Insurance Executive

Six Questions for Grace Ries

Risk & Insurance® caught up with FM Global's Grace Ries to discuss the insurer's latest cyber products and its approach to helping clients manage their cyber exposures.
By: | February 7, 2017 • 3 min read

In July 2016, FM Global announced that Grace Ries, assistant vice president and manager of cyber risk insurance products, would lead a dedicated unit to develop an underwriting approach and coverage capabilities to meet clients’ needs for first-party cyber solutions. We caught up with her to ask her about the initiative and FM Global’s approach to the market.

R&I: Grace, part of your background is providing risk management support to the chemicals industry. What lessons learned will you be bringing forward as you underwrite this pressing issue of cyber risk?

Ries: My background is in chemical engineering and material science engineering. Many clients in the chemical sector have global exposures, and in my mind that is similar to cyber. Cyber is a global risk. Our clients’ data can be anywhere in the world. The solutions we provide for cyber need to be applicable globally. Both cyber and chemical risks also are high hazards. High hazards require a specialized risk management and underwriting approach, which is how we are approaching cyber.

R&I: How does FM Global plan to bring its engineering expertise to bear in managing cyber?

Ries:  We are treating cyber the same way that we approach any other risk. We always start with the science and research to determine what kind of standards, tools and methodologies are needed to help our clients address their risk at a location level and at a corporate level. We expect to offer some new cyber products and services in 2017. I am working closely with Mel [Carmelina] Borsellino, FM Global’s vice president and manager of cyber hazards, on this.

R&I: With so much insurance product now out there targeted at cyber, how is FM Global going to be able to differentiate its product?

Ries: Three things come to mind. First, FM Global is a specialty company. We focus on commercial and industrial property only. Cyber policies are usually driven by third-party liability. We focus solely on first-party exposure.

Our current FM Global cyber offerings address five areas: malware, denial of service, off premises data services, resultant damage and we provide a cyber optimal recovery endorsement. There’s more to come in 2017.

Second is that cyber is offered as part of our all-risk FM Global Advantage policy, in contrast to the marketplace, where cyber policies are usually a stand-alone offering. Also, FM Global has been providing coverage for cyber for more than 10 years.

And third, our insurance product is linked to our loss prevention engineering expertise. We look for ways to help clients access, quantify and improve their risk and to help them stay resilient.

R&I: Can you give us an idea of the traits you are looking for as you seek candidates to build your underwriting team?

Ries: To keep up with this rapidly evolving risk, you’ve got to have some fun! The people that we’re looking for on the FM Global cyber underwriting team are people who share the belief that the majority of loss is preventable and are focused on enhancing FM Global’s leadership in the industry.


We also are looking for people who are visionary, forward thinking and client-focused because, as a mutual insurance company, we are owned by our policyholders. And lastly, they’ve got to be passionate about always seeking ways to better protect the value our clients create and keep them resilient.

R&I: Can you tell us what some of your products will address specifically?

Ries: Our current FM Global cyber offerings address five areas: malware, denial of service, off premises data services, resultant damage and we provide a cyber optimal recovery endorsement. There’s more to come in 2017.

R&I: What’s the most challenging aspect of this new assignment, the one that keeps you up at night?

Ries: I work with a talented and dedicated team and believe our organization has the right people in place to address cyber. So, I sleep well at night and so should our clients. &

Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Cyber Liability

Fresh Worries for Boards of Directors

New cyber security regulations increase exposure for directors and officers at financial institutions.
By: | June 1, 2017 • 6 min read

Boards of directors could face a fresh wave of directors and officers (D&O) claims following the introduction of tough new cybersecurity rules for financial institutions by The New York State Department of Financial Services (DFS).


Prompted by recent high profile cyber attacks on JPMorgan Chase, Sony, Target, and others, the state regulations are the first of their kind and went into effect on March 1.

The new rules require banks, insurers and other financial institutions to establish an enterprise-wide cybersecurity program and adopt a written policy that must be reviewed by the board and approved by a senior officer annually.

The regulation also requires the more than 3,000 financial services firms operating in the state to appoint a chief information security officer to oversee the program, to report possible breaches within 72 hours, and to ensure that third-party vendors meet the new standards.

Companies will have until September 1 to comply with most of the new requirements, and beginning February 15, 2018, they will have to submit an annual certification of compliance.

The responsibility for cybersecurity will now fall squarely on the board and senior management actively overseeing the entity’s overall program. Some experts fear that the D&O insurance market is far from prepared to absorb this risk.

