Silent Cyber and Professional Indemnity Insurance

In the fast-growing world of technology, cyber-related exposures are becoming far more commonplace. Businesses now have to carefully consider what measures should be put in place to protect them in the event of risk associated with financial loss, disruption, or damage to their reputation due to their IT systems.

As of the 1 January 2021, Lloyd’s syndicates are now required to be more explicit about their position on “silent cyber” when it comes to professional indemnity (PI) policies. This means that PI policies will likely result in reduced cover when it comes to cyber-related exposures.

For this reason, it is vital that you understand how this may affect you and your business, and what you should do to ensure that you have adequate cover.

Silent Cyber – what is it?

“Silent” (or “non-affirmative”) Cyber is a term used for potential cyber exposures in traditional property or liability policies where cyber coverage is not clearly included or explicitly excluded in the insurance policy.

This can cause a higher dispute risk and cover that does not meet the expectations of the policyholder.

Unlike affirmative insurance (which clearly outlines what is included), other policies are unlikely to refer to cyber risks and could potentially be assumed to cover certain losses.

How are insurers dealing with it?

In 2019, Lloyd’s of London and the Prudential Regulatory Authority made insurers put action plans into place over concerns that underwriting and risk pricing might not accurately reflect the risks that policies are “silently” providing.

These plans were created to reduce silent exposures, either by explicitly excluding them or providing affirmative coverage.

As of 1 January 2021, the phase that covers PI insurance and other liability policies was introduced.

What does that mean for your PI insurance?

All PI policies that have been written through Lloyd’s now must expressively include or exclude cyber cover, and many insurers have now chosen the option of excluding rather than affirming cover.

When it comes to your PI renewal, we will discuss cyber cover with you to ensure that you understand what this means and that your business is sufficiently protected.

As a brief overview, you should expect them to apply to claims that result or arise from:

  • Security breaches of your computer network or data
  • Breach of data protection law
  • Unplanned or unintentional system failures involving your business computer network or access to data stored on your computer network

 If you would like to discuss cyber cover in more detail, please call us on 0345 251 4000.