U.S. Justice Dept. Offers Guidance for Delayed Reporting Under SEC Cyber Rules
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With the Dec. 18 effective date of the U.S. Securities and Exchange Commission’s (SEC) cyber incident reporting rules looming, federal officials have offered guidance on when it may approve delays in the interest of national security.
The SEC cyber rules, adopted this past July, give publicly traded companies four days to disclose the occurrence of a “material” cyber event via regulatory filing. The U.S. Department of Justice and the FBI gave examples of scenarios that may warrant delay.
“The primary inquiry for the Department is whether the public disclosure of a cybersecurity incident threatens public safety or national security, not whether the incident itself poses a substantial risk to public safety and national security,” stated the Justice Department. “While cybersecurity incidents themselves frequently threaten public safety and national security, the disclosure to the public that those incidents have occurred poses threats less often.”
These “limited circumstances” would apply to cases in which a company “reasonably” suspects the event occurred because of a tactic with no known mitigation—for example, an as-yet-unpatched software vulnerability.
Another example given included impacts to events impacting systems containing sensitive government information.
“This category includes systems operated or maintained for the government as well as systems not specifically operated or maintained for the government that contains information the government would view as sensitive, such as that regarding national defense or research and development performed pursuant to government contracts,” said the Department. It also highlighted events involving public companies performing remediation efforts for critical infrastructure or critical systems.
The FBI “strongly” encouraged companies to quickly contact federal officials as soon as they determine an event could threaten national security or public safety.
“This early outreach allows the FBI to familiarize itself with the facts and circumstances of an incident before the company makes a materiality determination,” said the agency. “If the victim of a cyber intrusion engages with the FBI or another U.S. government agency, this engagement doesn’t trigger a determination of materiality. However, it could assist with the FBI’s review if the company determines that a cyber incident is material and seeks a disclosure delay.”
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2024 General Liability Insurance – Market Outlook
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Rising claim frequency and severity have generated hardening conditions across the general liability insurance segment in recent years, prompting ongoing rate increases, stringent underwriting standards and limited capacity. Fortunately, insurance carriers experienced slightly better underwriting results in 2022-23, paving the way for rate moderation. Nonetheless, several concerning trends across the segment—including rising litigation concerns, increasing medical expenses, and heightened risks related to per- and polyfluoroalkyl substances (PFAS)—still have the potential to threaten claim costs and negatively impact overall market performance. As such, policyholders can anticipate another year of modest premium increases in 2024. Additionally, insureds who operate in sectors with elevated liability risks may be vulnerable to larger rate hikes and face difficulties obtaining higher coverage limits.
Developments and Trends to Watch
- Litigation concerns—As social inflation drives up the frequency and severity of insurance claims, businesses face a growing number of lawsuits following liability incidents (actual or alleged) and, in turn, greater penalties from such legal action. One of the main factors influencing social inflation issues in the liability market is the rise in nuclear verdicts (jury awards exceeding $10 million). According to independent public relations firm Marathon Strategies, the five years leading up to the COVID-19 pandemic saw the total sum of nuclear verdicts increase by 178%. Although these awards decreased in 2020 due to pandemic-related court closures, they skyrocketed in the following years; the average nuclear verdict nearly doubled from $21.5 million in 2020 to $41.1 million in 2022. Altogether, litigation shifts and social inflation issues have largely contributed to elevated general liability insurance claim costs, increasing the risk of coverage gaps and out-of-pocket expenses.
- Increased medical expenses—Coverage for medical costs stemming from third-party injuries is a critical component of general liability insurance. Consequently, surging medical expenses have compounded claim costs in the segment throughout the past few decades, with no end in sight. According to the U.S. Bureau of Labor Statistics (BLS), the total value of medical care has jumped by 115.1% since 2000. However, it’s worth noting that inflation among overall goods and services began exceeding medical inflation in 2023, evidenced by monthly consumer and producer price index data from the BLS. This is a rare occurrence, as medical care and health spending generally outpace growth across the rest of the economy. Regardless, surging medical expenses will likely continue playing a role in elevated general liability insurance claim costs going forward.
- PFAS exposures—PFAS consist of a large grouping of chemicals that have been widely manufactured and utilized within different products and packaging across the United States since the 1940s. Over the past few years, PFAS have been the subject of increased regulatory scrutiny stemming from emerging developments regarding the health and safety of these substances. Although some types of PFAS have faced regulatory action in the past, the federal government recently implemented multiple efforts to limit overall PFAS usage and exposure in the coming years and beyond. Apart from federal legislation, 15 states currently have PFAS-related restrictions in place, while New York and New Jersey have already listed these chemicals as hazardous substances in their regulatory regimes. This legislation has contributed to a rise in litigation against businesses that are found responsible for causing PFAS exposure and related ailments via their products and packaging. As regulatory pressures and litigation concerns related to these chemicals press on, businesses that leverage PFAS may experience elevated liability exposures. Further, businesses facing PFAS-related incidents could be more susceptible to coverage exclusions and substantial out-of-pocket losses.
