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cyber risks - too risky for Lloyd’s market?

23 November 2015

Syndicates within Lloyd’s market have reduced the amount of cyber risks they are underwriting. With instances of cyber-crime occurring on an almost daily basis and the huge costs of investigating and remediating a breach meaning loss ratios look set to take a significant hit, it is perhaps unsurprising that the market has wobbled.

The uncertainty that developing technology and increasingly sophisticated 'hacktivists' pose, coupled with a lack of specialist cyber risk underwriters within Lloyd's market has made cyber risk difficult to price. Further, there is a risk that cyber and data cover is being given inadvertently which should raise concerns with underwriters. Matching underwriters’ intention, with appropriate wordings and achieving certainty for insureds is a difficult balancing act, particularly in the world of cyber risk.

It will be interesting to see whether other insurers follow suit and expect the government to establish a state-backed scheme similar to 'Pool Re' for terrorism, or whether they gear up to fill the Lloyd’s market void.

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