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Lloyd’s Calls for Insurance Policies to be Explicit About Cyber Coverage

August 8, 2019

Nicely done Lloyd's. If you read my post on Tuesday, you know what a mess cyber coverage, with very few insureds understanding what is covered and what is not when it comes to cyber coverage.

According to a post from Insurance Business America, It looks like silent cyber has become deafening for Lloyd's of London, which is now requiring clarity of coverage for cyber exposures in all insurance policies.

Lloyd's said it believes it is in the best interests of customers, brokers, and syndicates alike for all policies to be clear on whether losses caused by a cyber event are covered.

"Lloyd's is mandating that all policies provide clarity regarding cyber coverage by either excluding or providing affirmative coverage," stated the insurance exchange. "To support the market in making the necessary changes, this requirement will be implemented using a phased approach."

Under the first phase, all first-party property damage risks incepting on or after January 01, 2020 – regardless of whether written on an all-risks basis or as named perils – must contain policy language which is explicit as to whether coverage exists or is excluded as far as losses caused by cyber risks are concerned.

This phase spans the following Lloyd's classes of business: energy construction, energy offshore property, energy onshore property, nuclear, power generation, cargo, fine art, marine hull, marine war, specie, yacht, difference in conditions, property direct & facultative (either US or non-US binder or open market), engineering, livestock & bloodstock, and terrorism.

"Where clarity cannot be provided because wording changes are prohibited by local legal or regulatory requirements, Lloyd's expects managing agents to assume these policies provide affirmative coverage for the purpose of exposure management," read the market bulletin seen by Insurance Business.

"Lloyd's recognizes that it will remain a matter for the courts in the local jurisdiction to determine the extent of cover, if any, provided by the policy."

For the second and third phases, Lloyd's said a market working group will be established to consider how the clarity requirement can best be implemented for liability lines of business. Details will be provided in early 2020 following a period of further market consultation slated to be concluded by the end of this year.

Bully for Lloyd's! It is headed in the right direction – here's hoping other insurance companies follow suit.

Sharon D. Nelson, Esq., President, Sensei Enterprises, Inc.
3975 University Drive, Suite 225|Fairfax, VA 22030
Email: Phone: 703-359-0700
Digital Forensics/Cybersecurity/Information Technology
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