Tips for Insurance Buyers
- Educate yourself on key market changes affecting your rates and how to respond using loss control measures.
- Ensure your establishment has measures in place to reduce the likelihood of customer or visitor injuries.
- Create workplace policies and procedures aimed at minimizing PFAS exposures. Consult legal counsel to ensure compliance with applicable PFAS legislation.
- Examine your general liability coverage with trusted insurance professionals to ensure your policy limits match your insurance needs.
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Understanding Protective Safeguards Endorsements (PSEs)
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When it comes to property insurance, it’s not just about securing a policy; it’s about fully understanding its nuances to ensure you have the highest level of protection for all your assets. In some cases, misunderstanding the details of your property coverage can mean the difference between safeguarding your investments and costly oversights.
One often overlooked policy detail is the protective safeguards endorsement (PSE). These endorsements, embedded within many commercial property policies, stipulate specific safety and security measures businesses must uphold. Failure to adhere to these measures can leave your property vulnerable and lead to insurers denying claims when disaster strikes. As such, business owners and property managers must recognize, understand and actively maintain the conditions set by PSEs to ensure the integrity of their insurance coverage and the safety of their commercial property.
What Are Protective Safeguards Endorsements?
In property insurance, PSEs are conditions of coverage requiring policyholders to ensure that specific protective devices and services are installed, maintained and in proper working order. Regarding property insurance, common examples of PSEs include automatic sprinkler systems, automatic fire alarms, burglar alarms, leak detection systems, security services and surveillance systems. If the PSE conditions are not met, the insurer will likely not pay for losses incurred.
For example, if a fire damages a restaurant and a subsequent investigation finds that the sprinklers weren’t functioning properly, an insurer can deny coverage due to a PSE.
The common types of PSEs added to a commercial property policy include:
- Fire protection system endorsement—An endorsement stating losses resulting from fire will not be covered by the insurer if fire alarms, sprinkler systems and other fire prevention systems are not in use or maintained.
- Security systems endorsement—States that security equipment like closed-circuit television (CCTV), motion sensor devices, weapon detection systems and intruder alert notification systems must be operational and retained. It may also require a service contract with security personnel.
- Water detection systems endorsement—Requires the use and upkeep of water detection equipment like water sensors and leak detectors in areas where water damage can occur, including toilets and laundry areas.
- Heating system endorsement—Requires insureds to utilize and maintain hot water radiators, furnaces and boilers, solar heaters and similar devices.
- Automatic commercial cooking exhaust and extinguishing system endorsement—Requires commercial kitchens in the food service industry to operate and maintain automatic fire extinguishers, hood exhaust fans and wet chemical systems.
Implications for Policyholders
PSEs have a variety of implications for policyholders. Chiefly, if an insured has a PSE in their policy, they are responsible for:
- Monitoring protective devices and keeping them in proper working order; and
- Notifying the insurer promptly of any malfunction or impairment of protective devices or services listed in the PSE over which they have control.
Beyond these obligations, there are a number of benefits to PSEs. Notably, since PSEs encourage loss prevention measures, they can positively impact the cost of premiums. In many states, insurers provide a premium discount or credit when such an endorsement is attached to a policy.
Key Considerations for Policyholders
There are essential considerations for policyholders when dealing with PSEs:
- Compliance with endorsement—Policyholders need to meet the conditions of the endorsement to prevent claims denial.
- Periodic inspections—Some endorsements may require regular inspections of protective devices and services.
- Ongoing maintenance—Having protective devices serviced at recommended intervals is necessary to comply with PSEs. Building owners and landlords may need to clarify in their agreements which party is responsible for maintenance duties and how to keep detailed records of maintenance activities.
- Notification responsibility—PSEs mandate that insurers be promptly informed when protective devices are suspended or turned off, even for repairs. It’s essential for policyholders to establish protocols—like where and how to send notices—for proper notification.
- Understanding potential impairments—To ensure that all listed systems, devices and services remain functional, it may be necessary for property owners and tenants to consult experts, such as system vendors or engineers, to learn how non-impairment can be maintained.
- Communication with insurer and broker—Insureds should maintain open dialogue if any change is made to systems or if they have concerns about compliance.
Conclusion
Commercial property insurance policies that have PSEs impose additional duties on insureds. To avoid the hassle of being denied coverage, ensure that protective devices and services are well-maintained and functioning as intended, and notify insurers immediately if these are suspended or impaired.
