Traditional cyber cover for power grid threats ill-defined: Best

There is a growing need for protection from power grid cyber threats, but coverage for the risk in traditional insurance and reinsurance has not always been clearly defined, and its level and scope is often difficult to ascertain, says A.M. Best in a special report.

“Moreover, there is the potential for much larger-than-expected claims, especially in relation to property damage,” says Oldwick, New Jersey-based A.M. Best Co. Inc. in the report called “Power Grid Cyber Threats Underscore the Growing Need for Vigilance and Coverage,” which is dated Thursday and was distributed Friday.

“For the utility sector, cyber attacks have always been a concern, but have become an even greater threat,” said the report, pointing to the power grid attack in the Ukraine.

In the U.S., “the lack of adequate protection against cyber vulnerability can be attributed in part to the complexity of the power system itself,” it states.

The report says for some time now specialty insurers have been exploring this area. “As there is no standard definition of specialty insurance, estimating the size of this market is complicated,” it states.

“As cyber security coverage continues to evolve, so does the security threat – the latter even more rapidly – and there is no way to predict how this threat will manifest itself over the coming years,” the report says. 

It says Best now rates eight specialty insurers in the utility sector, including four specialty insurers, three single-parent captives and one electricity cooperative.