CYBER
RISK

Professional Indemnity Insurance (sometimes also referred to as E&O Insurance or Professional Liability Insurance) is meant to protect professionals against liability for alleged failures to provide proper professional services.  On the other hand, Cyber Insurance is meant to protect businesses against cyber-crimes.

While cyber-crime is a type of crime, most crime insurance policies only insure against physical crimes (i.e. many crime insurance policies have exclusions against the theft of monies or property by “electronic instructions”).  Cyber insurance fills that gap by adding coverage for crimes that take place in cyberspace.

Each insurer has its own proprietary way of calculating insurance premiums but there are several factors that we know have a significant impact on your premiums:

• Types of security systems installed
• Cybersecurity policies and training in place at your organization
• Coverages and limits of insurance chosen
• Nature of the business

This really depends on the type and size of your business.  For reference, you can look at the outcome of similar businesses that have fallen victim to cyber-attacks.

Yes, most businesses have sensitive data stored on computer devices that, if lost, could severely impact the business.  The proper cyber insurance policy protects you and your clients against that.

All Cyber Insurance policies come with important exclusions.  But to help you better understand the coverages, here are a few:

• Cyber losses may not be covered if your company fails to maintain cybersecurity up to “industry standards”
• Bodily injury and property damage are not covered here.  You’ll need other policies in your insurance portfolio to cover that.
• Cyber attackers will often breach your company’s security and look around for a long time before you discover them.  Any breaches that started before the Retroactive Date of your policy are not covered.

In the past, cyber insurance was a niche product.  But the rapid rise in cyber-crime targeted towards businesses has brought this product to the forefront.  These days, almost all businesses gather sensitive client information or store their own confidential data on computer devices. Even with good computer security and backup systems, nothing is perfectly safe.  Cyber insurance serves as that last line of defence to indemnify your business and your clients if you fall victim to a cyber-attack.

Cyber Insurance covers financial losses that result from data breaches and other cyber-attacks.  In general, there are 2 types of coverage offered:

First-party coverage: this pays for expenses your firm suffers as a result of cyber-attacks such as:

• The cost of informing your clients of the hack and providing them with free credit monitoring services.
• Cyber extortion like ransomware attacks
• Loss or damage to electronic data
• Loss of income and extra expenses
• PR and reputational damage

Third-party coverage: this pays for 3rd party liability that has suffered a loss as a result of your actions or omissions.  For example, you could be sued by a client who has their information leaked following a hack of your computer systems.