Lloyd’s cyber coverage requirements – clarification for excess layer and facultative reinsurance policies

To clarify how the cyber requirement set out in Lloyd’s Bulletins Y5258 and Y5277 can be satisfied for excess layer and facultative reinsurance policies that are written on a follow form basis.

All Lloyd’s policies need to provide clarity regarding cyber coverage by either excluding or providing affirmative coverage.

It is common for excess layer, facultative reinsurance and deductible buy-back policies to be written on a follow-form basis (either of the primary policy or the underlying insurance contract). In many cases the primary/underlying policy includes language addressing cyber exposures.

The LMA has gained clarification from Lloyd’s that where underwriters are able to assess that the primary/underlying policy language provides: a) sufficient clarity on coverage for cyber exposures to meet the Lloyd’s requirement, and b) the excess layer/facultative reinsurance is written on a follow-form basis, they can record this language as if it was included in the excess layer/facultative reinsurance policy and report this policy as compliant. This would require that underwriters identify the relevant policy language and record it accordingly. While this would deem the excess layer/facultative policy compliant, Lloyd’s preference remains that syndicates re-state the same cyber policy language in the excess layer/facultative reinsurance policy to match the primary.

Any queries regarding the content of this Bulletin should be referred to the LMA.

Ioanna Romanou
Senior Technical Executive, Underwriting
ioanna.romanou@lmalloyds.com