Cyber events are increasingly in the news, contributing to the booming growth of cyber liability insurance products. But what about the impact of cyber events on other insurance coverages, and more specifically, on Directors & Officers (D&O) insurance? How can a cyber event impact the directors and officers of a company, and therefore its D&O policy? Here are a few examples:
In response to the heightened awareness of cyber-related D&O exposure, some boards are actively seeking to add members with cyber security knowledge. It is becoming clear that it is in the best interest of boards to put cyber security at the forefront of their concerns.
So how do D&O underwriters consider this emerging exposure in their risk analysis? In the absence of any meaningful recoveries on a D&O policy as a result of a cyber-event, most D&O underwriters are aware of the exposure to some degree, but not necessarily evaluating or pricing for the risk.
Given the current levels of competition in the D&O market and in the absence of any significant cyber-related D&O losses, we are unlikely to see any proactive measures of substance. However, underwriters are well advised to consider cyber security in their underwriting analysis. At a minimum there should be questions on the application that determine whether the directors and officers are aware of their companies’ cyber exposure and are proactive in their approach to cyber security. Where possible, the D&O underwriter should work in conjunction with cyber liability underwriters to gauge the amount and type of cyber exposure, and to ascertain what will be covered under the D&O policy, as well as to address any potential aggregation across both coverages.
To quote Miguel de Cervantes: “To be prepared is half the victory.”
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The views and opinions expressed above are those of the author alone and do not necessarily reflect those of PartnerRe nor do they constitute legal or professional advice.