Lloyd’s Sets Out Requirements For State-backed Cyber-attack Exclusions

Lloyd’s Sets Out Requirements For State-backed Cyber-attack Exclusions

Lloyd’s Sets Out Requirements For State-backed Cyber-attack Exclusions

Lloyd’s Sets Out Requirements For State-backed Cyber-attack Exclusions

The latest market bulletin from Lloyd’s, the world’s oldest marketplace for insurance and reinsurance, outlines specifications for state-backed cyber-attack exclusions in standalone cyber-attack policies.

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The market stated in the research that they continue to strongly support the authoring of cyber-attack coverage but acknowledge that the risk associated with cyber-related business is still evolving. If improperly handled, it might expose the market to systemic risks that syndicates might find difficult to control.

Because of how much societies rely on their IT infrastructure, including the ability to operate physical assets, losses may be much more than what the insurance market can bear.


According to Lloyd’s, they have continually emphasized the necessity for underwriters to use precise language when describing the coverage they are offering.

Lloyd’s Sets Out Requirements For State-backed Cyber-attack Exclusions

When damages result from cyberattacks sponsored by sovereign states, market attention has been focused on the exposure to those losses.

According to the market, underwriters should take into account the likelihood that state-sponsored attacks could take place without the use of physical force in a war when writing cyberattack risks.

According to the paper, insurers face a similar systemic risk due to the potential harm that these attacks can do and their propensity to spread.

The market is aware that many managing agents are already incorporating language in their policies designed particularly to limit exposure to cyberattacks, including those supported by states during and outside of war.

They do, however, want to make sure that all syndicates writing in this class do so at a suitable standard and with strong wordings.

According to the research, state-backed cyberattack exposures can be complicated and underwriters should make sure that their wordings are legally assessed to make sure they are suitably strong.


Lloyd’s Sets Out Requirements For State-backed Cyber-attack Exclusions

Lloyd’s says it is important that they have the confidence that syndicates are managing their exposure liabilities from war and state-backed cyber-attacks. Robust wordings also provide the parties with clarity of cover, which means that risks can be properly priced and reduces the risk of disputes.

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Therefore, Lloyd’s requires that all standalone cyber-attack policies falling within risk codes CY and CZ must include, unless agreed by Lloyd’s, a suitable clause excluding liability for losses arising from any state-backed cyber-attack in accordance with the requirements.

This clause must be in addition to any war exclusion (which can form part of the same clause or be separate from it). At a minimum, the state-backed cyber-attack exclusion must:

Exclude losses arising from a war (whether declared or not), where the policy does not have a separate war exclusion.

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Exclude losses arising from state-backed cyber-attacks that significantly impair the ability of a state to function or significantly impair the security capabilities of a state.

Lloyd’s Sets Out Requirements For State-backed Cyber-attack Exclusions

Be clear as to whether cover excludes computer systems that are located outside
any state which is affected in the manner outlined.

Set out a robust basis by which the parties agree on how any state-backed cyber-attack will be attributed to one or more states and ensure that all key terms are clearly defined.

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The requirements set out here take effect from 31 March 2023 at the inception or on the renewal of each policy, says Lloyd’s.

In implementing the requirements set out above, the market requires managing agents to have regard to the terms of their reinsurance programmes, to ensure they provide appropriate, back-to-back cover.

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