LMA calls for greater standardisation in cyber exposure management

By Rebecca Delaney

April 1 - (The Insurer) - The Lloyd's Market Association has called for cross-market collaboration to invest in talent and adopt a standard approach to exposure management in the cyber market, as Lloyd's prepares to refresh its cyber realistic disaster scenarios.

At the beginning of the year, Lloyd’s requested aggregates for cyber to understand the exposure in the market by industry, geography and company revenue.

The LMA's new guidance on best practices for managing cyber risks said this exercise was designed to enhance understanding around exposure and the level of diversification in the market.

Linked to this is a planned refresh of Lloyd's cyber realistic disaster scenarios. This refresh will ensure that the scenarios are fit for purpose and align with the current risk landscape.

The market is also focused on preparing for a major catastrophe event, which has not yet been experienced in cyber.

"Lloyd’s wants to ensure that should a major catastrophe event happen, the market is prepared to respond and is ready for the impacts that follow," said the report.

"In doing so, Lloyd’s aims to assess the response of third-party contracts for the supply of incident response. As well as this, Lloyd’s is in the process of adopting a more granular claims data framework for cyber."

However, the LMA outlined persistent challenges in collecting and standardising data. As a result of these barriers, ensuring consistent reporting, pricing adequacy, model validation and governance also remains challenging.

"Syndicates should fully understand the data they receive, identify where there are deficiencies and consider ways to mitigate these," said the LMA.

"This could be through data augmentation using commercially available third-party datasets, or by applying well-documented and considered expert judgements and assumptions where necessary."

The report continued that collaboration across the market around coverholder data standards will also be considered as part of the 2025 exposure management delegated authority deep-dive project.

The LMA concluded by calling for upskilling within exposure management teams, as well as leveraging of emerging technologies and the adoption of a standard approach to exposure management in the cyber market.