Pool Re, the UK terrorism reinsurance pool, will begin providing cyber terrorism insurance based on a study by the Cambridge Centre for Risk Studies.
Pool Re, the UK terrorism reinsurance pool set up in 1993 in the wake of the IRA bombing campaign on the UK mainland, announced today that it will extend its cover to include physical damage and business disruption due to remote digital interference or “cyber terrorism”. The move follows consent by the UK Treasury to extend coverage to this new threat.
The new coverage, which begins in April 2018, is based on a study commissioned from the Cambridge Centre for Risk Studies at Cambridge Judge Business School, University of Cambridge, and follows two years of work including discussions with the Treasury.
The new insurance cover and details of the report were announced at an event today at The Fishmonger’s Hall in London.
Julian Enoizi, Chief Executive, Pool Re, said: “We will continue to evolve our coverage and today’s announcement is an effort to future proof the Scheme. As technology grows more ubiquitous, it seems inconceivable that terrorists will not increase their efforts to deploy cyber means to further their extremist ideology.
“The threat from a cyber-attack is evident and businesses have become increasingly concerned about the extensive repercussions these types of attacks could have on them. This was a clear gap in our coverage which left businesses potentially exposed. After rigorous analysis, we determined that we can close this gap. It is a pivotal moment for Pool Re which establishes a new standard for terrorism cover and places the UK at the forefront of nations reinforcing their economies against emerging risks. It is also an indication of what can be achieved through cross-industry, academic and governmental collaboration. We will continue to research and evaluate other emerging terror threats as they become evident.”
The study by the Cambridge Centre for Risk Studies identified 40 potential cyber terrorism scenarios which may impact a UK terrorism insurance portfolio. The report looked at situations of different gravity in 10 exposure categories including property, aerospace, construction, transport, energy and healthcare.
In transport, for example, cyber terrorism could include “deliberate cargo and signal tampering to create explosive collisions”, while in aerospace and many other sectors the growth of additive manufacturing could increase the “risk of introducing deliberate and scalable compromises into 3D-printed parts causing serious damage, injury, or loss of stock.”
The 41-page report defines cyber terrorism as “an act of politically-motivated violence involving physical damage or personal injury caused by a remote digital interference with technology systems.” The report concludes that the systems described in the 40 potential cyber terrorism scenarios “are vulnerable and will develop additional vulnerabilities as technology develops if not rigorously tested and safeguarded against cyber compromise.”
Simon Ruffle, Director of Research and Innovation at the Cambridge Centre for Risk Studies, said the study for Pool Re was very timely given the evolving nature of cyber terrorism. He said:
The Centre has applied an academic approach to modern business, enabling a deep analysis of current geopolitics and technology in order to illuminate the shape of an emerging threat to the UK economy. The cyber terrorism scenarios we examined provide insight into what types of attacks might be possible in the next few years that could impact Pool Re’s portfolio.
Pool Re is a mutual reinsurer whose members comprise the vast majority of insurers and Lloyd’s Syndicates which offer commercial property insurance in Great Britain, with membership of the scheme affording them a guarantee which ensures that they can provide cover for losses resulting from acts of terrorism, regardless of the scale of the claims. The scheme is owned by its members but is underpinned by a HM Treasury commitment to support Pool Re if ever it has insufficient funds to pay a legitimate claim.
The Pool Re scheme has dealt with some 16 separate terrorism events paying losses amounting to in excess of £600m.