By taking these necessary steps, property owners, managers and tenants can better protect their interests and ensure they have the coverage they need when it matters most.
Contact us today for more information.
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Mental Health Minute
This article is from RISQ Consulting’s Zywave client portal, a resource available to all RISQ Consulting clients. Please contact your Benefits Consultant or Account Executive for more information or for help setting up your own login.
Stress and anxiety is bound to creep into your life no matter the mitigation. When it does, you can prepare yourself with simple and quick techniques to sooth the impact and recover quicker.
How Can Grounding Techniques Help Manage Feelings?
Grounding is a practice that can help you manage experiences such as flashbacks, unwanted memories or negative emotions. These techniques involve focusing on the present to distract yourself from anxiety and other challenging emotions.
Physical Grounding Techniques
Physically grounding yourself involves using your senses to help you navigate feelings of distress. A technique to physically ground yourself is to put your hands in water and focus on the temperature of the liquid or switch from cold water to warm water and back while focusing on the present moment.
Other physical grounding exercises include deep breathing, savoring food or drink, picking up nearby objects and moving your body (e.g., walking, running in place or doing jumping jacks).
Mental Grounding Techniques
You can mentally ground yourself with exercises that prevent mental distractions and help redirect your thoughts to the present.
Such exercises include memory games, category-thinking (e.g., listing all the types of cake you can think of), reciting a song or book passage you know by heart, and visualizing a daily task you enjoy.
Soothing Grounding Techniques
Soothing techniques can be used to comfort yourself in times of high anxiety or distress. These techniques are intended to promote good feelings that reduce or distract from negative emotions.
You can practice soothing techniques by picturing the face of someone you love, repeating compassionate phrases about yourself, spending time with your pet, visualizing your favorite place or listing positive things.
Conclusion
Grounding techniques can help you manage unpleasant experiences like distress, anxiety, traumatic nightmares and flashbacks. Try these exercises to reduce distress when you first start to feel negative emotions.
Try These Mood-boosting Activities
Negative emotions and disappointments can easily derail your activities. Although it’s common to be in a bad mood occasionally, letting negative emotions take over your day can leave you feeling worse. Instead of ignoring a bad mood, try a mood-boosting activity.
Free Mood-boosters
- Walking outdoors is a great activity for improving your mood. Spending time outdoors and being in sunlight have both been proven to boost mood. Additionally, walking can release endorphins, which ease stress and discomfort.
- Find ways to laugh, such as watching funny videos, sharing jokes with a friend, going online or watching comedians.
- Try aromatherapy to de-stress. Smells can trigger positive memories and help relieve anxiety or stress. Find your favorite scented soap, smell something that reminds you of a loved one or sample a new essential oil.
- Play cheerful and upbeat music. This can help boost your mood, ease tension, reduce anxiety and even improve certain brain functions, such as memory.
- Do something nice for somebody else, such as a co-worker or friend. Being compassionate to others can make them feel better and may improve your mood as well. Consider small favors, such as doing chores for your housemate or partner, walking a neighbor’s dog or helping a stranger with their groceries.
- Talk to people in your life who uplift you. A short call or time spent with a loved one can help you reduce tension. As a bonus, your loved one may be able to make you laugh, take your mind off your troubles or remind you that you’re not alone.
Conclusion
The next time you’re in a bad mood, try one of these free mood-boosting activities to reduce stress and lessen the impact of negative emotions.
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Protecting Your Business From Power Surges
This article is from RISQ Consulting’s Zywave client portal, a resource available to all RISQ Consulting clients. Please contact your Benefits Consultant or Account Executive for more information or for help setting up your own login.
Power surges, which are sudden spikes in electrical voltage, can wreak havoc on business equipment and systems. While they may seem like minor inconveniences, power surges can have a significant impact on a business’s bottom line. This article explores the dangers of power surges, effective strategies to shield businesses from their effects and the crucial role of insurance in safeguarding their assets.
What Causes a Power Surge?
A power surge happens when there’s a sudden increase in electrical voltage in a building’s electrical system or the electrical grid. These voltage spikes are caused by different factors, like lightning strikes that discharge massive amounts of electricity into the grid or directly into buildings. Electrical grid fluctuations, such as changes in demand or power line switching, can also cause surges. Internally, power surges can happen when there’s faulty wiring, malfunctioning appliances, or when power-hungry equipment like heating, ventilating and air conditioning systems and large motors start up. These surges can spread throughout the electrical system, potentially damaging connected devices and equipment.
Identifying the various sources of power surges is important to ensure effective surge protection in commercial settings.
