1. Forms
2. CY
3. CY-10-05

What the Form Is

The CY 10 05 Calculation of Premium endorsement is an Insurance Services Office (ISO) form used in conjunction with Commercial Cyber Insurance policies. Its primary purpose is to establish a clear and agreed-upon method for calculating revised premiums at each policy anniversary for policies that have a term longer than one year (multi-year policies). This endorsement ensures that the premium for ongoing coverage can be adjusted periodically, reflecting potential changes in exposure, risk landscape, or other factors as defined in the policy or endorsement.

Classes of Business It Applies To

This endorsement is designed to be used with all ISO Commercial Cyber Insurance Coverage Forms. Therefore, it can apply to a wide array of businesses and organizations that purchase multi-year cyber insurance policies. Real-world examples include:

• Financial Institutions: Banks, credit unions, and investment firms handling sensitive financial data.
• Healthcare Providers: Hospitals, clinics, and other medical facilities managing patient health information.
• Retail and E-commerce: Businesses processing online transactions and storing customer payment information.
• Technology Companies: Software developers, IT service providers, and data hosting services.
• Educational Institutions: Schools and universities holding student and employee data.
• Manufacturing Companies: Businesses increasingly reliant on interconnected industrial control systems.
• Professional Service Firms: Law firms, accounting firms, and consultants handling confidential client information.

Essentially, any organization with a multi-year cyber insurance policy that needs a mechanism for premium adjustment at anniversary dates would utilize this endorsement or a similar one.

Special Considerations

Key considerations for the CY 10 05 endorsement include:

• Multi-Year Policies Only: This endorsement is specifically relevant for cyber insurance policies written for terms exceeding one year.
• Premium Adjustment Mechanism: It formalizes the process for how premiums will be re-evaluated. The actual factors or methodology for the adjustment (e.g., based on updated revenue, number of employees, loss experience, or other risk metrics) would typically be outlined in the endorsement, the policy declarations, or a related schedule.
• Transparency and Budgeting: For the insured, this endorsement provides a degree of predictability regarding future premium calculations, aiding in financial planning. For the insurer, it allows for premium adjustments to reflect changes in the insured's risk profile over the policy term.
• Clarity is Key: It is crucial that the basis for premium recalculation is clearly understood by both the insured and the insurer to avoid disputes at the time of anniversary adjustments.

Key Information for Agents and Underwriters

• Agents: Agents should clearly explain the function of this endorsement to clients purchasing multi-year cyber policies. This includes how and when their premium might be adjusted and what factors could influence the revised premium. This manages client expectations regarding future insurance costs.
• Underwriters: Underwriters must ensure that the methodology for premium recalculation is appropriate for the risk and clearly documented. They need to define the specific metrics that will be used for adjustment (e.g., revenue, number of records, changes in security posture) and ensure these are consistently applied. Pricing considerations will involve assessing the stability of the insured's exposures over the multi-year term and determining if the planned recalculation method adequately addresses potential changes. Underwriters should also be aware of any state-specific regulations that might impact how premiums can be adjusted during a multi-year policy term, although this endorsement itself is a standard form.
• Coverage Gaps: This endorsement does not directly address coverage gaps but ensures the premium collected over time aligns with the evolving exposure. Failure to properly apply this endorsement or a lack of clarity in its terms could lead to premium disputes rather than coverage gaps.