Everyone is at risk for cyber attacks, but perhaps businesses have the most to lose. Both our businesses and personal lives are intricately connected to the vast and ever-evolving cyber sea. And while this interconnectedness offers countless opportunities, it also exposes us to a constant barrage of cyber threats lurking beneath the surface.

In 2024, the global average of a cyber attack was $4.5 million. As larger businesses upgrade their cybersecurity posture, smaller companies become obvious targets to cyber criminals.

Cyber insurance can help prevent your business from being financially impacted by a cyber attack and keep operations running as smoothly as possible.

Beyond Standard Business Insurance

Unlike traditional liability coverage that protects against physical harm or property damage, cyber security insurance focuses specifically on the financial repercussions of cyberattacks. These attacks can take many forms, including data breaches, ransomware attacks, and business email compromise scams (BEC). The resulting financial losses can be substantial, encompassing costs associated with:

• Data recovery: Lost or compromised data can be complex and expensive to recover.

• Forensic investigations: Identifying the source and scope of a cyberattack often requires engaging specialized forensic professionals.

• Regulatory fines: Depending on the nature of the attack and the type of data compromised, businesses may face hefty fines from regulatory bodies.

• Legal expenses: Affected individuals may file lawsuits, and regulatory actions can incur from cyber security attacks, incurring significant legal fees.

• Customer notification: Businesses are often required by law to notify affected individuals of a data breach.

Types of Cyber Security Insurance Coverages Available

Cyber security insurance policies offer various types of coverage, catering to different needs and vulnerabilities. Here's a breakdown of the two main categories:

First-Party Cyber Coverage

This type of coverage focuses on the financial losses incurred by the business itself as a direct result of a cyberattack. Examples include:

• Costs associated with data recovery and system repair.

• Business interruption losses due to system downtime.

• Cyber extortion payments (in some cases).

• Costs of credit monitoring and identity theft protection for affected individuals.

Third-Party Cyber Coverage

This type of coverage protects businesses from legal liabilities arising from cyberattacks that impact third parties, such as customers or business partners. Examples include:

• Legal defense costs associated with lawsuits filed by affected individuals.

• Regulatory fines and penalties.

• Costs associated with notifying affected individuals of a data breach.

Choosing the Right Coverage

The specific cyber security coverage needs of a business can vary depending on the company’s size, complexity of the company’s corporations, industry and any compliance requirements.

Small to Mid-Sized Enterprises (SMEs)

For SMEs, the focus is often on protecting against common cyber threats such as malware, phishing attacks, and data breaches. First-party coverage for data recovery, business interruption, and cyber extortion can be crucial for these businesses. Additionally, third-party coverage for legal expenses and regulatory fines can keep these smaller enterprises afloat after a cyber attack.

Large Corporations

Large corporations typically face a broader range of cyber threats and may require more comprehensive coverage. This can include additional features such as cybercrime coverage, which covers losses from employee fraud or social engineering attacks, and network security liability coverage to protect against third-party claims resulting from network security failures.

Cyber Insurance Coverage Limitations

It's crucial to understand that cyber security insurance, like any insurance product, has its limitations. While it provides valuable protection against a wide range of cyber threats, there are certain scenarios it generally does not cover:

• Intentional acts: Losses resulting from intentional acts of cybercrime committed by the insured or their employees are typically excluded.

• Physical damage: Cyber security insurance focuses on financial losses, not damage to physical infrastructure or equipment.

• Acts of war or terrorism: Most policies exclude losses arising from acts of war, terrorism, or cyber warfare.

• Systemic events: Widespread cyberattacks impacting a large number of businesses may fall outside the scope of coverage, depending on the specific policy language.

• Data breaches caused by negligence: Some policies may limit or exclude coverage for data breaches resulting from the insured's negligence or failure to implement adequate security measures.

It's essential to review the policy and its exclusions with your insurance provider to ensure you understand any coverage limitations.

The Role of ISSQUARED

While cyber security insurance offers valuable protection, it's important to remember that it doesn't guarantee complete immunity from cyberattacks. Businesses must still prioritize robust cybersecurity practices, including:

• Implementing strong cybersecurity protocols and employee training programs.

• Regularly updating software and systems with the latest security patches.

• Conducting regular vulnerability assessments and penetration testing.

ISSQUARED plays a vital role in helping businesses navigate these challenges. We offer a comprehensive suite of managed security services, including:

• Virtual Chief Information Security Officer

• e-Discovery Services

• Security Engineering

• Security Operation

• Vulnerability Management

• Threat Intelligence

• Risk Management

• Governance and Compliance

• Security Strategy

By combining cyber security insurance with proactive cybersecurity measures, businesses can significantly increase their resilience against cyber threats and navigate the digital landscape with greater confidence.

Learn from the experts

Join ISSQUARED and Cyber security insurance experts, Blackfire Cyber Insurance to discuss the importance of cyber security and enterprise risk management in protecting businesses from potential threats and vulnerabilities. Blackfire specializes in Cybersecurity Insurance, Tech E&O, Professional Liability, Management Liability (D&O), and Commercial Insurance.

Register Now

You’re invited to join ISSQUARED and Blackfire Cyber Insurance at the Cyber Security and Enterprise Risk Management, The Key to Safeguarding Your Business fireside chat this April. This live, 25-minute fireside chat will explore how cyber security and enterprise risk management are fundamental to protecting your business.