Cyber Insurance

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Cyber Insurance


Cybersecurity insurance is designed to mitigate losses from a variety of cyber incidents, including data breaches, business interruption, and network damage. A robust cybersecurity insurance market could help reduce the number of successful cyber attacks by: (1) promoting the adoption of preventative measures in return for more coverage; and (2) encouraging the implementation of best practices by basing premiums on an insured’s level of self-protection. Many companies forego available policies, however, citing as rationales the perceived high cost of those policies, confusion about what they cover, and uncertainty that their organizations will suffer a cyber attack.

Why is cyber insurance important?


The loss, compromise or theft of electronic data can have a negative impact on a business, including the loss of customers and revenue. Businesses may be liable for damages stemming from the theft of third-party data. Cyber liability coverage is important to protect businesses against the risk of cyber events, including those associated with terrorism. Cyber-risk coverage can assist in the timely remediation of cyber attacks and incidents.

In 2011, Sony's PlayStation Network was breached by hackers, exposing personally identifiable information (PII) of 77 million PlayStation user accounts. The breach prevented users of PlayStation consoles from accessing the service, an outage that lasted for 23 days. Sony incurred over $171 million in costs related to the breach. Portions of this cost could have been covered by a cyber insurance policy, but Sony did not have one in place. A court case ruled that Sony's insurance policy covered damage to physical property only, leaving Sony to incur the full amount of costs related to cyber damages.