6 Overlooked Real Estate Risks
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Cyber risk is everywhere. Embedded in the hardware of every computer system, in the cloud, in the headlines of national newspapers, and in the worries of risk managers across every sector.
It’s not a new risk, but its constantly evolving nature makes it tough for companies to stay up to speed on exposures, and to know how best to mitigate and transfer the risk.
“While the market for cyber coverage is maturing rapidly, it’s still less developed than other lines,” said Tim Marlin, Head of Cyber Underwriting, The Hartford.
“We hear a lot of clients say they want cyber coverage, but often they aren’t really sure what that means.”
“There’s no uniformity of cyber products on the market,” said Marlin. “That complicates conversations about exposures and cyber coverage.”
Oftentimes insureds may not understand the full extent of their exposure, so they don’t know what kind of coverage to ask for.
Without industry-wide standards, it’s a real challenge for brokers to advise clients on what good cyber coverage should look like. Just because a coverage is available in the market doesn’t mean it’s a good fit for the client. A lack of understanding makes insureds more likely to buy improper coverage, or buy nothing at all.
“As an industry, we need to do a better job of talking with our clients about cyber in a clear and concise way. We have to remove the fear around the risk,” Marlin said.
Cyber becomes less scary when it’s broken down into the exposures and coverages that insureds already are familiar with.
“The coverage is much simpler than many people realize. Do you understand coverage for third-party liability? Do you understand coverage for the first-party costs related to notification and credit monitoring in the event of a breach? If you have a firm grasp of those, then you already have a basic understanding of cyber coverage,” Marlin said.
“It’s the cryptic term ‘cyber’ that throws people off. It conjures up images of bad guys in black hats, doing nefarious things over the internet, but the exposure is much older and broader than that.”
Cyber risk connotes computer and network-related exposures. But good “cyber” coverage and advice addresses a much broader range of information risk.
“It has to do with the use and exchange of information; how we move it around; how we process it; and how we store it,” Marlin said.
The dominance of digital media, a richly connected society, distributed processing, and the speed at which information moves amplifies risk.
Compound that with controls that lag behind both technology and threats, a bit of regulatory uncertainty, and you have a rather intimidating risk landscape. It’s our job to help simplify that for clients.
Core business functions are carried out electronically. Paper-based processes, where they still exist, are surely on the way out.
The information housed in digital processes, however, is much harder to protect when buried in an internet server or floating around in the cloud. A locked filing cabinet was a simpler, more easily-understood solution.
Some industries, like health care, financial services and education, are better-versed in the protection of private information in the digital era, simply because they bear greater scrutiny from regulators. Often, they’re also better resourced, and more focused on the issue making them more likely to buy cyber coverage.
However, other industries have been slower to understand their cyber risk exposure.
In life sciences, for example, the drug discovery process and protection of intellectual property has changed dramatically.
“Generations ago, drug discovery was done more or less in the lab and documented in lab notebooks,” said Mark Silvestri, Sr. Managing Director, Products & Innovation, The Hartford Specialty Commercial.
“Now, it’s often enabled computationally through bioinformatics or computational biology. Molecular models for drug compounds can be built online and scientists can simulate their effect on biological systems on a computer,” Silvestri said.
An early stage life sciences company’s value is primarily its intellectual property. That IP is now stored on a computer system, making it more susceptible to theft or ransomware attacks. There’s a market for that stolen IP too.
Manufacturing faces similar challenges.
“They are relying on information in a number of ways that are critical to their ability to make money and service their clients,” Silvestri said. “Just-in-time inventory supply management, for example, is all done on a computer. Any sort of cyber outage could disrupt the delivery of crucial materials.”
Supply chain or network disruption could disrupt income or delay production and delivery. Manufacturers generally understand these risks in the physical world. Connecting them back to a cyber incident as the underlying cause is a step many just haven’t taken yet — and where some fall short on protecting themselves.
These are just two examples of industries that may not necessarily think they are in the crosshairs of cyber risk, but they have just as much exposure as any other sector.
“We hear a lot of clients say they want cyber coverage, but often they aren’t really sure what that means.”
-Tim Marlin, Head of Cyber Underwriting, The Hartford
In the move to a digital environment, access to data at any given moment is critical.
Third party liability, business interruption and IP risks may be covered under other policies, but forgoing cyber coverage could leave companies in a lurch if they cannot quickly get to their data or begin the remediation process after a breach.
Partnering with the right carrier means more than getting the right coverage. It means access to the expertise and guidance to help companies actually understand what cyber risk means for them, and what they can do to mitigate their exposure.
At The Hartford, a panel of experts dubbed The Hartford First RespondersSM is available to help insureds assess their information security practices, review contracts with third parties, and get a better understanding of the full breadth of their cyber exposure.
“We negotiated below-market rates with a number of risk service providers and security vendors that our customers can take advantage of to remediate any pre-existing weaknesses they have in their system security,” Marlin said. “They are also there to help companies react quickly in the event of a breach or other cyber incident.
