Cybersecurity insurance, adapting to a changing need

January 18, 2024

The constant technological advancement, along with the increase in cyber threats and the ever-increasing frequency of cyberattacks, especially in recent years, have made clear that organizational cyber security management cannot rely solely on risk mitigation measures.

In addition, the widespread media coverage of these attacks, especially when they result in serious impacts to organizations, has further highlighted the need for more proactive cyber security actions.

Awareness of Cyber Security threats has been on the rise and data privacy regulations have placed the burden on companies to manage their cyber exposure.

Cybersecurity insurance should not be considered a single solution, but part of a comprehensive cyber security strategy that includes preventative measures and incident response.

Cybersecurity insurance to cover the consequences of an incident

It is therefore becoming increasingly common for companies of all sizes, sectors, and regions of the world to choose to share the risk with a third party. Risk sharing can be implemented through cyber insurance to cover the consequences of an incident, or through outsourcing to prevent the risk from materializing.

Cyber insurance policies Cyber insurance can cover a wide range of security incidents, including:

System malfunction.
Data breach.
Loss of data integrity or availability.
Human error.
Malicious activity.

These and other incidents can cause financial losses, legal sanctions, business interruptions, network damage, reputational damage, etc. in the affected organizations.

✅ In 2017 Equifax suffered a massive cyberattack that exposed the personal data of approximately 147 million people. As a result, the company faced lawsuits and a significant loss of trust from its customers.

Equifax had cyber insurance that helped them mitigate the costs associated with the incident. The insurance covered the costs of forensic investigation, notification of those affected, credit monitoring services, and liability. The cyberinsurance also provided crisis management and reputational recovery assistance to the company.

The incident highlighted the importance of Cyber Security in business and demonstrated the value of having cyber insurance.

Cyberinsurance coverage

Cyber insurance coverage can differ depending on regulatory constraints, market practices, the business strategy of each insurer and the needs of the insured.

It is generally to cover costs associated with recovery after an incident, such as data restoration, damage mitigation, legal expenses and even ransom payments, in cases of ransomware attacks.

The terms, as well as the conditions and exclusions of each cyber insurance policy are detailed in an insurance policy document that can stand alone or can be part of other broader policies of the o organization .

Businesses can turn to cyber insurance as a financial protection measure and as an aid in their recovery, following a security incident.

Cyber insurance, unlike any other type of insurance, is constantly and rapidly evolving, and the data obtained from claims from ten years ago is not necessarily indicative of risks within the next ten years. In addition, it would need to be determined whether and how policy payouts influence both the attacker behavior and the frequency of the cyberattacks.

Risk assessment and prevention protocols

Insurance companies are seeing the need to adopt an approach that allows them to be more proactive, forward-thinking, and accurate in assessing risk, as well as to ask for more details on how organizations monitor and manage their day-to-day cyber security operations.

This could involve regular security assessments, employee training and access to cyber security tools. They are also more likely to underwrite customized policies that are explicitly tailored to the policyholder and provide incentives to ensure that Cyber Security best practices and prevention protocols are adopted.

With the development of new technologies, such as the Internet of Things (IoT), AI or quantum computing, cyber insurance policies will need to adapt to address the emerging risks associated to their use. them

Therefore, insurers increasingly need to partner with specialized companies to offer comprehensive solutions that combine their insurance policies with professional mitigation and incident response services.

AUTORES
ALFONSO RAEZ RUIZ
&
MIRUNA POPA
Analysts of cyber intelligence

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