Firms face ruin over reinsurers' exclusion of digital liabilities
Hundreds of companies face ruin from loss of data following a major terrorist or computer virus attack, because they are unaware that such risks are no longer insured, a digital risk specialist warned
And this week, a survey by Pricewaterhousecoopers (PWC) of 1,000 UK companies found 44% of businesses suffered an IT security breach last year.
Mi2g said that since January most reinsurers and insurers specifically excluded data and other digital liabilities from their standard commercial policies, along with terrorism.
The decision attempted to protect against potentially catastrophic losses.
Such policies, which previously incorporated digital risks exposure, include business interruption, workers' compensation and property and liability cover.
Mi2g chairman DK Matai said there was no longer any broad liability cover for business interruption that included digital risk comprehensively, but that many insurers were "vigorously developing digital risk insurance products to fill the gap left by the exclusions".
He said companies that were developing these "bolt-on" products included AIG, Chubb, Hiscox, Royal & SunAlliance (R&SA) and The St.Paul.
Alexander Forbes executive director Trevor Moss confirmed that risk managers and purchasers were not aware they should be checking their commercial liability for digital risk cover. He described cyber risk as the "soft underbelly" of many corporates.
"Any business that uses email or has a website must have digital risk cover," he said. "But the market has not taken off like many underwriters thought it would."
R&SA group underwriting and claims manager David Ovenden said companies most at risk were the ones that had been pressured into creating websites to complement their businesses, such as media or small and medium-sized businesses (SMEs).
"These areas put new dimensions on liability cover which have yet to be addressed," he said. "Most people are aware of the consequences of throwing a lit cigarette on their carpet at home, but what about the implications of losing all your data or not taking precautions with data security?"