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Are cyber war exclusions fit for purpose?

A special Insurance Day podcast looks at whether new cyber war wordings create clarity or confusion and what it means for the future of the market

Mandatory wordings seek to bring clarity to contracts over what is and is not covered; but while there is consensus that exclusions are necessary, there is disagreement over how they are best achieved

War is commonly excluded from many lines of business, including marine and aviation and property – where the potential losses are simply far too great to be included in normal coverage – so it makes sense the same applies to cyber, where the risk of accumulative events is already well known.

The debate has been thrust into the limelight by the introduction earlier this year of Lloyd’s exclusions for cyber war and state-backed attacks. The mandatory wording seeks to bring clarity to contracts as to what is and is not covered.

But while there is consensus that war exclusions are fundamental to the sustainability of the cyber market, there is also plenty of disagreement about how best this is achieved.

Cyber war is a uniquely grey area, where anonymity can make attribution difficult and where attacks have the potential to spread far beyond their intended targets.

This debate was highlighted by the recent tussle over carve-backs for collateral damage. Multiple brokers have been pushing some of this risk to be reincluded, arguing the exclusions made cover less relevant and attractive. On the other side, carriers have argued collateral war is far beyond the scope of what cyber policies were ever meant to cover.

For Insurance Day’s special report on cyber risk, deputy editor, Francis Churchill, spoke to Julian Miller, partner at DAC Beachcroft and one of the leading experts in cyber war wordings, about whether these new wordings are creating clarity or confusion, and what it all means for the future of the cyber market.


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