Directors and officers need to be certain of their responsibilities relating to the prevention or management of a cyber event, or else they run the risk of being held personally liable should an attack against their firm occur, according to Marsh in comments about the UK D&O market.
Under many regulatory regimes, directors and officers have extensive responsibilities to implement systems and controls to manage their company’s data usage. If, following a cyber attack, it is found that they have breached these fiduciary duties, company directors and officers could be personally exposed to lawsuits, shareholder class actions and regulatory activity.
“Management boards should develop cyber strategies that take these legal obligations into account,” said Beth Thurston, head of Management Liability, Financial and Professional (FINPRO) Practice, Marsh. “However, it is clear from recent high-profile cases that such strategies must be more than a box-ticking exercise – the management of cyber risk now needs to be an intrinsic part of day-to-day life for management boards.”
Marsh said there is an abundance of capacity in the UK insurance market for directors and officers’ liability (D&O) insurance. With the exception of financial institutions, rates for D&O insurance have declined on average by 0 percent to 10 percent, or have remained stable, in the last 12 months. As a result, clients are increasingly utilizing the cost savings on their current program to purchase larger limits of D&O insurance.
“Although the UK D&O insurance market is still highly competitive, insurers are acutely aware of the impact cyber-related claims can have on their margins. As a result, underwriters are scrutinizing their clients’ policies and procedures to establish a clearer picture of the understanding and management of cyber risk at board level,” said Eleni Petros, a senior vice president in Marsh’s FINPRO Practice.
“Typical D&O policies are very broad and cover individual directors for all acts, errors, and omissions arising from their conduct as directors, which could include matters relating to a cyber incident,” she said.
“Cover may also be available for the company itself in the event of shareholder litigation, but insureds should check that there is no cyber exclusion, which would mean that no insurance cover is available for a cyber incident,” Petros continued.
“Directors and officers should take a proactive approach to managing their insurance arrangements. By ensuring that they have adequate cover in place, they can personally protect themselves from the impact of regulatory investigations or shareholder litigation following a cyber incident,” she said.