Silent cyber
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Does equipment breakdown coverage respond to ‘silent cyber’ exposures?

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    A cyber attack can cause equipment breakdown losses

    When cybercriminals attack a business, they can access more than data or personal information. In our connected world, they may also gain control of the equipment running the business.

    A hacker who is able to access a boiler’s safety control system would be able to disable it. If they were successful, this would interrupt business operations and pose a serious safety risk.

    Silent cyber exposures create coverage gaps

    The term ‘silent cyber’ is used to describe unassessed and/or unmeasured cyber exposures under a conventional insurance policy (a policy not specifically designed to cover cyber) in the following three situations:

    -       The policy is silent on cyber

    -       The policy contains a cyber exclusion not comprehensively excluding cyber

    -       The policy contains a cyber inclusion which is ambiguous, unclear or incomplete

    This can create a gap in coverage, leading to uncertainty about whether a claim relating to a cyber event will be covered or not and leaving policyholders exposed to significant financial losses.

    Loss scenario: Cyber attack on semiconductor manufacturer

    Malware is injected into a semiconductor manufacturing system when a vendor installs infected software in some of the machinery.

    Due to the lack of isolation of different production lines, the malware spreads to all major locations of the facility.

    As a result, damage to machinery occurs. Production is halted. Replacing such highly specialized machines quickly is difficult, causing business interruption.

    The resulting supply shortage also hits processing manufacturers who
    are highly dependent on the supply of this critical chip manufacturer, causing contingent business interruption for those customers.

    HSB TechAdvantage® covers such losses

    Equipment breakdown insurance covers sudden and accidental physical damage to equipment. If a cyber attack causes direct physical damage to equipment, it is a covered cause of loss under HSB’s TechAdvantage® policy.

    Not all equipment breakdown policies are the same. There is a trend in the industry to add cyber exclusions to many insurance policies. For instance, some vandalism exclusions do not make an exception for cyber vandalism. HSB TechAdvantage® does make this exception. We believe that protecting equipment against breakdown in our connected world means insuring it against direct physical damage caused by cyber events.

    What about cyber liability insurance?

    Cyber liability coverage would not respond to an equipment breakdown loss caused by cyber exposures because it focuses solely on information security exposures, such as:

    -       Costs associated with computer restoration and data recovery

    -       Third-party liabilities a business might have as a result of a failure of system security

    To learn more about HSB’s Cyber solutions check them out here:

    This article is for informational purposes only and is not intended to convey or constitute legal advice. HSB makes no warranties or representations as to the accuracy or completeness of the content herein. Under no circumstances shall HSB or any party involved in creating or delivering this article be liable to you for any loss or damage that results from the use of the information contained herein. Except as otherwise expressly permitted by HSB in writing, no portion of this article may be reproduced, copied, or distributed in any way. This article does not modify or invalidate any of the provisions, exclusions, terms or conditions of the applicable policy and endorsements. For specific terms and conditions, please refer to the applicable insurance form. Posted on June, 2023

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