Sponsored Content by The Hartford

Taking the Fear Out of Cyber

Resources are available to help insureds assess and manage their cyber exposures.
By: | November 1, 2017 • 7 min read

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.

Demystifying Cyber

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.

Digital Era Drives Risk

Tim Marlin, Head of Cyber Underwriting

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

Coverage and Services

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.


The Hartford is a leader in property and casualty insurance, group benefits and mutual funds. With more than 200 years of expertise, The Hartford is widely recognized for its service excellence, sustainability practices, trust and integrity.

More from Risk & Insurance

More from Risk & Insurance

Risk Report: Marine

Crewless Ships Raise Questions

Is a remote operator legally a master? New technology confounds old terms.
By: | March 5, 2018 • 6 min read

For many developers, the accelerating development of remote-controlled and autonomous ships represents what could be the dawn of a new era. For underwriters and brokers, however, such vessels could represent the end of thousands of years of maritime law and risk management.

Rod Johnson, director of marine risk management, RSA Global Risk

While crewless vessels have yet to breach commercial service, there are active testing programs. Most brokers and underwriters expect small-scale commercial operations to be feasible in a few years, but that outlook only considers technical feasibility. How such operations will be insured remains unclear.

“I have been giving this a great deal of thought, this sits on my desk every day,” said Rod Johnson, director of marine risk management, RSA Global Risk, a major UK underwriter. Johnson sits on the loss-prevention committee of the International Union of Maritime Insurers.

“The agreed uncertainty that underpins marine insurance is falling away, but we are pretending that it isn’t. The contractual framework is being made less relevant all the time.”

Defining Autonomous Vessels

Two types of crewless vessels are being contemplated. First up is a drone with no one on board but actively controlled by a human at a remote command post on land or even on another vessel.

While some debate whether the controllers of drone aircrafts are pilots or operators, the very real question yet to be addressed is if a vessel controller is legally a “master” under maritime law.


The other type of crewless vessel would be completely autonomous, with the onboard systems making decisions about navigation, weather and operations.

Advocates tout the benefits of larger cargo capacity without crew spaces, including radically different hull designs without decks people can walk on. Doubters note a crew can fix things at sea while a ship cannot.

Rolls-Royce is one of the major proponents and designers. The company tested a remote-controlled tug in Copenhagen in June 2017.

“We think the initial early adopters will be vessels operating on fixed routes within coastal waters under the jurisdiction of flag states,” the company said.

“We expect to see the first autonomous vessel in commercial operation by the end of the decade. Further out, around 2025, we expect autonomous vessels to operate further from shore — perhaps coastal cargo ships. For ocean-going vessels to be autonomous, it will require a change in international regulations, so this will take longer.”

Once autonomous ships are a reality, “the entire current legal framework for maritime law and insurance is done,” said Johnson. “The master has not been replaced; he is just gone. Commodity ships (bulk carriers) would be most amenable to that technology. I’m not overly bothered by fully automated ships, but I am extremely bothered by heavily automated ones.”

He cited two risks specifically: hacking and fire.

“We expect to see the first autonomous vessel in commercial operation by the end of the decade. Further out, around 2025, we expect autonomous vessels to operate further from shore — perhaps coastal cargo ships. For ocean-going vessels to be autonomous, it will require a change in international regulations, so this will take longer.” — Rolls-Royce Holdings study

Andrew Kinsey, senior marine risk consultant, Allianz Global Corporate & Specialty, asked an even more existential question: “From an insurance standpoint, are we even still talking about a vessel as it is under law? Starting with the legal framework, the duty of a flag state is ‘manning of ships.’ What about the duty to render assistance? There cannot be insurance coverage of an illegal contract.”

Several sources noted that the technological development of crewless ships, while impressive, seems to be a solution in search of a problem. There is no known need in the market; no shippers, operators, owners or mariners advocate that crewless ships will solve their problems.

Kinsey takes umbrage at the suggestion that promotional material on crewless vessels cherry picks his company’s data, which found 75 percent to 90 percent of marine losses are caused by human error.


“Removing the humans from the vessels does not eliminate the human error. It just moves the human error from the helm to the coder. The reports on development by the companies with a vested interest [in crewless vessels] tend to read a lot like advertisements. The pressure for this is not coming from the end users.”

To be sure, Kinsey is a proponent of automation and technology when applied prudently, believing automation can make strides in areas of the supply chains. Much of the talk about automation is trying to bury the serious shortage of qualified crews. It also overshadows the very real potential for blockchain technology to overhaul the backend of marine insurance.

As a marine surveyor, Kinsey said he can go down to the wharf, inspect cranes, vessels and securements, and supervise loading and unloading — but he can’t inspect computer code or cyber security.

New Times, New Risks

In all fairness, insurance language has changed since the 17th century, especially as technology races ahead in the 21st.

“If you read any hull form, it’s practically Shakespearean,” said Stephen J. Harris, senior vice president of marine protection UK, Marsh. “The language is no longer fit for purpose. Our concern specifically to this topic is that the antiquated language talks about crew being on board. If they are not on board, do they still legally count as crew?”

Harris further questioned, “Under hull insurance, and provided that the ship owner has acted diligently, cover is extended to negligence of the master or crew. Does that still apply if the captain is not on board but sitting at a desk in an office?”

Andrew Kinsey, senior marine risk consultant, Allianz Global Corporate & Specialty

Several sources noted that a few international organizations, notably the Comite Maritime International and the International Maritime Organization, “have been very active in asking the legal profession around the world about their thoughts. The interpretations vary greatly. The legal complications of crewless vessels are actually more complicated than the technology.”

For example, if the operational, insurance and regulatory entities in two countries agree on the voyage of a crewless vessel across the ocean, a mishap or storm could drive the vessel into port or on shore of a third country that does not recognize those agreements.

“What worries insurers is legal uncertainty,” said Harris.

“If an operator did everything fine but a system went down, then most likely the designer would be responsible. But even if a designer explicitly accepted responsibility, what matters would be the flag state’s law in international waters and the local state’s law in territorial waters.


“We see the way ahead for this technology as local and short-sea operations. The law has to catch up with the technology, and it is showing no signs of doing so.”

Thomas M. Boudreau, head of specialty insurance, The Hartford, suggested that remote ferry operations could be the most appropriate use: “They travel fixed routes, all within one country’s waters.”

There could also be environmental and operational benefits from using battery power rather than conventional fuels.

“In terms of underwriting, the burden would shift to the manufacturer and designer of the operating systems,” Boudreau added.

It may just be, he suggested, that crewless ships are merely replacing old risks with new ones. Crews can deal with small repairs, fires or leaks at sea, but small conditions such as those can go unchecked and endanger the whole ship and cargo.

“The cyber risk is also concerning. The vessel may be safe from physical piracy, but what about hacking?” &

Gregory DL Morris is an independent business journalist based in New York with 25 years’ experience in industry, energy, finance and transportation. He can be reached at [email protected]