Cyber Risk & Marine Cargo: Progress in Meeting Needs of Policyholders
Marine Cargo: Addressing Silent Cyber Risk
Recently the American Institute of Marine Underwriters (AIMU) approved language for a Cyber “buy-back” clause. This move was made by the AIMU’s Cargo Committee “in response to market changes and at the request of its members” to offer language other than the organization’s existing cyber exclusion language, which was created in 2015.
We see this as an encouraging development that speaks both to the frequency and severity of cyber events across many industry classes, including Marine and to the need for solutions that extend beyond monoline cyber policies. This body of underwriters -- of which Corvus is a proud member -- clearly recognizes the impact cyber risk has on Marine Cargo policyholders. We applaud this progress.
As more of these kinds of cyber endorsements like AIMU’s appear in the market to address “silent cyber” risk and/or dissatisfaction with exclusions, we suggest brokers look closely at the language they are offering. These endorsements represent steps forward, but brokers should be sure to characterize them appropriately, so as not to give a false sense of security to their clients. The Cyber buyback clause mentioned above is a great solution for some clients based on existing insurance and relative cyber risk, but for others, a more intensive endorsement may be needed.
What to Look For in Endorsements
Some of the most critical coverages for cyber risk in the past few years involve business interruption. Because of the nature of Ransomware attacks, stoppages to businesses have become a more acute risk for clients across industries than it was a few years ago when data breaches for the purpose of stealing and selling data PII were the more common form of attack.
Now, with Ransomware viruses able to shut down an entire enterprise in minutes, the lost business from being shut down for hours or even days looms over the industry. Business Interruption Coverage and Contingent Business Interruption coverage are appearing on monoline cyber policies in response to this need. Not having a monoline cyber policy, or having underbought cyber at lower limits for those coverages, presents a coverage gap.
Other potential pitfalls are coverage that doesn’t extend to the warehouse, and instead only covers goods in the course of transit.
Do You Require Enhanced Coverage?
Thanks to the AIMU’s progress, brokers should be on the lookout for new language appearing in policies that represents a major upgrade from the cyber exclusions you may have become accustomed to in Marine Cargo.
Those policies may have the just-right coverage for your clients. But if you’re finding that these options have not completely filled the cyber gap for Marine Cargo clients, we’d suggest looking into our Smart Cargo + Cyber offering. Our “+ Cyber” endorsement affirmatively provides Cyber coverage for:
Business Interruption and Ransomware
Contingent Business Interruption
Diversion of your insured’s goods from the intended delivery destination
Coverage is not limited to due course of transit but will apply to domestic transit shipments and goods while at covered stock locations, and allows coverage to apply to goods insured whether the attack is made on the Insured’s network or a 3rd party’s network.
The rise of remote work and growing concerns over ransomware acted as partners-in-crime to get organizations to hone in on risk mitigation efforts over the past couple years. Through compiling our Risk Insights Index, we found that with certain initiatives — safer or reduced usage of RDP, growing use of email security tools, and other measures taken to limit the impact of threat actors — businesses are more prepared than a year before and ready to play defense. Those efforts are borne out in our finding that the rate of companies who pay a ransom when attacked with ransomware fell by half within a year.
Marine Cargo insurance is vaunted as the foundation of modern insurance, with its lineage dating to the insuring of ocean-crossing vessels, and their cargoes, in the fifteenth century. With all that history, change tends to come gradually to the line. (And with generally stable profitability, carriers could be forgiven for not rocking the boat.) More recently, technologies such as connected temperature sensors and GPS trackers have entered the picture for shippers. But the data they generate hasn’t been factored into insurance underwriting at scale. Today, we’re sharing an exciting update that will help to finally bridge Cargo Insurance into the 21st century.