Beeware: Just Where Is the
Natural Home for Cyber Fraud?

Insight Crime

Written by

Anthony Wright

2 min read

The 2023 film The Beekeeper centres on a sophisticated cyber-enabled fraud operation that persuades victims to transfer their life savings to criminals. While the mechanism of the fraud is technology-driven, the ultimate loss is not a network outage, privacy breach or system failure. It is the theft of money through deception. That distinction sits at the heart of an increasingly important insurance debate: is cyber-enabled fraud really a cyber risk, or is it fundamentally a crime exposure?

From both an underwriting and coverage perspective, standalone crime insurance is generally regarded as the natural home for cyber-enabled fraud. Although the attack may involve phishing emails, business email compromise, account takeover, malware or fraudulent digital instructions, the proximate cause of the loss remains a criminal act intended to misappropriate funds. The loss therefore aligns far more closely with traditional crime policy triggers than with the operational, response and liability triggers typically found within cyber insurance policies.

A key differentiator lies in policy construction. Standalone crime policies are typically written on an all-risks basis, covering financial loss arising from criminal acts unless specifically excluded. This allows crime insurers to respond to a broad range of established and emerging fraud techniques without the need for every scenario to be expressly contemplated within the policy wording.

Cyber policies, by contrast, generally address cyber-crime through specified-peril insuring clauses. Cover is restricted to the particular events, circumstances and triggers defined within those clauses. As fraud methodologies continue to evolve at a pace that often outstrips policy drafting, insureds can find themselves seeking cover under provisions that were never intended to address newer and increasingly sophisticated forms of financial crime.

The distinction becomes even more apparent when considering policy limits. Within the standalone crime market, losses arising from computer fraud, funds transfer fraud, payment diversion fraud, fraudulent instructions and other cyber-enabled thefts will often benefit from the full policy limit. Social engineering fraud is frequently the exception. Given its higher frequency, accumulation potential and dependence on human error rather than technological compromise, insurers commonly apply a sub-limit or inner limit to this exposure.

Even where social engineering cover is subject to restriction, the wider suite of cyber-enabled crime perils will typically continue to enjoy access to the main limit of indemnity. This contrasts with many cyber policies, where cyber-crime cover may be written on a narrower basis, subject to more restrictive triggers and supported by significantly lower sub-limits.

Ultimately, insureds looking for meaningful balance sheet protection against the theft or misappropriation of funds should follow the money rather than the method. The fraud may enter through a cyber doorway, but the resulting loss remains a crime loss at its core. For that reason, crime insurance remains the natural hive for cyber fraud exposures, while cyber policies can often be better suited to addressing the operational and liability consequences of a cyber event.

Anthony Wright

With 20 years of experience in financial lines insurance, Anthony brings deep technical expertise with a relationship-led approach. He has held roles at several major insurers, where he built specialist knowledge across a wide range of financial lines products.

Drawing on this solid technical foundation, he has successfully supported business growth within the Midlands market, with a particular focus on Management Liability, Crime and Pensions products.

Today, as a Senior Underwriter and product manager at MPR, Anthony continues to deliver expert insight and technical knowledge, with a commitment to building strong, trusted broker partnerships.