Find out why businesses need DBI coverage to insure against cyber threats associated with suppliers and partners.

In today’s digital age, businesses across all industries are more reliant than ever on technology, creating a growing vulnerability to cyber risks within their supply chains. Cyber supply-chain risks pose a serious threat to companies, as even minor disruptions from third-party providers can lead to significant financial losses.

This article explores the importance of dependent business interruption (DBI) insurance coverage as a critical solution for managing cyber risks within the supply chain. We’ll discuss recent high-profile cyber incidents, challenges that businesses face, and how working with a cyber insurance expert like Costero can help brokers and their commercial clients stay ahead of these risks.

Cyber supply chain challenges facing your commercial clients

Regardless of how secure a business’s internal systems are, no organisation is entirely immune to cyber supply-chain risk. Many businesses, especially those operating complex supply chains, rely heavily on third-party software and technology providers for their day-to-day operations. The failure of these external providers can result in widespread interruptions, even if a company’s internal networks are secure.

For example, businesses may depend on cloud services, IT management platforms, or digital payment systems to operate efficiently. When these third-party services suffer from system failures, software glitches, or cyberattacks, the businesses that rely on them can experience significant operational disruptions. These interruptions could affect thousands or even millions of users or customers, depending on the scale of the provider. This is known as a systemic risk, where a single point of failure in a major provider’s network can have a cascading effect, bringing entire industries to a standstill.

In the headlines: cyber incidents and their financial impacts

Recent events have highlighted just how costly these supplier-related cyber incidents can be – such as:

• CDK Global: In June 2024, a ransomware attack against software provider CDK Global caused widespread disruption across North American auto dealerships. For example, the attack forced the giant Sonic Automotive group to announce losses amounting to $30 million in income due to the prolonged system outage. This case demonstrates the far-reaching financial consequences that businesses can face when third-party technology providers are impacted by a cyber event. (Source: Data Breach Today)

• CrowdStrike: In July 2024, leading cybersecurity provider CrowdStrike distributed a faulty software update to its commercial clients that crashed around 8.5 million Microsoft Windows systems globally. This led to significant disruptions across various industries. For example, the disruption caused by the outage cost Delta Air Lines a reported $500m, including lost revenue and compensation to passengers. Although the incident was not a result of a malicious cyberattack, it nonetheless illustrates how businesses are increasingly dependent on third-party technology partners, underscoring the need for businesses to have contingency plans in place, even when their own systems remain uncompromised. Source: BBC News)

Providing cyber insurance solutions for managing supply chain risks

Given the unpredictability of cyber incidents, it’s challenging for businesses to evaluate their exposure to supply-chain risks. However, having the right cyber insurance coverage, particularly “dependent business interruption” (DBI) coverage, is a vital way to mitigate this exposure. DBI provides insurance protection for companies when a third-party service provider suffers an outage or cyberattack, which in turn disrupts the insured business’s operations.

A critical feature of any robust cyber insurance policy is the “system failure trigger” for DBI. This ensures that the policy covers businesses for disruptions caused by system failures such as those seen in the CrowdStrike incident, which are not necessarily the result of a cyberattack but can have equally damaging impacts.

Some cyber policies on the market only include standard (not dependent) business interruption cover, which protects businesses against direct financial losses resulting from their own network being compromised by a cyber event. This type of coverage is essential for reimbursing the loss of income during network downtime and covering the costs of responding to the incident. However, it is important to note that business interruption cover is generally limited to the insured business’s own network. As a result, it does not typically cover losses arising from a failure of a third-party’s network – highlighting the importance of having DBI coverage as part of a broader risk management strategy.

How Costero can help you meet your clients’ cyber risk challenges

As a broker, your commercial clients depend on you to provide comprehensive insurance solutions that address their specific needs, and nowhere is this more apparent than in the evolving world of cyber risk. At Costero, we specialise in tailoring cyber insurance programmes to meet the unique risk profiles of your clients. Rather than providing generic, off-the-shelf policies, we take the time to understand each of your client’s operations, their reliance on third-party technology providers, and their broader risk appetites.

Working with Costero means gaining access to Lloyd’s of London and other specialist re/insurance markets. We deliver competitively priced, bespoke programmes that offer your clients comprehensive coverage. We ensure that the policies we negotiate on behalf of your clients include key elements like dependent business interruption, system failure triggers, and other critical protections that can safeguard businesses against systemic risks within their supply chain. Our experts continually review the evolving cyber threat landscape to ensure that your clients’ policies will remain up-to-date and fit-for-purpose.

