The Lloyd’s Market Association (LMA), an organisation set up to represent the interests of the Lloyd’s community, has published a number of new clauses for the property and marine markets that aim to provide clarity for cyber coverage under first-party property damage policies.
The publication comes as part of a push for more clarity on cyber exposures, which Lloyd’s previously outlined in a market bulletin back in July 2019.
From January 1, 2020, Lloyd’s underwriters will be required to clarify whether first-party property damage policies affirm or exclude cyber cover.
For liability and treaty reinsurance, the requirements will come into effect in two phases during 2020 and 2021.
The move also follows guidance from the Prudential Regulation Authority (PRA), which called on the UK re/insurance industry to ensure more effective management of silent cyber exposures back in January.
The PRA ordered firms to work towards developing an action plan in the first half of 2019, and to set out clear milestones and dates by which action would be taken.
The new clauses published by the LMA comprise a cyber endorsement and exclusion clause for Property D&F and a cyber endorsement and exclusion clause for Marine. All clauses explicitly supersede or replace conflicting policy wording related to cyber loss and data.
Both the property endorsement and exclusion clauses exclude coverage for any cyber loss, as well as any costs related to the use or replacement of data.
The endorsement does, however, affirm coverage for physical loss or damage to property caused by fire or explosion that results directly from a cyber incident, as well as coverage for physical damage related to data processing media owned by a policyholder.
The marine clauses, meanwhile, rule out coverage for any loss or expense related to the “failure, error or malfunction of any computer, computer system, computer software programme, code, or process or any other electronic system.”
They similarly exclude coverage for “the use or operation, as a means for inflicting harm, of any computer, computer system, computer software programme, malicious code, computer virus or process or any other electronic system.”
Patrick Davison, LMA’s deputy underwriting director said, “There is strong support in the market for the need to address evolving cyber risks and exposures.
“The Lloyd’s underwriting communities have invested significant time and effort in the drafting of these new clauses which seek to bring terminology up to date and clarify the coverage position to the benefit of insureds and underwriters.”