FCA cyber priorities welcomed

Cyber underwriter Corvus has welcomed calls from UK regulators to bring more clarity to cyber policy wordings.

Matthew Waller, head of underwriting for the UK, the business’s Lloyd’s underwriting facility, said he welcomed the Financial Conduct Authority’s (FCA) recent letter setting out cyber insurance as a priority for the regulator, adding the regulator’s involvement could help create more consistent wordings.

While the cyber market needed to be dynamic enough to address changing risks, buyers also needed to be clear about the terms and conditions of their cover, Waller told Insurance Day. 

“The cyber market needs to be dynamic and it has to adapt to the ever-changing marketplace. However, we also need to be clear to the buyers what the terms and conditions are and what they’re buying,” Waller said.

“It’s a balance between adapting to the trends but also giving clarity to the buyer. I think the FCA comments in particular will help drive that forward. That’s not going to happen overnight… because there are so many products out there and markets are adapting to the needs, but there is an evolution.”

Waller added wording was just one aspect of the cyber market, and greater standardisation would allow insurers to differentiate their product in other ways – including by price or other value-added services such as active threat monitoring. “Wording consistency is important but then you have a lot of other offerings that are associated with cyber which really add value to the clients.”

The FCA listed cyber insurance as one of its priorities in an open letter to chief executives in the wholesale insurance market late last month.

'It’s a balance between adapting to the trends but also giving clarity to the buyer. I think the FCA comments in particular will help drive that forward'

^{Matthew Waller, Corvus}

In the letter, the regulator acknowledged the important role cyber insurance could play in supporting businesses of all sizes in recovering from an event but raised concerns that, with the number of cyber attacks increasing, cyber policy wordings “may result in firms not meeting customer’s needs”.

“Firms offering cyber insurance must make sure their policy wordings are clear and that customers understand the coverage they are buying,” the FCA said. “We also expect firms to manage cyber claims handling in a fair and timely way.”

Waller said in an evolving line of business such as cyber, having a set of standards helped “give sustainability to the market” and creates opportunity for growth by giving customers confidence in the product they are buying.

He added it was both about making day-to-day terminologies consistent across the market and creating a more consistent understanding of systemic loss events – which has been seen by many as a barrier to growing the market – and called for further engagement with regulators to help develop that shared understanding.

“For the FCA to come out with the CEO letter, it’s a really important first step. But we’re also looking for engagement from them, to give that feedback to insurers as we progress down this path,” said Waller.

He added while it was up to the market to signal its risk appetite to the regulator, there needed to be “a process or a conversation” between the businesses and regulators on how to address key concerns including around systemic risk and war.

“When we look at the specific comments from the FCA, that’s the first step. My interpretation is that is setting markers out there, saying this is an area that is of keen focus for them, which they’re going to want to move forward with and engage with,” Waller said.