This is an unprecedented time for insurers. As margins associated with conventional lines of coverage continue to tighten, pressure is increasing to offer new forms of coverage to respond to the emerging cyber threats facing insureds in today’s digital economy. At the same time, insurers are compelled to make certain that those risks are effectively excluded from coverage under many other “traditional” policy forms.
Unfortunately for underwriters of both traditional and newer policy forms, emerging cyber threats can be difficult, if not impossible, to predict and factor into underwriting and policy drafting processes. But as we’ve already seen in the context of cyber incidents, today’s unknown cyber threat can become tomorrow’s front-page news and unanticipated limits payout. And if that threat is spread across multiple insureds in an insurer’s coverage portfolio, the bottom-line effect of the aggregated losses could be devastating. Making matters worse — as recently recognized by the Bank of England’s Prudential Regulation Authority (PRA) — these “silent” cyber exposures can simultaneously affect multiple lines of coverage, (including casualty, marine, aviation and transport), affecting both direct and facultative coverages.
Imagine this scenario:
Company A manufactures components used in the Wi-Fi systems of commercial airliners. Mr. X, a disgruntled employee of Company …