Underwriters focusing on directors and officers (D&O) liability ranked cybersecurity issues as their newest and most pressing concern, according to a recent report from AHT Insurance.
“Recent news coverage surrounding cyber breaches for Target, Wyndham Worldwide and Sony have shown examples of what to do, what not to do, and what the potential fallout of a major breach can bring,” noted brokerage firm AHT in its 2015 State of the D&O Market report. “These events have trickled over into the D&O space as shareholders have started to bring derivative suits against directors and officers for breach of duty in these matters, and as companies take major reputational hits that start to affect earnings – the securities suits won’t be far behind.”
AHT noted that the failure to disclose a breach could open up an organization to a Securities and Exchange Commission (SEC), among other risks.
Sixty percent of D&O underwriters reported that they considered cybersecurity to be a major factor when pricing risks. They indicated that in 2015, the underwriting process would involve more questions about potential insureds’ cybersecurity, including whether they maintain separate cyber insurance, the firm’s internal controls and processes on cybersecurity, the level to which the board is involved, and who maintains responsibility for updating the board.
Erin is the managing editor of Advisen’s Front Page News. She has been covering property-casualty insurance since 2000. Previously, Erin served as editor-in-chief of The Standard, New England’s Insurance Weekly. Erin is based in Boston, Mass. Contact Erin at [email protected].
