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By Henry Clark – Head of Professional & Executive Risks
Increases to Directors’ and Officers’ liability and retention rates have moderated significantly since the peak of the hard market. Insurers continue to focus their underwriting on business’ financial health, COVID-19 resilience, and Environmental Social Governance (ESG) concerns (including Cyber risk management). As a result of increased rates of cyber attacks, company directors and officers are now facing greater regulatory oversight to disclose cyber security issues.
The recent decision by a major global carrier to withdraw from certain occupations in the professional indemnity insurance market will further tighten already underserved industry sectors, including Australian Financial Services Licence holders, financial planners, construction professionals, and lawyers.
Cyber attacks targeting supply chains are the major concern for technology Professional Indemnity (PI) and cyber insurers, as threat actors continue to leverage third-party vendors and technology service providers to gain access to their targets. The switch to remote working during the COVID-19 pandemic has amplified this threat, with the incidence of supply chain attacks growing by 430% in recent times. Log4j, SolarWinds, Colonial Pipeline, Microsoft Exchange, Kaseya, and JBS are just a few of the supply chain compromises that dominated the cyber landscape in 2021; equating to $85 million in ransomware demands.
Ransomware and cyber extortion continue to be the main threats. In 2021, 35% of all companies experienced at least one cyber ransom incident, and ransomware attacks cost businesses more than $20 billion globally, up from $325 million in 2015. Ransomware is now the fastest growing, and one of the most damaging types of cybercrime.
We welcome the increased spending on cybersecurity announced in the Federal Budget. The cybersecurity and intelligence package will deliver $9.9 billion in funding to enhance Australia’s intelligence and cyber capabilities and allow us to keep pace with the rapid growth of potential adversaries, as well as being able to counter-attack and protect our most critical systems. We have seen a dramatic rise in the cost of cyber insurance in recent periods and this added capability will help to ensure measures are in place to counter the increased threats.
The second shareholder class action to reach judgment, Crowley v Worley Limited [2020] FCA 1522, was widely regarded as a significant win for companies and insurers alike. However the decision was recently overturned, and the proceedings must now be remitted back to a single judge for a rehearing on selected issues.
The third class action to reach judgment, Bonham as Trustee for the Aucham Super Fund v Iluka Resources Ltd [2022] FCA 71, delivered a recent win for companies and insurers alike. Applying well-established principles concerning forward-looking statements, the Court dismissed allegations that Iluka had engaged in misleading and deceptive conduct and breached its continuous disclosure obligations. Thus, great emphasis was placed on disclaimers and qualifications provided by the company.
Read the Q3 Corporate Insurance market update.
