Cyber Insurance Market in Turmoil Over State-Backed Attacks

May 22, 2023 – Published on Bloomberg Law

Global insurers are racing to figure out how to avoid covering government-sponsored cyberattacks and catastrophic hacks, as large damages and some notable companies’ retrenching spook the market.

Chubb Ltd. is exploring higher prices and insurance deductibles for widespread cyber events. Beazley Plc is developing a new war insurance product outside of its standard cyber policy to cover hacks between nation-states. Other insurers are tweaking their policies to exempt acts of cyber terrorism.

As the leading carriers decide how to move forward, corporate customers are left to deal with a messy cyber market and contradictory contract terms, brokers and insurers say.

Lloyd’s of London, the biggest global insurance market, asked all carriers selling through its platform to stop covering state-backed hacks. But many insurers, including those fearing a backlash from US customers, are coming up with other ways to manage the risks.

Businesses that are frequent targets of cyberattacks, including financial, health-care, and utility companies, are concerned that Lloyd’s mandate gives insurers too much leeway to deny coverage for state-backed attacks, especially when it isn’t clear how much a foreign government was involved.

In some cases, corporate customers have favored insurers—especially those selling in the US market—that took a softer stance on cyber war and systemic risks.

But corporate policyholders are confused by the shifting landscape for cyber coverage, and some are skeptical that their policy will pay out for a big attack.

Mark Lance, vice president at GuidePoint Security, said multiple businesses have told him they decided to pass on cyber insurance, opting instead to spend the money on internal security controls. “We’ve heard it from some large public companies and some private ones as well,” he added.

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