Cyber coverages are evolving

Is this "blended product" the future?

Cyber coverages are evolving

Cyber

By Daniel Wood

Cyber risks continue to present some of the insurance industry’s biggest challenges. In response, coverages continue to evolve and offerings that include cyber integrated with another insurance are becoming more common.

In October, IQUW, a London-headquartered property and speciality insurer, launched a new cyber product in Australia. According to the firm’s media release, the cyber cover is part of a financial institutions (FI) insurance product, called FortiFI. This offering, targeting financial services businesses in the mid-market space, covers their management liability, professional liability and business interruption (BI) risks.

Tristram Prior (pictured above), IQUW’s lead underwriter for financial institutions, said his firm saw an opportunity to provide a combined, “one-stop shop solution” in Australia integrating FI and cyber to address “the blurred lines between different risk categories” and offer “greater certainty” in claims handling.

“We believe this is the future of the FI insurance market, as it allows clients to work with one insurer and one claims team, reducing complexity and improving outcomes,” said Prior.

He said financial services businesses are often looking for comprehensive coverage to address their full range of exposures, including to cyber threats. The complexity of these risks, said Prior, usually requires a “tailored solution.”

Financial services business face more pressure from regulators

One impetus behind this new cyber offering is recent regulatory actions impacting the financial services sector

“The Australian Securities & Investments Commission’s latest annual report has revealed that its enforcement actions resulted in 130 new investigations against Australian businesses, which has led to increased exposure for insureds,” said Tilly Milnes, IQUW’s, London based, senior claims handler.

In the release launching the offering, Milnes said that both the FI and cyber claims processes are overseen at her firm by the same legally qualified claims team.

Common challenges in the US and Australian markets

IQUW’s FortiFI product was already available in the United States before it was launched in Australia. Insurance Business asked Prior, what’s different about doing business with a product like this in the US compared to Down Under?

“The US and Australian markets do share some similarities,” he said.  “Both territories are litigious, with active regulators and litigation funders continuing to fuel large scale claims.”

Prior said, from a risk profile perspective, his firm approaches both territories in the same way.

“Our approach in Australia isn't fundamentally different from other markets,” he said. “We have strong relationships with highly capable local brokers and international wholesalers, who have a strong level of technical expertise.”

However, he said there are some nuanced differences between the US and Australian markets.

“For example, in Australia, deductibles tend to be lower, wordings are broader,” he said.

Cyber protections for strata and construction insurance

Sydney-headquartered Hutch Underwriting (Hutch) is another insurance firm that has integrated cyber protections into its other insurance offerings.

In 2022, the firm launched a strata insurance policy that included cyber protections.

In 2023, the firm launched another product it described as a “first in the market offering”: construction insurance with built-in cyber protections.

Some brokers are adapting to cyber

Some brokers are also adapting their business models to the challenge of cyber risks.

In 2023, Andrew Brett announced the launch of Infosure Insurance. He described the new firm as “a dedicated cyber insurance brokerage.”

“What makes our offering first of its kind is the services we can provide in-house,” he said. “We have IT solutions and cyber auditing services so we don’t send our clients off to find a solution themselves, or even try and source the solution externally ourselves.”

Brett said his firm only does cyber covers.

“We’re not doing property, motor or liability and then at the end of a meeting with a customer telling them there’s a thing called cyber and they should probably look into it,” he said.

Cyber risks but few have coverage

The IQUW release said “there is an increasing need for a blended financial institutions product, which includes cyber security coverage.”

According to some cyber surveys, more than 70% of Australian SMEs view cyberattacks as a major risk. However, some industry sources suggest that as few as 10% of SMEs have cyber insurance.

Are you an insurance broker? What do you think of coverage offerings that integrate cyber protections? Please tell us below

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