A conveyancers’ regulator is considering making it mandatory for firms to take out stand-alone insurance to cover cyber attacks. The Council for Licensed Conveyancers says cyber incidents present a ‘clear risk’ to clients and the cost of restoring systems and data to protect client interests are likely to be significant - putting firms potentially in jeopardy.
Some professional indemnity insurers already require their firms to take out separate cyber insurance to cover those costs, and the CLC has previously been content to let the market resolve the issue.
But the possibility of mandating stand-alone cyber insurance is back on the agenda. Consulting on new proposals for PII, the regulator said: ‘Claims under PII in the event of a cyber incident could be very considerable if the affected practice is not able to recover any affected systems and data effectively to allow transactions to progress with minimal delay.
‘We believe that it is likely that these and other evolving forms of cyber risk could become more complex and proliferate.’
Any decision to make cyber insurance mandatory would not entail changes to the minimum terms and conditions at this stage. The CLC also asks in its consultation whether it might require a practice to have cyber cover unless it can explain why it is necessary.
The threat of a cyber attack was brought into sharp focus towards the end of last year when the Simplify group confirmed that a ‘security incident’ caused a major systems outage which paralysed some of its conveyancing practices.
The CLC consultation follows discussions with current brokers and insurers about the state of the PII market, and a commitment from the CLC council to carry out a review.
The regulator has opted against proposing changes to the breadth of cover provided by the minimum terms and conditions, nor does it plan any changes to the nature and extent of run-off cover at this stage.
The CLC does propose to continue to set maximum excess levels based on practice turnover but allow insurers to depart from those levels where it can be justified.
In a system similar to that run by the Solicitors Regulation Authority, the CLC wants to include a provision for a 60-day extension of a firm’s full indemnity cover in the event it cannot renew PII at the end of the insurance year. This period would allow firms to complete matters or arrange for the transfer of matters, but those affected could not take on any new instructions during the extension. The consultation closes on 25 February.