The Implication of Silent Cyber Coverage Restrictions

This summer we learned that coordinated efforts were underway in London to tackle the thorny issue of coverage for cyber claims under insurance policies that are not specialty cyber insurance products. Specifically, at least one large industry segment of the global insurance marketplace urged its constituents to address cyber coverage by either excluding it altogether or expressly addressing the scope of cyber protection that would be provided under a “non-cyber” insurance policy. The problem was presented as the scourge of “silent cyber.”

For policyholders, there is nothing unduly “silent” about claims within the coverage grant that are not explicitly excluded. The problem is where to look if the insurance industry solves its “silent cyber” problem by cutting back existing coverage in traditional policies.

Policyholders have due cause for suspecting that the notion of harnessing “silent cyber” is insurance industry code for cutting back on much needed insurance protection. For the past few decades, a movement has been afoot in the insurance industry to create new insurance product lines to respond to a growing list of designated risks that insurance companies do not want to cover under existing insurance products. The result has been a proliferation of specialty insurance products, including fiduciary liability policies, environmental policies, and, most recently, cyber policies. Risk managers who need seamless coverage are forced to piece together a coherent insurance program in an ever more segmented market.