Lloyd’s updates cyber war wordings

Lloyd’s of London has recently issued an updated Market Bulletin to offer clearer guidance on cyber war wordings, aiming to prevent disputes over policy coverage.

In August 2022, Lloyd’s released Market Bulletin Y5381, outlining requirements for exclusions in standalone cyber-attack policies. This was done to help the Lloyd’s market better manage the perceived systemic risk posed by state-backed cyber-attacks.

As part of this initiative, Lloyd’s stated, “We are therefore requiring that all standalone cyber-attack policies falling within risk codes CY and CZ must include, unless agreed by Lloyd’s, a suitable clause excluding liability for losses arising from any state backed cyber-attack”.

Recently, Lloyd’s announced: “In order for Lloyd’s to continue to track exposures to the different types of clauses, managing agents are required to continue to complete the clause adoption attestation.”

However, starting from the Q2 2024 return, these attestations will only be required twice a year, with the first due on January 31, 2025.

Syndicates offering cyber treaty reinsurance will also need to complete this attestation from January 31, 2025. Lloyd’s will collaborate with the market and the LMA to ensure the attestation template suits treaty reinsurance business.

Furthermore, these updates introduce coverage clauses that fall outside Lloyd’s standard risk appetite. For policies starting January 1, 2025, syndicates wishing to cover cyber-attacks in conventional war scenarios must do so explicitly, possibly through a separate product.

Starting April 1, 2024, only syndicates approved as “Advanced” may use a type 4 clause, limited to renewal business and subject to overall aggregate limit caps. Also, from January 1, 2025, Lloyd’s syndicates won’t be allowed to use Type 4 clauses for both new and renewal policies.

Lloyd’s has also updated oversight for cyber reinsurance risks, subjecting syndicates to the same requirements as insurance business. However, acknowledging the later implementation date for reinsurance, Lloyd’s will provide a slightly longer run-off period for business including Type 4 or Type 7 clauses.

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