Risk managers at insured businesses will benefit from the clearer underwriting that will result from the IUA guidance. But excluding losses from cyber perils simply means they will have to look for other solutions for coverage. Already the spread of monoline Cyber Insurance policies has offered some coverage for many businesses, but those businesses also rely upon the broad (and ambiguous) coverage within P/C and other lines to complete their coverage — in theory — in addition to their primary cyber policies.
When that gray area becomes black and white, the coverage gaps for cyber perils will be laid bare. Primary cyber policies won’t be enough without a drastic change to how they are written. In the near term, affirmative cyber endorsements to other commercial policies will become the only viable route to close the coverage gap.
And as we’ve noted before at Corvus, brokers, in particular, are caught in the middle of an issue that puts them at risk. They cannot control the actions of the carriers whose policies they sell, but they have a duty to provide proper coverage to their clients. Failing to do so could put them at risk of errors and omissions claims. Brokers will be at the forefront of the new world of affirmative endorsements.
“Silent cyber” risk won’t go away overnight. Exclusions will merely open the door to the affirmative policies the industry ultimately will need. Insurers and MGAs now need to step in to provide those solutions.