Feedback: Joint Excess Loss Committee Looks at Cyber

Some feedback from the LMA and IUA;

The LMA’s and IUA’s Joint Excess Loss Committee hosted a packed session in the Lloyd’s Old Library for underwriters and brokers, to talk through the genesis and development of the committee’s 2023 cyber clause, designed for use across the marine and upstream energy sectors.

The new clause was developed after extensive cross-sector consultation during 2023 and was launched as a way to assist practitioners in clarifying coverage and understanding exposures to cyber within their marine and upstream energy books of business.

Having seen a rapid change in risks and wordings since the outbreak of the Ukraine war, the LMA’s and IUA’s Joint Committee undertook a review of all the cyber clauses then in use. The result was one distilled wording which could be utilised across all marine and upstream energy classes and enable a move away from scheduled underlying clauses. The use of schedules created an aggregation uncertainty, making it challenging for reinsurers and cedants to understand how claims with a cyber element would be aggregated against a fast-moving environment of cyber risk.

Claire Wallace, Head of Marine Treaty at Canopius and Chair of JXL, said: “Our Committee ultimately wants to clarify and preserve coverage for the market’s marine clients, while also quantifying a clear approach to cyber risk.

“To achieve our aims, we needed to come together as a market to tackle this very difficult subject. We also needed to assess the impact that possible aggregations of this could have on capital adequacy and reinsurers’ positions in the market.

“Reinsurers need to be fully prepared for a major global cyber event, malicious or non-malicious, and ensure that there is clarity of coverage. Further, we recognise that aggregation causes the majority of reinsurance disputes, and it is helpful to all parties to avoid these where possible.

“We’re confident that the JX2023-019 is robust and clearer for all sides to use within the treaty and excess loss environment.”

The JX2023-019 is held on the Lloyd’s repository and the IUA website.