UK firms could face losses if uninsured for data and IT meltdowns

UK insurers will strip out swaths of technology-related cover for firms as the current level of coverage may leave groups without coverage for damages from lost data and IT meltdowns, leaving companies potentially exposed.

Regulators demanded insurers clarify policies so that customers were aware of what incidents fall under traditional policies and which would require new cyber insurance policies, according to a report in the Financial Times.

"They are choosing to exclude anything connected with technology, which could leave our clients without coverage," said Sarah Stephens, the cyber, media and technology practice leader at insurance broker Marsh JLT Specialty. "Clients are very concerned."

The pressure from bodies included the UK's Prudential Regulation Authority and Lloyd's of London.

Regulators fear that cyber attacks could leave insurers facing unexpected and enormous costs. However, according to experts redrafted policies were already leaving companies without appropriate cover.

"They are aiming to take out pure cyber losses but a lot of the drafting could potentially take out a lot more," said Rob Smart, technical director at Mactavish.

Smart said that costs associated with technology problems such as loss of data from floods or fires could potentially be excluded even if they were unrelated to cyber attacks.

"I think a lot of companies would be horrified by that," he added. "You remove ambiguity but at the cost of having a gap [in coverage]."