Canada Chronicle: Providing Clarity for Automobile Policies in Canada and Cyber Exposures
Vehicles with fully automated capabilities are coming to Canadian roads and the current provincial and territorial regulatory approved insurance wordings will need to be updated to reflect this exposure.
For now, in the Canadian automobile market, cyber coverage has not been addressed through the regulatory approved automobile endorsements and exclusions. In effect, Canadian automobile policies are silent on cyber coverage.
Lloyd’s view is that it is in the best interests of customers, brokers, and syndicates for all policies to be clear on whether coverage is provided for losses caused by a cyber event. This clarity should be provided by either excluding coverage or by providing affirmative coverage in the automobile policy. In Market Bulletins Y5258 and Y5277, Lloyd’s set out requirements for ensuring that Lloyd’s customers have clarity on coverage for cyber exposures.
On 28 October 2020, Lloyd’s requested that managing agents do not include cyber endorsements on Canadian automobile policies.
Automobile policies in Canada are governed by each province’s or territory’s regulation. Each province and territory maintain a set of regulatory approved automobile coverage wordings that insurers are required to utilise. Changes, deletions or additions to regulatory approved wordings is prohibited by provincial legal/regulatory requirements. Currently, there is no regulatory approved cyber exclusion nor cyber affirmation that can be applied to any Canadian automobile policies.
The Insurance Bureau of Canada (IBC) in their Automated Vehicle report noted “IBC anticipates that the rollout of automated vehicles will affect all auto insurance policies and supporting legislation as vehicle use will have new risks including software & network failure and hacking and cyber-crime”
And the Canadian Council of Insurance Regulators (CCIR) recent issues paper: Connected and Automated Vehicles and their Impact on the Automobile Insurance Market states: Connected and automated vehicles “… will also collect significant amounts of data, thereby creating new risks, such as cyber security and software failures” and reduction in automobile insurance premiums “could be easily managed by appropriately adapting insurance products to offer cyber and product liability coverage for automobile insurance policies”
As more Insurers require cyber certainty for their automobile business, the Canadian provincial and federal governments and regulators, insurers and other stakeholders must work together to ensure regulated automobile policies adapt to address the exposure.
What’s changed for Canadian Automobile with respect to Cyber exposure?
While the requirements set out in Market Bulletins Y5258 and Y5277 continue to apply to managing agents writing automobile business in Canada, as a result of the Canadian regulatory framework, managing agents writing Canadian automobile coverage CANNOT include the LMA model or propriety cyber endorsements within Canadian automobile policies.
Canadian stakeholders, Lloyd’s brokers and managing agents are advised that effective 1 January 2021, all Lloyd’s Canadian automobile policies will be considered to include affirmative cyber coverage. If managing agents are unable to assume affirmative cyber coverage for Canadian automobile policies, they must contact their Lloyd’s oversight manager to discuss changes to business plans.
Managing agents are still required to complete the annual attestation process to confirm that their Canadian automobile policies have been assumed to have affirmative cyber coverage.
What this means to Canadian Coverholders?
Coverholders in Canada who are currently writing or planning to write automobile insurance MUST NOT deviate from the provincial or territorial regulatory approved wordings. Furthermore, cyber wordings, either proprietary or LMA model clauses, MUST NOT be included in any Canadian automobile policies.
As a reminder, all Canadian automobile business:
- must be written as a fleet (i.e. five or more vehicles under common ownership and used for commercial or public purposes) - except for the Province of Quebec if the provincially approved Lloyd’s rules & rates are applied;
- must be written on Regulatory Approved Automobile Forms only;
- must be written via binding authorities held by approved Lloyd’s Coverholders;
- cannot be written on the open market or via lineslips - as stated in the Canada Bulletin AU-19-020; and
- must be processed through Lineage
For further information, please contact firstname.lastname@example.org.