1. Forms
2. CY
3. CY-20-05

What the form is

The CY 20 05 Agreed Value For Business Income endorsement is designed to modify the valuation method for business income losses covered under a cyber insurance policy. Instead of calculating the actual loss sustained, this endorsement allows the insured and insurer to agree upon an hourly amount for business income loss prior to any incident. This pre-agreed value is then used to determine the amount payable for business interruption caused by a covered cyber event, as described in the endorsement.

Classes of business it applies to

This endorsement is relevant for businesses that purchase cyber insurance and want a more predictable and streamlined process for business income loss claims. It can be particularly useful for:

• Businesses where quantifying the exact hourly business income loss after a cyber incident could be complex or contentious.
• Organizations that prefer to have a predetermined understanding of their business income coverage to facilitate financial planning and recovery.
• Service-based industries or other businesses where income is closely tied to hourly operations. For example, a consulting firm that bills by the hour or an online retailer whose revenue is directly impacted by website downtime could benefit from an agreed hourly value.

Special considerations

Key considerations for using this endorsement include:

• Accurate Valuation: It is crucial for the insured to accurately determine and agree upon an hourly value that truly reflects their potential business income loss. Underestimating this value could lead to insufficient recovery, while overestimation might result in higher premium costs.
• Policy Integration: This endorsement must be used with specific ISO Commercial Cyber Insurance Policy coverage forms, namely CY 00 10, CY 00 11, CY 00 12, or CY 00 13.
• Documentation: The agreed hourly amount will be specified in the endorsement or declarations, forming a clear basis for claim settlement.
• Review and Updates: Businesses should periodically review the agreed value to ensure it remains appropriate as their revenue and operational structure change over time.

Key information for agents and underwriters

Agents and underwriters should consider the following:

• Risk Assessment: The agreed value should be substantiated by the insured's financial records and a realistic assessment of their hourly income exposure from cyber-related disruptions. Underwriters will need to assess the reasonableness of the proposed agreed value in relation to the business's operations and revenue streams.
• Pricing: The agreed value will likely influence the premium for the business income portion of the cyber coverage. A higher agreed value may lead to a higher premium.
• Coverage Clarity: This endorsement can simplify the claims process for business income loss by removing the need for extensive post-loss calculation and potential disputes over the amount of loss. However, it's important to ensure the client understands that this agreed value applies specifically to business income and how it interacts with other policy terms and limits.
• Suitability: Agents should discuss with clients whether an agreed value approach is suitable for their specific needs compared to a traditional actual loss sustained valuation for business income.