“In addition, we provide a cyber risk services fund, which is rather unique in the industry,” Marlin said. In the event that an insured has a covered loss, The Hartford provides insureds with a fund, in addition to incident related expenses and costs to help remediate the issues that resulted in the incident in the first place.
“The better off our customers are, the better off we are,” Marlin said. “The bottom line is, we’re here to help you become a better risk before, during and after a loss.”
To learn more about The Hartford’s cyber coverage, visit www.thehartford.com/cyber.
FOR PRODUCERS ONLY. CyberChoice First Response is offered on a SURPLUS LINES* basis. This material is not to be used for solicitation purposes. The Hartford has arranged for data risk management services for our policyholders at a discount from some third-party service providers. Such service providers are independent contractors and not agents of The Hartford. The Hartford does not warrant the performance of third-party service providers even if paid for as part of the policy coverage, and disclaims all liability with respect to use of or reliance on such third-party service providers.
*Eligibility for surplus insurance coverage is subject to state regulation and requires the use of a licensed surplus line broker. Surplus lines insurance policies are generally not protected by state guaranty funds. Policies should be examined carefully for suitability and to identify all exclusions, limitations, and other terms and conditions. Surplus lines coverage is underwritten by Pacific Ins. Co. Ltd (except in CT and HI) and The Hartford Ins. Co. of Illinois in CT and HI. The Hartford® is The Hartford Financial Services Group, Inc. and its subsidiaries. Its headquarters is in Hartford, CT. All rights reserved.
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with The Hartford. The editorial staff of Risk & Insurance had no role in its preparation.
Working at Dominick’s Finer Foods bagging groceries. Shortly after I was hired, I was promoted to [cashier] and then to a management position. It taught me great responsibility and it helped me develop the leadership skills I still carry today.
R&I: How did you come to work in risk management?
While working for Hyatt Regency McCormick Place Hotel, one of my responsibilities was to oversee the administration of claims. This led to a business relationship with the director of risk management of the organization who actually owned the property. Ultimately, a position became available in her department and the rest is history.
R&I: What is the risk management community doing right?
The risk management community is doing a phenomenal job in professional development and creating great opportunities for risk managers to network. The development of relationships in this industry is vitally important and by providing opportunities for risk managers to come together and speak about their experiences and challenges is what enables many of us to be able to do our jobs even more effectively.
R&I: What could the risk management community be doing a better job of?
Attracting, educating and retaining young talent. There is this preconceived notion that the insurance industry and risk management are boring and there could be nothing further from the truth.
R&I: What’s been the biggest change in the risk management and insurance industry since you’ve been in it?
In my 20 years in the industry, the biggest change in risk management and the insurance industry are the various types of risk we look to insure against. Many risks that exist today were not even on our radar 20 years ago.
R&I: What insurance carrier do you have the highest opinion of?
FM Global. They have been our property carrier for a great number of years and in my opinion are the best in the business.
R&I: Are you optimistic about the US economy or pessimistic and why?
I am optimistic that policies will be put in place with the new administration that will be good for the economy and business.
R&I: What emerging commercial risk most concerns you?
The commercial risks that are of most concern to me are cyber risks, business interruption, and any form of a health epidemic on a global scale. We are dealing with new exposures and new risks that we are truly not ready for.
R&I: Who is your mentor and why?
My mother has played a significant role in shaping my ideals and values. She truly instilled a very strong work ethic in me. However, there are many men and women in business who have mentored me and have had a significant impact on me and my career as well.
R&I: What have you accomplished that you are proudest of?
I am most proud of making the decision a couple of years ago to return to school and obtain my [MBA]. It took a lot of prayer, dedication and determination to accomplish this while still working a full time job, being involved in my church, studying abroad and maintaining a household.
R&I: What is your favorite book or movie?
“Heaven Is For Real” by Todd Burpo and Lynn Vincent. I loved the book and the movie.
R&I: What’s the best restaurant you’ve ever eaten at?
A French restaurant in Paris, France named Les Noces de Jeannette Restaurant à Paris. It was the most amazing food and brings back such great memories.
R&I: What is the most unusual/interesting place you have ever visited?
Israel. My husband and I just returned a few days ago and spent time in Jerusalem, Nazareth, Jericho and Jordan. It was an absolutely amazing experience. We did everything from riding camels to taking boat rides on the Sea of Galilee to attending concerts sitting on the Temple steps. The trip was absolutely life changing.
R&I: What is the riskiest activity you ever engaged in?
Many, many years ago … I went parasailing in the Caribbean. I had a great experience and didn’t think about the risk at the time because I was young, single and free. Looking back, I don’t know that I would make the same decision today.
R&I: What about this work do you find the most fulfilling or rewarding?
I would have to say the relationships and partnerships I have developed with insurance carriers, brokers and other professionals in the industry. To have wonderful working relationships with such a vast array of talented individuals who are so knowledgeable and to have some of those relationships develop into true friendships is very rewarding.
R&I: What do your friends and family think you do?
My friends and family have a general idea that my position involves claims and insurance. However, I don’t think they fully understand the magnitude of my responsibilities and the direct impact it has on my organization, which experiences more than 9 million visitors a year.