“The new rules could raise compliance risks for financial institutions and, in turn, premiums and loss potential for D&O insurance underwriters,” warned Fitch Ratings in a statement. “If management and directors of financial institutions that experience future cyber incidents are subsequently found to be noncompliant with the New York regulations, then they will be more exposed to litigation that would be covered under professional liability policies.”

D&O Challenge

Judy Selby, managing director in BDO Consulting’s technology advisory services practice, said that while many directors and officers rely on a CISO to deal with cybersecurity, under the new rules the buck stops with the board.

“The common refrain I hear from directors and officers is ‘we have a great IT guy or CIO,’ and while it’s important to have them in place, as the board, they are ultimately responsible for cybersecurity oversight,” she said.

William Kelly, senior vice president, underwriting, Argo Pro

William Kelly, senior vice president, underwriting at Argo Pro, said that unknown cyber threats, untested policy language and developing case laws would all make it more difficult for the D&O market to respond accurately to any such new claims.

“Insurers will need to account for the increased exposures presented by these new regulations and charge appropriately for such added exposure,” he said.

Going forward, said Larry Hamilton, partner at Mayer Brown, D&O underwriters also need to scrutinize a company’s compliance with the regulations.

“To the extent that this risk was not adequately taken into account in the first place in the underwriting of in-force D&O policies, there could be unanticipated additional exposure for the D&O insurers,” he said.

Michelle Lopilato, Hub International’s director of cyber and technology solutions, added that some carriers may offer more coverage, while others may pull back.

“How the markets react will evolve as we see how involved the department becomes in investigating and fining financial institutions for noncompliance and its result on the balance sheet and dividends,” she said.

Christopher Keegan, senior managing director at Beecher Carlson, said that by setting a benchmark, the new rules would make it easier for claimants to make a case that the company had been negligent.

“If stock prices drop, then this makes it easier for class action lawyers to make their cases in D&O situations,” he said. “As a result, D&O carriers may see an uptick in cases against their insureds and an easier path for plaintiffs to show that the company did not meet its duty of care.”


One area that regulators and plaintiffs might seize upon is the certification compliance requirement, according to Rob Yellen, executive vice president, D&O and fiduciary liability product leader, FINEX at Willis Towers Watson.

“A mere inaccuracy in a certification could result in criminal enforcement, in which case it would then become a boardroom issue,” he said.

A big grey area, however, said Shiraz Saeed, national practice leader for cyber risk at Starr Companies, is determining if a violation is a cyber or management liability issue in the first place.

“The complication arises when a company only has D&O coverage, but it doesn’t have a cyber policy and then they have to try and push all the claims down the D&O route, irrespective of their nature,” he said.

“Insurers, on their part, will need to account for the increased exposures presented by these new regulations and charge appropriately for such added exposure.” — William Kelly, senior vice president, underwriting, Argo Pro

Jim McCue, managing director at Aon’s financial services group, said many small and mid-size businesses may struggle to comply with the new rules in time.

“It’s going to be a steep learning curve and a lot of work in terms of preparedness and the implementation of a highly detailed cyber security program, risk assessment and response plan, all by September 2017,” he said.

The new regulation also has the potential to impact third parties including accounting, law, IT and even maintenance and repair firms who have access to a company’s information systems and personal data, said Keegan.

“That can include everyone from IT vendors to the people who maintain the building’s air conditioning,” he said.

New Models

Others have followed New York’s lead, with similar regulations being considered across federal, state and non-governmental regulators.

The National Association of Insurance Commissioners’ Cyber-security Taskforce has proposed an insurance data security model law that establishes exclusive standards for data security and investigation, and notification of a breach of data security for insurance providers.

Once enacted, each state would be free to adopt the new law, however, “our main concern is if regulators in different states start to adopt different standards from each other,” said Alex Hageli, director, personal lines policy at the Property Casualty Insurers Association of America.

“It would only serve to make compliance harder, increase the cost of burden on companies, and at the end of the day it doesn’t really help anybody.”


Richard Morris, partner at law firm Herrick, Feinstein LLP, said companies need to review their current cybersecurity program with their chief technology officer or IT provider.

“Companies should assess whether their current technology budget is adequate and consider what investments will be required in 2017 to keep up with regulatory and market expectations,” he said. “They should also review and assess the adequacy of insurance policies with respect to coverages, deductibles and other limitations.”

Adam Hamm, former NAIC chair and MD of Protiviti’s risk and compliance practice, added: “With New York’s new cyber regulation, this is a sea change from where we were a couple of years ago and it’s soon going to become the new norm for regulating cyber security.” &

Alex Wright is a U.K.-based business journalist, who previously was deputy business editor at The Royal Gazette in Bermuda. You can reach him at [email protected]