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Insurers reluctant to cover cyber property exposures

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While businesses can find plentiful capacity for cyber liability coverage, those companies that want cyber-related coverage in their property policies have a harder time finding willing insurers.

Finding an insurer offering coverage may require some investigation, as well as an effort to piece together a program that has seamless cyber and property coverage, experts say (see related story).

Even those insurers that offer cyber-related coverage in their property policies, though, do so only on a first-party basis.

Policyholders would most likely have to turn to their cyber coverage for any cyber-related liability coverage, experts say.

Risk managers are concerned about obtaining cyber coverage in their property policies, said Grace Ries, Johnston, Rhode Island-based staff vice president and manager of cyber risk insurance products at FM Global, which is among insurers offering the coverage.

“There is a shift in risk managers’ minds from worrying about third-party exposure to the new, next concern, which is cyber attacks that can potentially cause catastrophic property damage and business interruption to their business,” she said.

Property insurers are “enthusiastically resisting” including cyber coverage, said Robert Parisi, New York-based managing director and cyber product leader for Marsh L.L.C.

Brokers and policyholders are asking insurers “to maximize the breadth of coverage” of cyber in the first-party property space, and insurers “would obviously want to limit that as much as they can,” said Mike Andler, New York-based property practice leader for Lockton Cos. L.L.C.

“They’re reluctant to provide clarity on whether coverage is available or not,” said Martha Bane, Glendale, California-based managing director of the property practice for Arthur J. Gallagher & Co.

Part of the problem is that many cyber liability insurers are unfamiliar with property coverage, and property insurers often don’t have the expertise to assess cyber risks.

It is “one of those things that are stuck in between,” said Eric Cernak, Hartford, Connecticut-based cyber risk and privacy practice leader at Munich Reinsurance America Inc.

Cyber exposures that property underwriters are prepared to consider usually relate to business interruption exposures.

“But the stand-alone cyber policies are intended to be much more than that, and so the customers are really trying to understand” the exposures and the coverage available, said Erica Davis, New York-based senior vice president and head of specialty products errors and omissions for Zurich Insurance Group Ltd.

Gary Martichello, New York-based property leader for Willis Towers Watson P.L.C., said property insurers “will accept some cyber risk” for larger policyholders with syndicated, multiple insurers, generally with “a $5 or $10 million sublimit” for that coverage.

But “the limits are just not available to cover” a major property loss caused by a cyber incident, said Ms. Bane of Gallagher.