This Week In Risk Management: February
Here’s a familiar question: If a tree falls in the woods, and no one is around to hear it, does it still make a noise? Of course, we know that it does! Scientific discovery works wonders when answering questions about the universe — but these questions still make us ponder. And we like that. As a result, this post poses risk management questions to get you thinking, from what influences coverage to how ransomware gangs play football. Let’s dive in.
What Happens When a Ransomware Gang Tries to Play Football?
Although the San Francisco 49ers didn’t play in Super Bowl LVI, a ransomware gang still deemed them worthy of a cyberattack. The NFL team called the threat a “network security incident” as it limited their corporate IT network. Thankfully, the attack didn’t impact ticket holders or stadium operations.
They aren’t the first, and they won’t be the last. Like many executives, the 49ers franchise leaders were jolted into action because of a cyberattack. However, the 49ers franchise notified law enforcement officials of the BlackByte ransomware and hired cybersecurity firms to help them recoup from the attack. Much weight now rests on their shoulders, and we wonder how much cyber liability concerns will impact other commercial insurance lines, such as D&O insurance.
EVP and Customer Success Manager Rachel Jenkins explains further, “We are starting to see more, still limited but increasing, cyber claims bleed into D&O through shareholder litigation as there is an increased fiduciary duty on the C-suite to maintain proper cyber controls through regulation and industry requirements.”
Can Ukraine Air Travel Impacts Other Insurance Coverage?
It might seem odd for seemingly unrelated incidents to impact the insurance market — but that’s what is happening currently. The conflict between Russia and Ukraine has disrupted Ukraine’s air travel. As a result, some insurers refuse to cover flights in the Ukrainian airspace. Officials have relocated aircrafts and rerouted or halted other flights, so the trickle effect is immense.
But why do these two countries play such a significant role in the future of the insurance market?
EVP and Broking Manager Kyle Jeziorski chimes in, “A good example here is to relate it to property insurance. For the National Flood Insurance Program (NFIP), you cannot bind coverage any sooner than 30 days in advance. This approach ensures that people are not binding coverage just before a large storm that will bring flooding with it rolls through.
Similarly, property insurers will often instate binding moratoriums in coastal areas when a hurricane is approaching or in California when wildfires are spreading. Insurance is meant to protect against unforeseen acts, and insurers will do what they can to avoid signing on to a risk when a loss is (seemingly) unavoidable.”
Are D&O and Cyber Insurance Maturing In a “Hard” Market?
We’ve seen the headlines about some insurance markets hardening; that’s old news. However, experts now report that some lines, specifically D&O and cyber liability insurance, are maturing amid the hard market.
EVP of Scale Underwriting Jeff Hirsch explains, Maturity refers to the evolving ways that brokers and underwriters seek to make deals by tailoring coverage to keep pricing within what the customer would find acceptable. Hard market refers to conditions where there is more demand than capacity, generally. A hard market does not mean ‘difficult’ but where underwriters get to push pricing north to cover their exposure to claims paid in the past and where the buyer has few options other than to accept the increase.”
What does this mean for the future? It’s straightforward; commercial insurance brokers must have candid conversations with clients to navigate the higher premiums and reduced coverage. It boils down to managing their clients’ expectations and creatively customizing coverage.
Will Vaccine Mandates Shake Up EPL Insurance Again?
Although the US Supreme Court and OSHA disagree on who has the power to require a poke in the arm, employees can still mandate vaccination. Of course, both sides of the fence pose increased EPL risks — and we’ve already seen plenty of EPL and D&O litigation stem from these issues. We’ll likely see some companies keep a steady footing while others sink in a crevasse of litigation.
Underwriter Leanna Marciana of Scale Underwriting shares her insights, “Staying updated is critical, especially in the ever-changing case of vaccine requirements. Companies that can remain agile and maintain flexible remote schedules are best suited to adapt rapidly to these changes while being profitable.
For example, Scale Underwriting works with many young and agile startups that can navigate such situations savvily. By being able to adapt to these changes and consulting with counsel, regarding frequent updates companies can avoid their employees feeling unsafe — and hopefully any litigation — while also maintaining their business.”
The takeaway revolves around the question of agility. So, how agile is your company?
As always, we’d be thrilled to hear your comments below. Until next time…
