Continuing uncertainty surrounding the application of cyber exclusion clauses in policy wordings by insurers is eroding the value of insurance and causing mounting concern among global energy firms, according to Marsh.
The inclusion of so-called “CL380 clauses”, which are currently imposed across a broad range of energy insurance policies, mean that insurers may deny energy firms’ claims for physical loss or damage stemming from cyber-related incidents, regardless of whether the motivation is accidental or malicious.
In its latest Energy Market Monitor, Marsh reports that as well as the threat of cyber terrorism, the key risks facing the global energy sector include rapid change in the geopolitical environment and the deployment of large scale projects. In 2013, insurance capacity for energy firms has remained largely buoyant due to the continued absence of a ‘market-changing’ event and the arrival of new entrants fuelling competition in major territories.
Andrew George, Chairman of Marsh’s Global Energy Practice, commented: “Energy clients remain perplexed and frustrated by the insurance industry’s stance on CL380 clauses. So far, the insurance industry’s stance remains largely untested; the global energy sector has not experienced physical damage to facilities or disruption to supply that has been attributed to a cyber-related event, which is testament to its aggressive approach to risk management.
“However, the current situation is clearly unsustainable. A cyber-related incident could potentially have catastrophic consequences. Insurers must deliver innovative products that offer coverage which responds to the changing risk profile of the energy industry, not only to stay relevant, but to help their clients continue to be successful.”
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