Cyber terrorism: A new frontier for insurers?

Recent events in Paris have shocked the world and highlighted a number of geo-political issues that are facing people and businesses alike. One of these is the proliferation of cyber attacks, now a threat not just for individuals and businesses, but a greater threat for governments and security services too.

At this week’s prime minister’s questions in parliament, George Osborne stated that in light of the Paris attacks, and the growing threat of a cyber attack by terrorist groups, he was to launch “a £160m defence cyber innovation fund to foster innovative procurement in defence”, designed to help the UK protect against cyber threats and also to “destroy the idea that there is impunity in cyber space”.

This is an issue that insurers operating in cyber and terrorism should be taking note of, as one of the biggest challenges facing the industry is a ‘cyber-terrorism’ event. Following the tragic events in Paris, there have been talks of French security and telecoms services being hacked beforehand, to allow the perpetrators the time and communication required to carry out the devastating attack.

Whilst this is certainly not the first time cyber capabilities have been used for such means, it should set alarm bells ringing for anyone looking to insure themselves against terrorism. Exclusions for cyber-terrorism can still be found in some cyber insurance policies, simply because of the ambiguity behind what constitutes an act of ‘cyber-terrorism’ and the ‘total’ risk it poses.

It is crucial therefore that those looking to insure against cyber terrorism understand the policy they are purchasing. From a geo-political standpoint, cyber attacks unfortunately don’t seem to be going away. Lloyd’s of London recognised the threat this could pose, with the launch of a report detailing the potential impact of a (fictional) cyber attack on the energy grid in the US. Whether this would be defined as an act of terrorism is something to be discussed; in reality this would depend on a number of factors such as the type of attack, motivation and consequences.

Technologically-advanced areas such as cyber insurance have always been fast-moving, and the shifting nature of the global political landscape is something that will impact this as the lines between cyber and terrorism insurances blur. It is up to the industry to make sure clients have the most appropriate cover possible, and to communicate where any potential gaps may lie.

Share on : Twitter/ LinkedIn

Leave a reply