Update 7/4/2019: Lloyd’s of London announced today that it will require underwriters to clarify cyber coverage or exclusion within property policies starting January 1st, 2020, in line with the PRA and IUA actions discussed below.
Cyber risk isn’t going away. Even if it’s excluded.
With news from the International Underwriting Association of two new exclusion clauses for the reinsurers to handle cyber risks, we are clearly seeing a response to a regulatory body, the PRA, which in January directed insurers to come up with a plan by June to address “silent cyber” risk. But it is also a long-time-coming response to an issue that has been looming over the industry since long before the PRA’s missive.
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.
With three years under our belt, the Corvus story is off to a thrilling start and 2019 was by far our most exciting chapter yet.
Mike Karbassi is Vice President and Head of Cyber Underwriting at Corvus. He specializes in Network Security, Privacy Liability, Technology E&O, Media Liability, and Miscellaneous Professional Liability. Karbassi has over a decade of experience in insurance and is a graduate of the Boston University Questrom School of Business.
Gerritt is the Chief Commercial Officer at Corvus. He has over 20 years of sales and marketing experience, primarily focused on technology and data solutions for the financial services industry.
James co-founded Corvus and is the company’s Chief Technology Officer. A 30+ year technology veteran, Jaimie most recently served as CTO of Iora Health and previously co-founded Gazelle.
Mike Lloyd is the Co-Founder and Chief Product Officer of Corvus Insurance. Previously, Mike co-founded Poncho, a personal lines agency InsurTech startup, and was a venture investor at FJ Labs. Mike has an MBA from Harvard Business School and engineering degrees from Virginia Military Institute and MIT.
Phil is the founder and CEO of Corvus. A 30+ year insurance veteran, Phil co-founded broker William Gallagher Associates (acquired by Arthur J Gallagher in 2015) and was an active leader in both the Worldwide Broker Network and Council of Insurance Agents and Brokers. Phil is the Managing Partner of Edmus Ventures where he invests in InsurTech companies including Verifly, Wellthie, Agentero, and Cover Wallet, and serves on the board of Cover Wallet.