Take the next step to better cyber coverage for your clients

With the increasing complexity of today’s digital supply chains, ensuring your clients are protected from the financial impacts of cyber disruptions is more important than ever. At Costero, we understand the intricacies of cyber insurance and are committed to helping you secure the right protection for your clients. Don’t settle for a one-size-fits-all policy – talk to us today about a cyber insurance programme that’s customised to each client’s specific needs and risk profile.

To learn more about our commercial cyber insurance solutions and discuss your goals, please get in touch with our expert Jonathan Olley at Costero Brokers.

Find out how to manage “hard to place” risk with innovative insurance and reinsurance solutions at Lloyd’s and beyond.

In the ever-evolving landscape of the insurance and reinsurance marketplace, it’s vital that you stay ahead of changing demands. As an insurance broker, carrier or underwriter – or as a large business with complex risks – this landscape presents both challenges and opportunities.

In this article, we’ll explore innovative ways to navigate these complexities and handle “hard to place” risks, particularly through alternative risk transfer (ART) – and explain how Costero Brokers can help you create your ideal risk solution.

Facing the challenges of large and complex risks

In today’s re/insurance marketplace, you face a range of common challenges that can impact your ability to secure appropriate coverage:

1. Rapidly changing carrier risk appetite: Insurance carriers frequently adjust their risk appetites in response to market conditions, regulatory changes, and emerging risks. As a broker or underwriter, this volatility can make it difficult to find suitable coverage for your clients.
2. Long-term pricing: Predicting long-term pricing trends is inherently challenging due to the unpredictable nature of risks and market dynamics. This uncertainty can make it difficult for you to secure stable and affordable coverage over extended periods.
3. Available capacity: The availability of capacity in the market can fluctuate, influenced by factors such as catastrophic events, economic conditions, and regulatory changes. Limited capacity can restrict your options for placing large or complex risks.

Addressing “hard to place” risks

“Hard to place” risks are those that are difficult to insure through traditional channels due to their complexity, high severity, or unique nature.

Discover the potential of alternative risk solutions

Alternative risk transfer (ART) offers you a strategic approach to addressing these challenges. This encompasses a range of techniques and structures designed to transfer risk outside of traditional insurance mechanisms. These solutions can give you greater flexibility, stability, and cost-effectiveness for managing complex and hard-to-place risks.

Among your potential options for alternative risk transfer are:

• Captives: As a large business, establishing your own self-owned “captive” insurance company allows you to retain and manage your own risks, providing greater control and potential cost savings.
• Risk pools: Pooling your risks with other entities can spread the risk and reduce the impact of large losses.
• Parametric insurance: This innovative approach triggers payouts based on predefined parameters, such as weather conditions or seismic activity, rather than actual losses.

Find expertise in creating alternative risk structures

At Costero Brokers, our expert team brings a wealth of experience in creating alternative risk structures. We work closely with you to understand your unique risk profile and develop customised solutions that align with your strategic objectives. Our approach involves:

1. Risk assessment: Conducting a thorough analysis of your risk exposures and identifying areas where traditional insurance may fall short.
2. Solution design: Developing bespoke alternative risk solutions that address your identified risks, leveraging our expertise in captives, risk pools and parametric insurance.
3. Market access: Utilising our strong relationships with Lloyd’s, other leading markets, and international partners to secure the best possible terms and capacity for your needs.
4. Ongoing support: Providing continuous support and monitoring to ensure the effectiveness of your alternative risk solution and making adjustments as needed.

Choose your best option for alternative risk solutions

You need innovative and flexible solutions to navigate the challenges of rapidly changing risk appetites, long-term pricing uncertainties, and fluctuating capacity. Costero Brokers is perfectly positioned to help insurance brokers, carriers, underwriters and large businesses leverage alternative risk transfer mechanisms to manage complex and hard-to-place risks effectively.

Our deep expertise in the Lloyd’s market and our commitment to creating tailored risk structures make us a trusted partner in this evolving landscape. Explore the benefits of alternative risk solutions with Costero and discover how we can help you achieve your risk management goals.

To learn more about our solutions for alternative risk transfer and “hard to place” risks, and to discuss your goals, please get in touch with our experts David Pratt or Mark Jesson at Costero Brokers.