The UK’s government-backed terrorism reinsurer Pool Re has revealed that it will extend its cover to include material damage and direct business interruption caused by acts of terrorism using a cyber trigger.
Pool Re announced yesterday that it will offer the coverage extension as standard to all policyholders who purchase terrorism insurance from Pool Re members from April 01, 2018. The move comes following two years of work and is based on the results of a research study which was commissioned from the Centre for Risk Studies at University of Cambridge Judge Business School.
With the threat of cyber terrorism evolving, it had become increasingly apparent that a “clear gap in coverage” – which could see businesses exposed – needed tackling, according to Pool Re chief executive Julian Enoizi.
“While terrorist actors have yet to successfully weaponise computer systems, it became evident that the advent of a destructive cyberattack by terrorist actors may only be a matter of time, and that the Pool Re scheme would not cover losses resulting from such an event,” Enoizi said at a Pool Re launch event in London yesterday.
“This coverage gap had to be addressed if Pool Re’s proposition was to remain relevant and fit for purpose. It was therefore incumbent on us to gain a better understanding of the risk in order to extend the scope of cover,” he went on to say.
As a result, in 2015 Pool Re entered into a partnership with the Cambridge Centre for Risk Studies, in order to examine the nature of the cyber terror threat, how it might develop, and how it would affect commercial property holders in Great Britain, the CEO explained.
Simon Ruffle, the Centre’s director of research and innovation, said the study for Pool Re – a partially redacted version of which has now been released – was “very timely” given the evolving nature of cyber terrorism.
“The Centre has applied an academic approach to modern business, enabling a deep analysis of current geopolitics and technology in order to illuminate the shape of an emerging threat to the UK economy,” Ruffle said. “The cyber terrorism scenarios we examined provide insight into what types of attacks might be possible in the next few years that could impact Pool Re’s portfolio.”
Speaking at the Pool Re event yesterday, the former director of GCHQ, Robert Hannigan, said that while there is a consensus that terrorists are a “long way” from having the capability to deliver a serious destructive attack, the adoption of cyber terrorism at some point in the future is likely.
“One thing we do know about terrorists is that they are not static, and I think the last few years have illustrated that in spades,” Hannigan said. “It would be very surprising if an organisation who understood the power of the internet to radicalise, to deliver propaganda, and to organise attacks, didn’t also get the possibility for a destructive cyberattack.”
Enoizi described the cyber terrorism cover extension as a “pivotal moment” for Pool Re, adding that it “establishes a new standard for terrorism cover and places the UK at the forefront of nations reinforcing their economies against emerging risks.”
He continued: “It is also an indication of what can be achieved through cross-industry, academic and governmental collaboration. We will continue to research and evaluate other emerging terror threats as they become evident.”
Giving his verdict on the move, David Nichols,
Zurich’s UK chief claims officer, said that while “Pool Re is sensible in theory” it is still “currently restricted in when it can pay out.”
“Pool Re has got the ball rolling and is implementing some change, but what we’d like to see is a speedy but sensible debate on how we can devise a more relevant framework to help the victims of attacks on our society,” he said. “We need parties across the industry including other providers and the Motor Insurers’ Bureau to support Pool Re in facilitating this change – and the Government to do its part in changing the legislation.
“It is a highly complex area to wade into, but we don’t think it quite hits the mark at the moment. We shouldn’t shy away from hard work, but instead get our heads together and find a solution which works for victims. Part of the discussion now should be about how Pool Re’s assets can be used, alongside where future contributions to the pot come from and I’ve already spoken to Pool Re who agree that it’s the right time to evolve the scheme.”
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