Commercial property policies leaving businesses exposed to cyber risks, Mactavish warns

Commercial property insurance policies are leaving businesses exposed to technology risks such as data loss, according to Mactavish, which reports a significant increase in policies that have removed this element of cover, even if the loss arises from a ‘traditional’ property loss, such as fire.

Mactavish says many insureds are now being told that even loosely tech-related elements of cover in their commercial property insurance cover are being removed outright, and they will now have to buy separate cyber cover to insure against these risks. This “black and white approach” fails to appreciate the integral role technology plays in almost every business today, it warns, adding that the cyber insurance market lacks sufficient capacity to write large-scale property risks.

One reworded commercial property insurance policy reviewed by the consultancy was found to have excluded all losses “indirectly contributed to by” IT or data failure, even “regardless of any other cause or event contributing” to a loss.

This comes after a recent call from the Prudential Regulation Authority for greater clarity over what commercial property insurance policies cover in relation to a cyber attack.

Technical director at Mactavish, Rob Smart commented: “While we welcome attempts to bring greater transparency to the insurance market, the redrafting of many commercial property policies is leaving clients under-insured and exposed to a range of broadly ‘tech-related’ risks which they had believed would be covered. Some of the new wording we are seeing goes far beyond the intent of the Lloyd’s mandate, and it means clients are no longer covered in areas such as loss of data from flooding or a fire for example – even if it’s not related to a cyber-attack.

“Clients are being forced to take out separate cyber insurance to cover these excluded risks, but often this cannot meet their needs either without significant alterations,” Smart added.

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