Loose contract wordings could be a claims time bomb for reinsurance industry warns Hiscox Re

Hamilton, Bermuda, (15 September, 2014) – The growing trend for including previously excluded areas of cover such as terrorism and cyber risk in poorly worded reinsurance contracts and at no extra premium, is not only disguising the true cost of risk, warns Hiscox Re, but could also trigger a torrent of future litigation.

When claims are made against contracts where risks such as what constitutes a cyber event are poorly defined, the outcome could see many cases ending up in expensive litigation, which will only damage the long term sustainability of the reinsurance industry as well as its reputation.

Commenting, Mike Krefta, Chief Underwriting Officer, Hiscox Re, says: “The pressure on reinsurers competing for limited premium is forcing many to loosen terms and conditions when it comes to previously excluded areas of cover such as terrorism, or emerging risks such as cyber. In many cases coverage has been expanded with no consideration for cost or even relevance to the client's own requirements. Not only does this disguise the true cost of the risk but poorly drafted wordings could lay the industry open to a torrent of litigation once the claims begin to arrive.

“Cyber is a great current example of an unappreciated, ill defined emerging peril and deciding on what actually constitutes a cyber event post-loss and what it should have cost, will only reward the lawyers while damaging the long term health and reputation of the reinsurance market. It is in everyone’s interests - buyers and sellers - that coverage is fully understood and priced for. Of equal importance is the seller’s responsibility to properly aggregate the cyber risk they have, allocate premium accordingly and report on it so as to allow proper risk management. Surprises will hurt both buyers and sellers.

“While it is important that contracts are tightened, the market should also proactively seek solutions to new emerging risks such as cyber. It is an important component of the value we can add for our clients, particularly as it is still unclear whether emerging forms of capital will offer full cyber coverage.”



For further information please contact:

Hiscox Ltd

Kylie O’Connor

Sebastian St.John-Clarke

+44 (0) 207 448 6656

+44 (0) 845 652 1937

[email protected]

[email protected]





Notes to editors


About Hiscox


Hiscox, the international specialist insurer, is headquartered in Bermuda and listed on the London Stock Exchange (LSE:HSX). There are three main underwriting divisions in the Group - Hiscox London Market, Hiscox Re and Hiscox Retail, which includes Hiscox UK and Europe, Hiscox Guernsey, Hiscox USA and subsidiary brand, DirectAsia. Hiscox underwrites internationally traded, bigger ticket business and reinsurance through Hiscox Re and Hiscox London Market. Through its retail businesses in the UK, Europe and the US Hiscox offers a range of specialist insurance for professionals and business customers, as well as homeowners.


For further information visit www.hiscoxgroup.com

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