New York regulator issues cyber insurance risk framework with implications for insurers and insureds

Tim Tobin, Harriet Pearson, Paul Otto, and Jonathan Hirsch of Hogan Lovells write:

On February 4, the New York Department of Financial Services (NYDFS) released Insurance Circular Letter No. 2 (2021), a Cyber Insurance Risk Framework (Framework) for insurers that write cyber insurance.

The Framework identifies best practices that property/casualty insurers “should employ” to manage cyber insurance risk and raises a number of issues relevant to multiple stakeholders including policyholders who rely on insurance as part of their cyber risk management strategy.

At its core the Framework is designed to address systemic risk to cyber insurers. But while NYDFS states that the Framework is directed to cyber insurers, those insurers that do not write cyber policies should assess and apply the Framework as relevant to “silent risk” they carry from non-cyber policies that may provide coverage for cybersecurity-related losses.

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