You’ve probably heard folks in the industry talking about Silent Cyber risk. You even might have an idea about what silent cyber risk is, and understand how it might impact your clients.
The persistence of the issue over nearly a decade is attributed to complex issues that are high in the insurance value chain. So what can a broker, on the front lines of the issue, do to find solutions for their clients?
Before we answer, let’s look at why solutions have been hard to come by.
You’d be forgiven for thinking, upon surveying the options for cyber coverage, why don’t insurers simply add it to the form and underwrite the risk!? It’s a valid question. The industry has already coined a term of art for this avenue: “affirmative cyber.” While underwriting the risk is the most logical response, there are at least three problems for large incumbent insurers.
First, not all commercial insurers underwrite cyber insurance directly. They may not offer a stand-alone cyber insurance policy or know how to underwrite the risk. There’s a simple lack of expertise standing in the way.
Second, even if a carrier offers a standalone policy, offering affirmative cyber as part of a Property policy requires writing endorsements, or mini-policies attached the larger policy. This requires legal and regulatory scrutiny, and adds a significant new source of complexity to policies that have been carefully honed over decades. If your competitors are staying silent on cyber and the sky hasn’t fallen, all of that complexity and expense seems daunting.
Third, bringing these solutions to market will be a huge endeavour for P&C insurers because of the manner in which they organize themselves. P&C insurers build towers of authority and business acumen based on the types of insurance policy — departments for Property Insurance, Products Liability Insurance and so on. Each of these units has their own slice of cyber risk that overlap with their historical perils, and each requires something a bit different from cyber underwriting. But none of these incumbent product lines is staffed with cyber underwriters. The ability of these insurers to cross-institutionalize their know-how will be a huge test.