London market clarifies marine cyber clause to address aggregation risk

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The Joint Excess Loss Committee of the Lloyd’s Market Association (LMA), an organisation that represents the interests of the Lloyd’s underwriting community, and the International Underwriting Association (IUA), which represents international and wholesale insurance and reinsurance companies operating in the London Market, hosted a well-attended session at Lloyd’s Old Library.

They brought together underwriters and brokers to discuss the genesis and development of their 2023 cyber clause, designed specifically for the marine and upstream energy sectors.

This clause emerged from extensive consultations across sectors in 2023 and aims to clarify coverage and understand cyber exposures within these industries.

Claire Wallace, Head of Marine Treaty at Canopius and Chair of JXL, commented: “Our Committee ultimately wants to clarify and preserve coverage for the market’s marine clients, while also quantifying a clear approach to cyber risk.”

“To achieve our aims, we needed to come together as a market to tackle this very difficult subject. We also needed to assess the impact that possible aggregations of this could have on capital adequacy and reinsurers’ positions in the market,” continued Wallace.

In response to the rapidly evolving risks and contractual terms since the onset of the Ukraine conflict, the Joint Committee conducted a comprehensive review of existing cyber clauses.

This resulted in a wording suitable for all marine and upstream energy classes, eliminating the need for separate underlying clauses.

The move away from scheduled clauses addresses concerns around aggregation uncertainty, providing clarity to reinsurers and cedants regarding the aggregation of claims involving cyber risks in a dynamic risk environment.

Wallace added: “Reinsurers need to be fully prepared for a major global cyber event, malicious or non-malicious, and ensure that there is clarity of coverage. Further, we recognise that aggregation causes the majority of reinsurance disputes, and it is helpful to all parties to avoid these where possible.”

“We’re confident that the JX2023-019 is robust and clearer for all sides to use within the treaty and excess loss environment.”

The post London market clarifies marine cyber clause to address aggregation risk appeared first on ReinsuranceNe.ws.

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