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FOR IMMEDIATE RELEASE
OLDWICK - DECEMBER 08, 2014 11:13 AM (EST)
A.M. Best has released a report exploring cyber liability, one of the most serious emerging risks facing the insurance industry. A.M. Best routinely discusses emerging risks with its rated insurers. Given the many headline incidents of 2014; these discussions will get increasingly more robust in 2015 and beyond as the industry and A.M. Best continue to "peel the onion" on this evolving issue. These discussions involve not only identifying general underwriting processes, the number of policies, types of coverage, policy forms, and limits and exclusions, but also how insurers manage and mitigate the many cyber risks and the ever-increasing threats of cyber-attacks on their own companies.
Cyber-attacks have become an almost daily event affecting small, medium and large businesses. Attacks, such as ones that occurred in recent years at Sony's PlayStation and Online Entertainment services, JPMorgan Chase and Target, have result in expensive investigations, litigation and settlements, which are borne by the customers and the businesses. Furthermore, the damage to these businesses' reputations may translate into declining customer bases and stock prices, and therefore, reduced earnings. Often the financial loss from these household name events has been borne by the ultimate parent companies as current insurance protection has been narrow in scope, totally unavailable or highly priced as the risk was misunderstood.
The report, titled "Cyber Security Presents Challenging Landscape for Insurers and Insureds," also discusses results from A.M. Best's Fall 2014 Insurance Industry Survey, which asked insurers about cyber security risks. Results indicate that just 13% of respondents admitted that their companies had been targets of data breaches or cyber attacks. Additionally, just 10% of respondents indicated they had a dedicated cyber security policy, while another 10% stated that they bundled such coverage with errors and omissions, property/business interruption and general liability policies. The remaining respondents either did not provide cyber security insurance or were noncommittal. A.M. Best recognizes that companies need to invest heavily—in terms of both knowledge and resources—to combat this risk. According to the survey, about 61% of the respondents place the responsibility of managing cyber security risks with their information technology departments and about only 2% have dedicated and specialized cyber security departments. The remainder place responsibility on their companies' general surveillance and enterprise risk management programs. It should be noted that more than 14% skipped the question, which may indicate they do not know where such responsibility resides.
For a full copy of this special report, please visit: http://www3.ambest.com/bestweek/purchase.asp?record_code=231473 .
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