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A great a timely article in CITY AM by the chairman of Lloyds of London on the City’s role in risk taking, and the need for the city to take a bigger lead in the management of risk. I have some heritage with the City, I have been a Freeman of the City for over 10 years and a Freeman of the The Worshipful Company of Security Professionals.
But what about risk, specifically cyber risk. Cyber is without any doubt one of the biggest non-financial risks that companies face, recently demonstrated in Lloyds of London System Risk Report. But what can the City do to support one of the biggest and least understood and least managed risks, both ‘Right of Bang(RoB)’, and ‘Left of Bang(LoB)’?
Has the City been inventive enough with cyber risk underwriting. No, as demonstrated by the many reports of cyber risk underwriting based on loss data, increased premiums, exclusion clauses and cover limits. That’s before you look at the actual % of firms that have cyber insurance (remember the 99% problem). How innovative is the city at managing cyber risk? If underwriters can switch on and off war zone cover for shipping based on geolocation, geolocation for young drivers and car insurance, or health insurers tracking a fitness regime. Where’s the innovation for cyber insurance, a risk that insurers are struggling to economically underwrite, its stuck RoB?
But what about cyber regulation? Cyber is rapidly becoming an issue for covered boards in the U.S, EU and Australia. It is also an opportunity for the insurance industry, as it enables the LoB collection of data, required to validate regulatory compliance. Data that enables improved underwriting.
Regulation affects national and international organizations, and trade. EU NIS 2, DORA, the SEC final cyber rule and Australia’s plans to regulate cyber in board rooms, drives cybersecuirty risk management compliance, risk reduction and transfers risk LoB. That is a benefit to the insurance industry.
Just one final point. Cyber GWPs are expected to increase over the coming several years. Is there enough capital to underwrite claims, no, not if the Lloyds systemic report is anywhere near accurate? If the City wants to be more front footed, then it needs to find solutions to the cybersecurity risk problem, and quickly. Solutions we have written, that’s innovation.
Ted Dziekanowski Brian D. McCarthy Rachel V. Rose, JD, MBA Bob Dix
#cybersecurity #cyberriskmanagement #cyberinsurance #cityoflondon
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