Insurance giant Allianz is stepping up efforts to provide more comprehensive cyber protection by implementing more specific and relevant wordings to the commercial, corporate, and specialty insurance policies of its property & casualty (P&C) companies.
Allianz Global Corporate & Specialty (AGCS), as its corporate insurance carrier, will be one of the first entities to roll it out globally.
AGCS will start updating and clarifying P&C policies in regard to cyber risks beginning 1 January 2019 for new business, and beginning 1 April 2019 for renewal business.
More specifically, this new approach tackles the complex and costly impact of ‘silent cyber’.
Silent cyber can occur when insurance or reinsurance policies across multiple lines fail to explicitly exclude cyber risks, which could result in an accumulation of losses within other policies from a single event.
In most traditional P&C insurance products in property, liability and other lines of business, cyber risk is not explicitly mentioned or considered, as these policies were developed at a time when cyber was yet to emerge as a major business risk.
The new Allianz cyber risk insurance strategy aims to tackle the growing risk of cyber threat by removing uncertainty of coverage for business customers.
This will be achieved with clear definitions of when cyber risks are covered under traditional policies, as well as for which scenarios a dedicated cyber policy is required.
As a result, clarity and certainty on cyber exposures and coverage will increase for both customers and for Allianz.
“Cyber risk is now a mainstream risk to business and society and can trigger extensive damages or even result in bodily injury or life-threatening consequences,” said Hartmut Mai, Chief Underwriting Officer, AGCS.
“In most traditional P&C insurance products, however, cyber risks are not explicitly mentioned or considered today. This leads to inadequate protection for businesses and a lack of clarity for all parties involved – clients, brokers, and insurers.”
“A new up-to-date insurance approach is required to counter cyber threats effectively. Customers need clarity and confidence, and our new approach will make it clear how cyber risks are covered in traditional policies.”
Under the updated wordings, physical damage and bodily injury arising from cyber events will generally continue to be covered in Allianz corporate, commercial, and specialty policies. Cyber-related ‘pure financial losses’ without physical damage or injury, however, will be covered in affirmative cyber insurance solutions only.
For example, if a hacker attack on industrial software causes an explosion at a factory, the physical damage and the subsequent business interruption loss would be covered in a standard P&C policy; however, if malware led to a disruption of production or service delivery and loss of revenues for a company without physical damage, such ‘pure financial losses’ may require a dedicated cyber insurance policy, or an endorsement to traditional policies, which were not originally designed to cover such risks.
Allianz’ commitment to evolving its coverage to provide adequate protection for cyber-related threats is encouraging.
To lead and monitor the implementation of the new cyber risk insurance strategy, Allianz has established a Center of Competence for Cyber at AGCS.
The implementation of the new cyber risk insurance strategy will start in a phased approach for all Allianz P&C entities between January 1, 2019, and January 1, 2020 for all new or renewed policies.
Allianz will clarify exactly how cyber risk is covered by its products, relying on market standard clauses whenever available and adequate, in order to ensure transparency and simplicity for clients.
Changes to the actual language of policy wordings will vary across different lines of business and regional markets.