Out-Law News 1 min. read
05 Apr 2016, 1:16 pm
Insurance and cyber liability specialist Manoj Vaghela of Pinsent Masons, the law firm behind Out-Law.com, was commenting after the Times reported that insurers have faced difficulties in providing accurate estimates of the cost of underwriting cyber risks.
The newspaper reported that management at the Lloyd's of London market have asked insurers to provide such estimates but that some were struggling to meet the deadline to do so because of challenges in valuing the risk.
"The insurance industry does not yet have a single product that sets the gold standard for cyber attacks," Vaghela said. "Instead, there are many different types of policies which may respond ranging from stand-alone cyber policies to fidelity policies. This fragmentation of risk makes it very difficult to assess the market’s exposure."
"In order to estimate potential cyber attack liabilities, Lloyds’ underwriters would have to sift through an enormous number of policies and endorsements, given that data breach cover was often added as an additional inducement to general liability covers. Insurers are right to be concerned about their liabilities. The Panama Papers serve a timely reminder of the wide-ranging consequences of a cyber-attack," he said.
Last year Lloyd's of London published a report outlining the potential cost to insurers of a major cyber attack on the US power grid. It said it could amount to tens of billions of dollars, and that the wider cost to the US economy could hit $1 trillion in the most serious case.