The Impact of Power Surges on Business Operations
The impact of power surges on business operations can be substantial and far-reaching. Financially, power surges can lead to extensive costs, including equipment damage or replacement expenses and downtime, resulting in lost productivity and revenue. Beyond the financial implications, surges can inflict reputational damage on a business, eroding customer trust and partnerships due to frequent disruptions and equipment failures. In essence, power surges have the potential to disrupt normal business operations, strain resources and harm a company’s reputation, making them a critical concern for businesses of all sizes and industries.
Strategies to Protect Against Power Surges
To protect against power surges, businesses can utilize the following effective strategies and tools:
- Surge protection devices (SPDs)—These devices should be installed at critical points in the electrical system to divert excess voltage away from sensitive equipment and prevent damage. It’s advisable to install SPDs throughout different areas of a building. The three primary zones for protection are service entrance SPDs, distribution panel SPDs and point-of-use SPDs. Service entrance SPDs prevent surges from entering the building, while distribution panel SPDs limit the spread of surges to downstream areas. Point-of-use SPDs offer targeted protection for specific assets.
SPD installation should comply with the manufacturer’s recommendations. SPDs need to be properly sized and grounded to protect equipment.
- Uninterruptible power supply (UPS)—A UPS is a type of device that powers equipment nearly instantaneously in the event of grid power failure, protecting the equipment from damage. Implementing a UPS can provide a temporary power source during surges or outages, allowing for safe equipment shutdown.
- Grounding and bonding—Proper grounding and bonding of the electrical system can reduce the risk of surges caused by electrical faults.
- Regular electrical maintenance—Regular inspections and maintenance can help identify and address potential issues before they lead to surges.
- Employee training and awareness—Educating employees about power surge risks and establishing protocols for immediate response can minimize damage and downtime in the event of a surge.
By adopting these strategies and tools, businesses can significantly enhance their protection against power surges and avoid potential financial and operational disruptions.
The Role of Commercial Property Insurance
Even though preventive measures are essential, power surges can occur unexpectedly, and accidents can happen. However, there is good news for businesses. Commercial property insurance policies and appropriate endorsements can help cover the financial losses that result from power surges. Here are some of the benefits of such coverage:
- Equipment replacement coverage—Insurance can cover the cost of repairing or replacing damaged equipment.
- Business interruption coverage—If power surges cause downtime, insurance may compensate a business for lost income during that period.
- Spoiled inventory coverage—Insurance may cover the cost of spoiled inventory that results from power outages.
Conclusion
To ensure smooth operations, businesses should take proactive measures to protect against power surges. This can be achieved by implementing surge protection strategies and acquiring the appropriate insurance. By doing so, businesses can safeguard their assets and maintain productivity even when faced with power surges.
Contact us today for additional guidance on commercial property risks.
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Stronger Hurricanes to Put More Properties at Risk
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Over 13.4 million properties not currently exposed to hurricane-force wind damage will face increased risk over the next 30 years as climate change propels more intense storms, according to new research from First Street Foundation.
“Compared to the historic location and severity of tropical cyclones, this next generation of hurricane strength will bring unavoidable financial impacts and devastation that have not yet been priced into the market,” said Matthew Eby, founder and CEO of First Street, a nonprofit research and technology group.
First Street’s models also estimated the average annual loss due to tropical cyclone damage rising to $19.9 billion, with about $1 billion in higher exposure in Florida alone.
Other regions that face lower exposure now will be even more at risk in the future, First Street warned. The study projected losses in the Northeastern United States to increase by 87% over the next three decades as hurricanes track further north.
“The northward increase in hurricane activity may significantly impact buildings that have not been built to a code that considers the wind speeds they will likely face over the next 30 years,” researchers said. “Additionally, the count of properties with any average annual loss from wind will increase by about 55%, with about 2.2 million newly-impacted properties by 2053.”
The total number of storms isn’t expected to change, but the intensity will, according to the report. Historical evidence already illustrates rising risk: The proportion of major hurricanes (Categories 3, 4, and 5) has quadrupled since the 1980s, from 10% of all tropical cyclone events to over 40% today. First Street attributed the change to rising air and sea-surface temperatures fueling storms, as well as increased moisture levels in the air and shifts in wind patterns.
“Hurricanes affect communities within the United States more frequently and severely than other natural disasters,” said First Street in the report. “As a result, tropical cyclones have caused a total of $1.194 trillion (consumer price index-adjusted) in losses in the United States between 1980 and 2022, with an average cost of approximately $21 billion per event.”
Understanding evolving risk can help insurers set property rates more accurately, assist communities in developing resiliency plans and allocating resources, and give property owners information on how to better protect themselves and their homes and businesses, First Street said.
For more risk management news and insights, contact RISQ Consulting today.
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