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Emerging trends in insurance coverage: Massive encryption attacks create urgent need for business interruption and cyber coverage
Cyber Security: A Peer-Reviewed Journal,
2
(2),
122-130
(2018)
Abstract
The evolving online digital threats to businesses have created an urgent need for insurance coverage products to mitigate the risk of loss due to business interruption. This need is driven by the expanded digital environment in which our information resides. The amount of data generated, transmitted and stored by businesses continues to expand at exponential rates. A related trend is that many businesses are going ‘paperless’, and an increasing number of professional services firms are storing all their data in the Cloud for enhanced security. Unfortunately, the more valuable the target, the more likely that it will be attacked. Consequently, malicious actors continue to follow the data into the cloud, which is not immune to data breaches. Businesses of all sizes, and in all sectors, continue to be targeted. If they have sensitive data (and most do), it can be stolen and monetised. If they have operational data (and all do), it can be encrypted and leveraged for extortion. If that were not enough, the cost of data security incidents continues to rise, in part due to increased regulation. All this is causing risk managers to pursue, with a sense of urgency, expanded business interruption and cyber insurance coverage to help mitigate both first and third-party economic risks. This paper reviews the trends in online digital threats, the corresponding trends in insurance coverage, and enterprise risk management measures that can be taken to better protect sensitive and operational data and mitigate the economic harm from data security incidents.
Keywords: cyber security; data privacy; cyber insurance; risk mitigation; insurance coverage; business interruption
The full article is available to subscribers to the journal.
Author's Biography
Sean Hoar CISSP, GISP, CIPP/US, has extensive experience managing responses to data breaches and working with cyber insurance carriers. As chair of the national Data Privacy and Cyber Security Practice at Lewis Brisbois Bisgaard & Smith LLP, he manages a national breach response team and personally manages responses to data breaches on a daily basis. He also counsels businesses on best practices in information privacy and data security. This includes incident response planning and employee/executive training on network security awareness. He served as the lead cyber attorney for the US Attorney’s Office in Oregon, where he was the point of contact for the FBI, Secret Service and Homeland Security in system intrusions and other digital crime emergencies. He also taught courses in cybercrime and privacy law at the University of Oregon School of Law and the Lewis & Clark Law School, and he serves as executive director of the Financial Crimes & Digital Evidence Foundation. Sean holds the Certified Information Systems Security Professional (CISSP), the Global Information Security Professional (GISP) and the Certified Information Privacy Professional/United States (CIPP/US) credentials.
Peter M. Marchel CPCU, ARM, RPLU, is president and founder of Marchel Risk Consulting LLC. Peter has extensive experience working with hundreds of insureds and insurance companies to draft and place management and professional liability policies, including cyber insurance policies. With more than 30 years’ experience in legal and insurance matters, his background is unique — from working on insurance opinions as a former law clerk to Chief Justice Keith M. Callow of the Washington State Supreme Court, to arguing insurance cases before the court on behalf of both defendants and plaintiffs as a trial attorney. His experience as in-house Counsel and General Counsel for both insurance companies and insurance brokerages has brought a unique and valuable perspective to his clients. Peter consults with clients and their counsel on complex claims. He is a frequent speaker on Insurance and legal matters to local, regional and national organisations, including: ABA (American Bar Association); ACC (Association of Corporate Counsel); Washington State Bar Association; PLUS (Professional Liability Underwriting Society); CPCU (Chartered Property Casualty Underwriting Society); FEI (Financial Executive International); National Business Institute; Segal Graduate School of Business, Simon Fraser University, British Columbia, Canada; NACD (National Association of Corporate Directors); CBW (Community Bankers of Washington) and the Directors Roundtable. Peter serves as an expert witness for both defence and plaintiff firms in State and Federal Courts around the US, on insurance coverage, claims handling, bad-faith claims and agents and brokers professional liability matters.
