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The UK Financial Conduct Authority issued a dear CEO letter to the insurance market last week. A letter that discussed Putting consumers’ needs first and the regulators wish for firms to demonstrate that products meet customers needs and provide value.
The FCA is concerned that certain policy wordings may result in firms not meeting customer needs, claims processing is to be managed in a fair and timely way and for market participants to continue to improve their knowledge of cyber risk at board and across their 2nd and 3rd Lines of defense. Making clear that it will take action otherwise.
The letter demonstrates the challenging position insurance firms and their clients find themselves. The market is expected to grow in GWP; the insurance industry does not understand how to underwrite the risk effectively; the reinsurance industry is covering increased aggregated losses and needs to find capital; insurers clients have relied on cyberinsurance as a significant risk transfer tool that has widened the coverage gap; and regulators are now pushing cybersecuirty risk management into the board rooms of covered entities. That transfers cyber risk onto financial statements of covered entities to mitigate, at the same time regulatory breaches may not be covered D&O and cyber insurance.
Are we heading towards a perfect storm for the insurers and insured? Where cyber attack complexity and severity of impact is increasing, corporate risk mitigation is playing catchup, the coverage gap is increasing and cyber regulation requires covered entities demonstrate risk management, when there are few skilled and experienced resources in the market Ted Dziekanowski and Brian D. McCarthy?
#cybersecurity #cyberriskmanagement #cyberinsurance #directorsandofficers
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