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Andrew Hill, of Hill Dickinson, explores the cyber threats that are increasingly being faced by the shipping industry and considers whether, in view of these emerging risks, traditional insurance will cover losses arising from such risks.

 

Cyber risks (ie those risks arising out of the use of technology and data) have become an everyday part of the risk landscape for most industry sectors. While the financial, health, retail and hospitality sectors (which have embraced technology for many years) have been particularly vulnerable to cyber attacks, the shipping industry appears to have been less affected. As the methods of attack become ever more sophisticated, however, and cyber attacks for political and terrorist objectives increase, is the shipping industry increasingly going to become a target?

 

Cyber attack

 

Use of technology and data in the shipping industry

 

The shipping industry is a sector steeped in tradition. There has, however, been a shift in recent years towards the use of technology to facilitate business operations. There is, perhaps, no clearer example of this than in navigation. Most ships now rely on automated navigation, eg global positioning systems (GPS), automatic identification systems (AIS) and electronic chart display and information systems (ECDIS). While such technology brings undoubted benefits, the systems on which the industry increasingly relies may be vulnerable to cyber attacks, which could have significant consequences.

 

Cyber security

 

For organisations taking a proactive approach to the emergence of cyber threats, a cyber risk mitigation strategy invariably forms a crucial element of risk management. While robust computer network security and data protection (such as regular patching and encryption of data) are an essential part of any cyber security defence programme, often not enough emphasis is placed on the "human risk". Employee error and deliberate acts still account for the majority of cyber incidents. Educating employees to use technology safely and securely can significantly reduce the risk of a cyber incident. A disaster recovery plan that caters for a variety of cyber incidents (eg a ransomware attach, business interruption and/or a data breach) and which has been properly stress-tested is also advisable.

 

Cyber insurance and traditional lines of insurance

 

Depending on the specific business, companies in the shipping sector might traditionally have marine hull insurance (mainly property damage); marine war (war perils excluded from marine hull cover); P&I liability/marine liability (liability); loss of hire insurance (business interruption); and kidnap and ransom insurance, among other products.

 

Whether there is any cover available for first party (ie an organisation's own losses) or third party ie liabilities to third parties) cyber perils in "traditional" policies such as those mentioned above will depend on the specific language used in the policy. As a general rule, however, "traditional" policies are unlikely to cover all losses arising out of cyber risks.

 

This is an extract of the full article by Andrew Hill, of Hill Dickinson. This first appeared in Maritime Risk International, September 2017.

 

The full article can be accessed on i-law.com with a subscription >

 

 


i-law.com brings you more on the topic of cyber crime in the shipping sector:

 

Battling cyber crime in ports and at sea

Peregrine Storrs-Fox, of the TT Club, provides an overview of the cyber-crime risks in the shipping industry

Maritime Risk International, March 2017

 

Time to catch up

Matthew Montgomery of Holman Fenwixk Willan LLP, asks how the insurance industry can catch up with the threat within the shiping industry and how shipping companies can best protect themselves against cyber attacks

Maritime Risk International, March 2017

 

Glencore International AG v MSC Mediterranean Shipping Co SA

Carriage of goods by sea - Bill of lading providing for bill to be surrendered in exchange for the goods or a "Delivery Order" - Carrier providing shipper's agents with "Release Note" containing PIN code - Whether "Release Note" was a "Delivery Order" - Goods misappropriated - Whether carrier in breach of contract.

Lloyd's Law Reports, [2017] 2 Lloyd's Rep 186

 

Cyber security at sea - the risks and consequences

David Thompson, of the UK P&I Club's Signum Services, discusses the risks around cyber security and maritime payment diversion fraud

Maritime Risk International, January 2017

 

Time to take stock of cyber risks

The maritime and broader logistics industries have, until recently, been viewed as relatively "low risk" from a cyber threat due, in part, to their cautious adoption of technology. Like in many other industries, however, organisations within the maritime sector are becoming increasingly "digitised" as technical solutions improve efficiencies.

Maritime Risk International, October 2017

 

How to mitigate your risk

Shipowners and operators have consistently looked to technology to better serve their customers, reduce operating costs and increase their profits. However, progress has a price; one that is often unforeseen. While digitalisation has undoubtedly brought with it multiple opportunities for the shipping industry, it has exposed all businesses to the threat of cyber attack. 

Maritime Risk International, October 2017

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