Financial Executives Struggling With Cyber Insurance Cover

A new report has laid bare the level of misunderstanding in the industry with regards to the depth of cover provided by cyber insurance. In a study conducted by FM Global, over 100 senior financial executives working for some of the largest companies in the world were questioned on the specifics of their cyber insurance cover in the event of a security incident, with seven out of ten believing that their policy would cover losses that aren’t typically covered by insurance.

Whilst some of these aspects of income loss are covered by a typical cyber insurance, several statistics stick out which are particularly alarming. For example, 45% of CFOs expect their insurers to cover most losses after an attack, with 26% expected that all of their losses would be covered.

Some of the financial losses that executives expected to face as a direct result of a cyber attack on their businesses included:

• Damage and deterioration to the company’s brand or reputation
• Increasing levels of scrutiny from the investment community
• Lessened revenue and earnings
• Decline in market share and share price
• Introduction of regulatory compliance problems

A typical cyber insurance policy would offer Business Interruption cover, offering financial assistance in the aftermath of an attack to get the affected company back on track, and some providers offer protection for reputation, offering PR support and crisis management to deal with the public effects that an attack can have, i.e. damage to public image, trust etc.

However, several of the potential losses mentioned above are not typically covered by insurance, let alone a cyber policy. Decline in market share and share price is not a standard component of cyber cover, alongside protection from any regulatory compliance issues and issues with any investment communities.

It points to a misunderstanding of the core components of cyber insurance, and a need for financial executives to improve their knowledge of what cover they actually have when purchasing cyber cover.

“As essential as cyber insurance is, the findings indicate financial executives may be deriving a false sense of security from it,” said Kevin Ingram, executive vice president and chief financial officer at FM Global. “While insurance is an essential part of the risk management formula, there are losses related to a cyber-attack that insurance cannot cover—like damage to a company’s reputation, lost market share, missed growth opportunities, decreased valuation, and losses stemming from increased cost of capital. That’s why we’re so committed to helping our clients prevent loss in the first place.”