Cyber-related incidents resulting in damage to physical property have the potential to become an issue as big as data theft or ransomware in the next few years.
By Camilla Walker | September 23, 2020
As cyber exposures continue to evolve, property underwriters (along with those in other traditional lines of insurance) are increasingly unwilling to include coverage for physical damage caused by a cyber attack. Growing regulatory intolerance of so-called ‘silent cyber,’ led by action taken by the U.K.’s Prudential Regulation Authority and Lloyd’s of London, means all Lloyd’s insurers must soon either explicitly include or exclude both malicious and non-malicious cyber cover. With the market hardening, the majority of product lines are opting for the latter, leaving many insureds who had previously relied on cyber cover being included in their all-risks policies, with a significant gap in coverage.
Other regulators are expected to follow suit with rating agency Fitch already announcing it would begin incorporating the management of non-affirmative cyber risk within its ratings. Subsequently, the extent of this coverage gap is expected to widen within the coming years.
The growth of IoT means more opportunities for hackers
The increased speed and capacity of 5G will play an important role in the growth of IoT (Internet of Things) technologies, many of which are being developed for use in smart buildings and operational environments. Unfortunately, in the race to rapidly develop smart devices, security and public safety can often be an afterthought. According to a report by McKinsey, the worldwide number of IoT-connected devices is projected to increase to 43 billion by 2023 — almost triple the number in 2018. As systems move away from secure, centralized hardware-based networks, the potential touchpoints for cybercriminals increases exponentially whilst the scope of what needs to be protected and monitored by security functions are also extended.