LMA introduces framework to help Lloyd’s insurers manage lesser-known cyber risks

In its new report, the Lloyd’s Market Association (LMA) presents a framework to help Lloyd’s insurers manage exposure to lesser-known systemic cyber risks.

Chris Mather, Senior Executive, Technical Underwriting at the LMA, explains that the framework assesses the aggregation potential in “other cyber” scenarios.

While systemic risks like the failure of a cloud service provider or widespread ransomware attacks have been intensively modeled by the insurance industry, the report argues that the rapid digitalisation of society is introducing new, unfamiliar cyber risks for insurers.

The report aims to provide insights for executives, underwriters, and claims managers into emerging cyber threats linked to growing digitalisation. It offers a practical framework for exposure management practitioners and risk managers on reviewing key information, identifying critical industry systems and aggregation points, and developing quantifiable scenarios.

The report examines two “other cyber” events: a cyber attack on an electronic healthcare record system and an attack on the maritime electronic chart display and information system. Experts from the LMA’s Cyber Risk Strategy Group use the new framework to gain a better understanding of these risks and their potential to accumulate.

The framework consists of six sections: apply cyber risk trends to material exposure area/industry, identify potential node(s) of aggregation and generate scenario narrative, impact factor derivation, calculate a gross loss to all policies, generate gross and net portfolio loss, and documentation, validation and governance.

Kelly Malynn, Underwriting Product Leader for Cyber Physical Damage M.A.P at Beazley and Chair of the LMA’s Cyber Risk Strategy Group, noted, “This new LMA framework is very timely and will be of real practical value to the market.

“One of the standout features of our report is its focus on the aggregation potential of cyber risks – particularly these lesser-known ‘other cyber’ scenarios. The interconnectedness of modern systems means that a single point of technological commonality can lead to widespread disruptions, underscoring the necessity for advanced risk modelling and comprehensive scenario planning to facilitate informed underwriting.”

Chris Mather, Senior Executive, Technical Underwriting at the LMA, added, “The detailed examples provided in this report in the healthcare and maritime sectors, offer valuable insights into how such scenarios can unfold across specific industries with common nodes of aggregation.

“By working together to enhance our understanding of cyber threats, strengthen our resilience to cyber attacks and develop innovative risk management solutions, we can mitigate the potential for catastrophic disruptions.”

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