The recent cyber-attacks inflicted by ransomware “WannaCry” and “Petya” impacted companies worldwide and across a broad range of sectors, emphasizing the growing and ever-present cyber threat that businesses are facing.
What is cyber-insurance?
Many companies are deciding to use cyber-insurance as one of the means to safeguard themselves against the financial, reputational, and operational consequences of a cyber-attack. Cyber-Insurance is comparable to the standard Commercial Business Interruption insurance policy, which covers the losses imposed when business operations are interrupted due to a physical disruption such as a fire or natural catastrophe. However, the quantification of a business insurance claim is complex, especially with regard to damages caused by a cyber-attack as well as the responsibilities of both the insurer and the victim of the cyber incident (i.e., the insured company).
What can be done in the event of a cyber-attack?
As soon as an incident or loss occurs, a company must react quickly. In addition to executing the Cyber Breach Response plan, the company must demonstrate that there was a financial impact and begin setting up the claim. The claims process entails the triggering and commencement of an investigation, and further involvement of underwriters and insurance brokers to define the policy coverage and the information security. The key considerations include:
- Know the policy, understand what is actually insured and the coverage limitations
- Calculate the loss of gross profit based on the underlying policy
- Estimate expected turnover without a loss versus actual turnover
- Know the figures and margin in order to identify the true variable and fixed character of the cost positions based on policy requirements
- Develop a first estimation of loss in order to ascertain advance payments from the insurer to finance mitigation, restoration and running fixed costs
The overall task is to manage the ‘crisis’ without losing focus on the continuity of daily business operations – perhaps with the assistance of experts (e.g., insurance claims experts, cyber-crime investigators, forensic investigators, IT professionals etc.).
For detailed information, please see EY Switzerland’s Fraud Newsletter