Experts warn cyber risks could swamp the market by Ida Axling
DAC Beachcroft says need for standalone cyber cover could be reinforced.
Law firm DAC Beachcroft predicts that changes in regulation will boost cyber insurance policies in 2016.
In its publication Insurance Market Conditions and Trends 2015/16, the company said it expected the proposed new European Data Protection Regulation to bring mandatory breach notification requirements, in effect making data breaches more costly.
The firm warned brokers and insurers that this could reinforce the need for standalone cyber cover and urged them to look over their existing policies.
DAC Beachcroft further predicted that an increase in cyber risks could swamp the market, as regulatory and legal trends were likely to result in more successful claims for damages following a data breach.
The report states that big data and new technology would lead to more personal data collected and shared, and that courts have shown an increased willingness to award damages for breaches of privacy in recent years.
Hans Allnutt, partner at DAC Beachcroft, said: "While still under negotiation, the proposed EU Data Protection Regulation should be much clearer on the type of compensation that can be sought, and I expect the right to claim damages for emotional distress alone will be included.
"The courts are already moving in this direction with the support of the regulator."
Allnutt warned that the issue did not only affect specific cyber insurance policies, and encouraged all liability underwriters to look at how their products would respond to such claims.
He added: "They should consider whether they need to amend wordings and ask more questions around privacy, cyber security and the use of people's private information."