Cyber security threat worries marine insurers

IHS Fairplay has written below article on their recent Maritime Cyber-security Survey. In the words of one Lloyd’s underwriter the marine market is “in a mess” over the issue and is yet to deliver a coherent solution to the risks presented by cyber crime. Only 1.9% of the surveyed companies have a specific cyber risk insurance in place. Edge has in place coverage to remove this risk. Please visit our solutions page, or contact one of our special risk brokers for further information.

As the threat of cyber-attack and hacking continues to hit the headlines, the marine insurance market is still significantly short of a solution.

Underwriters recognise there is a threat to the maritime sector with warnings over the ability for hackers to access a vessel’s GPS system to change its direction and in recent years there have been known cases where Somali pirates accessed a shipping firm’s cyber systems to identify ships passing through the Gulf of Aden with high-value cargoes and low levels of on-board security.

On land ports have seen denial of service attacks and efforts to access online systems with criminals hacking the systems to change cargo manifests and create false cargo documentation to smuggle into and steal goods from ports.

Reinsurance company Swiss Re has publicly stated that mariners should be concerned about cyber threats, and while there are no estimates on the potential cost to the hull and cargo sectors the underwriter said it did not mean the risks were not there.

The recent IHS BIMCO cyber survey across the maritime sector found that only 11.7% of acknowledged attacks were notified to the company’s insurers while just 3.3% of respondents said the loss had been covered by their insurer.

Of those claims none were paid though the hull and machinery policy, less than 1% were via the P&I coverage and just 1.9% said they had a specific cyber insurance policy that covered the loss.
The results have not come as a shock to the marine market with few if any brokers and underwriters sure of the industry’s current or future response.

One Lloyd’s underwriter told IHS Fairplay, “The cyber response is a mess at present. Lloyd’s has approached the market recently to ask if underwriters can look at a realistic disaster scenario where a piece of equipment is loaded onto a significant number of ships, which is then used to ‘take over’ the vessels.

“However, the underwriters have gone back to say exactly what is this piece of equipment? It is simply unworkable. The hull underwriters have moved to exclude the risk and unless the maritime firm has an all-risk policy that does not have a cyber exclusion it is difficult to see where the cover would come from.”

Keith Alderman associate director of Lloyd’s broker NDI Insurance told IHS Fairplay, “The issue of cyber cover remains difficult for the market. The hull underwriters are not keen to include cover in their policies but there has been talk that the P&I Clubs are seeking a solution given that there are liability issues.

“For instance, if hackers do access a ship’s navigation system and run a vessel into a reef and there is a pollution incident the P&I cover would be expected to step in as it is a pollution loss. Does the fact that it has been caused by a cyber attack on the navigation system or by human error make much of a difference? It is a difficult question to answer.”

He added, “I am not surprised that respondents to your cyber survey had recoveries for losses from their insurers at such a low percentage. I would expect at present that it is the professional indemnity policies that have limited cyber cover contained within them, and are a firm’s best option.
“The problem is real but the solution looks very hard to create because underwriters are nervous about the potential size of any loss and there is no historical data on which to base their pricing decisions. Couple this with the fact that there is new technology being developed and implemented continuously and with this come the potential for new risks.”

SOURCE: IHS Fairplay – John Guy