It should not be shock to read Lloyds of London discouraging their syndicates from underwriting cyber insurance next year.

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It should not be shock to read Lloyds of London discouraging their syndicates from underwriting cyber insurance next year. I have enclosed a paper we wrote earlier in 2021 focusing on the small business problem that governments face in protecting the vast majority of companies from cyber attacks. Demonstrating the problem insurers have with underwriting cyber insurance.

Cyber was once an extreme loss event, sitting way down on the right of the loss curve (page 7). It is now likely siting on the boundary between an unexpected or expected loss event. Our the ability to mitigate the risk has not been particularly successful for many reasons. Lloyds has made clear that cyber is a risk that is difficult to underwrite effectively today. This creates a problem when most of your businesses are small and do not have the resources or expertise to manage the risk. Market forces alone do not appear to be able to manage the risk.

This now provides an opportunity to develop appropriate solutions to enable companies manage cybersecurity. Countries like the US are looking to adopt stronger cyber regulations and enforcement. Controls inheritance and the shared responsibility model provide a solution to support small business better manage their data and security in the cloud. Better oversight and assurance from regulators if appropriately developed could provide a road map to support the public and private sectors comply. To make any real difference we will need a cyber educated and aware workforce capable of managing cybersecurity risk.

Brian McCarthy Jason Spezzano Ted Dziekanowski

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