Bystanding cyber asset

On August 16, 2022, Lloyd's Market Bulletin Y5381 required cyber policies written or renewed from March 31, 2023 to exclude state-backed cyberattacks. They also had to state clearly whether the exclusion reaches systems located outside the impacted state. In the language of the LMA 5567 clauses, a bystanding cyber asset is a computer system belonging to the insured or its third-party service providers that is not physically located in a state impacted by a state-backed cyber operation. It still suffers damage or disruption through propagation or network dependency. The question for the insurer is whether the exclusion tied to the impacted state also applies to these peripheral assets. LMA 5567A says no: paragraph 1.3 does not apply to systems outside the impacted zone. This is the bystanding write-back. It preserves cover for an insured whose assets sit abroad or in the cloud and are hit indirectly. The Hamilton variant reverses this logic. It rewrites paragraph 1.3 to exclude those third-party assets as well, which brings effective cover close to the LMA 5566 level. This is one of the most debated points of doctrine on the cyber market, because it sets the real value of the policy for multinationals and heavily cloud-dependent companies.