A new report from the International Underwriting Association (IUA), a representative body for insurance and reinsurance companies operating in the London Market, has urged the establishment of clear protocols related to the review process for business interruption (BI) claims to benefit the cyber insurance market.
The body explained that these claims often arise in complex situations where a tower structure has been established, with multiple insurers providing layers of coverage for large risks.
“An established framework, covering questions such as the appointment of experts, fee sharing, and information flows could bring greater consistency and efficiency to the process,” said the report.
The IUA’s new paper, ‘Split Market Reviews in Cyber BI Towers: Why It’s Time for a Rethink’, outlines how the layered structure of cyber towers currently poses several challenges in claims review. The paper has been published by the IUA together with advisory, tax, and assurance firm Baker Tilly, and argues that there is a growing appetite for reform.
Joe Shaw, Director of Claims, IUA, commented, “Each organisation, within often quite intricate insurance structures, is working towards the same goal – an efficient and fair resolution of the claim. Yet a lack of coordination can inadvertently introduce delays.
“A market protocol sitting within a tower policy wording, could provide clarity for all participants on what to expect if and when an incident occurs.”
The report also explained that “so-called ‘split market reviews'” can be fragmented with duplicated effort and other wasteful procedures.
When compared to traditional insurance sectors, like property, the paper argues that the cyber insurance sector is still relatively young and established protocols are still emerging. Many claim handlers are building their business interruption experience as the market grows.
Ben Hobby, Partner, Baker Tilly, added, “Business interruption is often perceived as one of the more challenging aspects of the cyber claim process. We are therefore delighted to partner with the IUA on this report, where we share some of our thoughts and observations, based on our own claims experience, of what a market protocol could include to help smooth the process for insurers and policyholders alike.”
To build on the findings of the new report, the IUA has announced that it will be convening market practitioners to consider potential solutions and practical next steps for the cyber insurance market in the coming months.
