The International Underwriting Association (IUA) has published two new London Market model clauses to help underwriters manage cyber losses and address issues related to non-affirmative cover.
The Cyber Loss Absolute Exclusion Clause provides re/insurers with an option to exclude any loss arising from the use of a computer system, network or data.
Meanwhile, the Cyber Loss Limited Exclusion Clause enables only the exclusion of losses directly caused by cyber events, rather than ‘directly or indirectly.’
“These two new model clauses provide broad policy exclusions which may be utilised as a starting or reference point for underwriters offering cover for traditional business classes that may include an element of cyber risk,” said Chris Jones, Director of Legal and Market Services at the IUA.
“By developing class-specific write backs insurers can then explicitly state the extent of any cover provided for such losses,” he explained.
Both clauses were developed in response to concerns that were raised by the UK’s Prudential Regulation Authority (PRA) about the unclear provision of cyber coverage for various classes of insurance business.
The regulator urged companies in a 2016 consultation paper to actively manage their exposures by considering adjustments to premium, robust wording exclusions, and specific limits of cover.
Jones continued: “Silent cyber cover creates uncertainty for both insurers and clients and has been a hot topic in the London company market for some time now. Increasing regulatory scrutiny has, of course, further highlighted the issue, but IUA members have been considering different approaches even before it was first raised by the PRA.”
“Many traditional policies were designed when cyber wasn’t a major risk and often do not explicitly mention cyber,” he added. “Some high profile cyber events and losses have clearly demonstrated, however, how important it is to address.”