Cyber Insurance: Preparing for the Inevitable

In today’s digital age, cyber threats are a stark reality for businesses of all sizes. From data breaches to ransomware attacks, no organization is immune to these potentially devastating events. This article will delve into some major areas of cyber insurance, highlighting its crucial role in modern risk management strategies.

Cyber insurance plays a pivotal role in addressing and mitigating the consequences of cyber incidents, outlining four essential roles.

1st Party Damage

• Forensic Analysis: Costs to hire forensic experts to investigate and understand the breach.
• Legal Guidance: Expenses for legal consultants to navigate breach response laws and customer notifications.
• Credit Monitoring: Costs of providing credit monitoring to affected customers.
• Public Relations: Expenses to restore public trust in your organization.
• Cyber Extortion: Fees related to ransomware attacks under specific conditions.
• Business Interruption: Loss of revenue, customers, and system recovery costs due to a successful attack.

3rd Party Damage

• Re-issuing of Credit Cards: Costs borne by financial institutions.
• Stolen Intellectual Property: When your breach affects a third party.
• Stolen Licensed Property: Disclosure of licensed property after the breach.
• Stolen Documents: Including libelous/slanderous content about a third party.

• System Improvement: Costs for vulnerability fixes and system redesign
• Hardware Damage: Damage to physical hardware.
• Mental Distress: Executive, employee, or customer distress.

The application process for cyber insurance involves submitting information on risk, data, security, and more.

• Policy Selection: Define the coverage you need.
• Industry and Revenue: Share your industry and annual revenues.
• Data Handling: Describe the type and volume of data you manage.
• Security Measures: Provide details on firewalls, system updates, encryption, and more.
• Device and Employee Policies: Explain your policies on third party and employee devices.

After obtaining cybersecurity insurance, individuals and businesses aim to avoid using it by maintaining strong security measures. Insurance providers typically require minimum-security controls such as MFA, EDR, encryption, backups, awareness training, patch management, email filtering, access controls, network segmentation, BCP/DR/IR plans, and more. Some insurers even offer cyber assurance security tools to reduce the risk of an attack.

A cyber insurance firm reported a sharp rise in claims during H1 2023, attributing it to increased damages from cyberattacks. Ransomware, accounting for 12% more claims than the previous year, was a major driver of this surge. May recorded the highest number of ransomware claims ever in Coalition’s history. Large firms with revenues over $100 million experienced a 20% uptick in cyber incidents. Funds transfer fraud claims increased by 15%. However, business email compromise claims decreased by 15%, providing a rare positive note. Cyber insurance is a rapidly expanding industry, predicted to reach $50 billion by 2030.