isolation from the industries which it insures,” corporate risk managers assembled in the FERMA professional lobby lament.

“There is a risk that the appeal of the cyber product for corporate buyers may decline due to increasing exclusions and more restrictive coverage which are reducing coverage certainty.”

Comments come as the market continues to mull the size and scope of potential systemic catastrophic events and moves to unify the policy wording that exclude those events and cyber events propagated by nations or state-backed bad actors.

“Recent decisions to restrict the scope of coverage have created uncertainty regarding the ability of insurance to meet the evolving cyber risk requirements of policyholders,” the chair of FERMA’s digital committee, Philippe Cotelle (pictured), said in a policy statement.

The corporate risk managers, far from calling directly for any roll-backs on recent policy moves, are chiefly smarting from having been left out of the planning to date. “More concerted dialogue” between re/insurers, brokers, small- and large-cap corporate buyers., regulators, and service providers should be taken up with regularity.

FERMA could stand behind a “COP-style” annual cyber event designed to explore means for developing and implementing a broader scope of cyber resilience.

“We need to approach cyber-related risks in a way that is commensurate with the size of the exposure that it creates,” explained Cotelle. “For many risk managers, cyberattacks pose one of the most significant and damaging threats to their organisation, while the systemic risk potential is recognised by all.”

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