PREVIEW:
Personal policies for health, auto, and homeowners’ insurance show how each of us use insurance to minimize our financial risks. Likewise, with cybercrime costing organizations around the world $2 trillion in 2019,1 organizations are acquiring cyber insurance to prevent game-ending financial impacts from data breaches, business opportunity lost to denial of service, cyber extortion from ransomware, phishing that empties bank accounts and other threats. To counter these risks, today’s organizations are paying annual gross insurance premiums of $2.5 billion. 2
By 2025, the cyber insurance market is expected toreach $20 billion.3 Returning to personal insurance, if you’ve ever had to make a claim against any of your insurance policies, you may have found unexpected limitations in your policy’s coverage or problems that cause delays receiving payments for damages. There are even more complications for cyber insurance policies. Unlike the insurance you are familiar with, standard forms of cyber risk coverage have not emerged yet. The terms and language can vary for each insurer and policy.4
The murkiness of cyber insurance coverage erupted with a 2018 $100 million lawsuit filed by Mondelez International against its cyber insurance provider, Zurich American for failure to cover damages it suffered during the 2017 NotPetya cyberattack. The insurer claimed “the losses are exempt from coverage because NotPetya occurred during “time of peace” in “warlike” fashion.5
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1 Matt Powell, 11 Eye Opening Cyber Security Statistics for 2019, CPO Magazine, June 25, 2019,
https://www.cpomagazine.com/tech/11-eye-opening-cyber-security-statistics-for-2019
2 Insurance 2020 & beyond: Reaping the dividends of cyber resilience, PWC.com https://www.pwc.com/gx/en/industries/financial-services/publications/insurance-2020-cyber.html
3 Samantha Ann Schwartz, 96% of insurers bundle cyber into commercial offerings, report finds, CIODIVE, February 19, 2020.
4 Scott Seaman and Jason Schulze, Allocation of Losses in Complex Insurance Claims (Thompson Reuters, December 2017). See Section 17.4 Cyber Risk Insurance Policies and Endorsements.
5 Samantha Ann Schwartz, Cyber insurance adoption lags as businesses require convincing, CIODIVE, January 28, 2019