Internet Risk Kevin Rooney General Reinsurance Krooneygenre com

Internet Risk Kevin Rooney General Reinsurance Krooney@genre. com

Date Issue Copyright © 1999, The Industry Standard

Outline • New or Increased Risks – Security /operational integrity – Content – Function / technology E&O • Traditional coverage • Specialty coverage • Factors for Actuaries to Consider

New LOB or Exposure?

Not Just Priceline & Amazon. . . • e. Commerce business model risks • Technology & Internet-enabling risks • Standard commercial risks using internet to varying degree: clicks & bricks • Personal Home Pages - Home-owners • Another way to segment is by Activity: – Access, Presence, Integration, e. Commerce

What are the risks? • Security /Operational Integrity • Content • Function / Technology E&O

Security Risks • Theft & Extortion: Outsider or insider can steal things or copy secrets, use them or threaten to reveal them publicly. • Business Income: Outsider or insider, maliciously or not, can interrupt your business. • Liability: – Downtime - interruption can lead to failed obligations – Negligent Netizen - pass virus, launchpad

Security Perils 1 st party • • Information Theft Malicious Code Denial of Service Repudiation Access Violations Programming Errors Social Engineering 3 rd party

Content Risks • Infringement - Trademark, Trade Name, Trade Dress & Copyright • Privacy / Publicity • Defamation - Libel Slander • Content E&O • Regulatory

Trademark Infringement • • • Domain Names Cybersquatting Metatags Typo-jacking Keying Traditional Infringement: Confusion, incl. Initial Interest Confusion • 1995 Trademark Dilution Act: Famous marks protected from dilution & tarnishment • 1999 - Anticybersquatting Cons. Prot. Act protects mark holders against bad faith intent to profit actors

Copyright Infringement • "Literary, " "Musical, " "Graphic" & other categories are copyrightable • Exclusive rights of the copyright holder reproduce, prepare derivative works, distribute, perform or display publicly • Direct, Contributory, Vicarious • DMCA - protects ISP’s

Privacy • Law unsettled, Plaintiff’s Bar grabbing at straws – DTPA – Anti-Stalking, etc. • FTC • Emotional Issue, teed up to get ugly

Jurisdiction • Interstate rules established; modification to online fairly well jelled • International - who knows? – Need to study local laws of all countries in world. – E. g. - UK Libel-tourism

Outline • New or Increased Risks – Security /operational integrity – Content – Function / technology E&O • Traditional coverage • Specialty coverage • Factors for Actuaries to Consider

Traditional Coverage • CGL - fair amount of (at least arguable) coverage - P&AI, PD loss of use – seemingly arbitrary applied to this space • Property - physical damage to covered property from a covered peril -- safe? – AMERICAN GUARANTEE & LIABILITY v. INGRAM MICRO, INC

Lose / Lose Proposition • Standard coverage mismatched with modern world • Consumers face uncertainty - consumers lose • Loss costs will rise - insurers lose • Cries out for change

Outline • New or Increased Risks – Security /operational integrity – Content – Function / technology E&O • Traditional coverage • Specialty coverage • Factors for Actuaries to Consider

Market Evolution of Platforms: • PI & advertising injury (GL), property and business interruption and crime • Miscellaneous E&O, media, tech E&O • Elimination of media exclusion, • Addition of worldwide coverage • Dedicated internet policies • Multi-line • Aimed at riskier and/or larger end of spectrum

Outline • New or Increased Risks – Security /operational integrity – Content – Function / technology E&O • Traditional coverage • Specialty coverage • Factors for Actuaries to Consider

What’s Next? • Amazon. Com, e. Bay, e*trade - specialty? • Large swath of “standard” commercial? – Will this mean risk is ubiquitous, therefore swallowed up by standard policies? – Or are exposures too unique for that platform, spawning new standalone products?

Observations • A lot of interest, negligible demand – Awareness issue? • An Exposure and a new LOB • Many challenges: – Underwriting: “E&O Like” – Rating - black hole – Jurisdiction - crossing their fingers – Technology - what’s a secure socket? • How big of a deal is all of this? ? ?

Internet Risk Kevin Rooney General Reinsurance Krooney@genre. com