Examining the Complexities of Cyber Insurance

How well does your cyber insurance reduce your financial loss in the event of a cyber incident?

This article will explore some of the ways mid-sized companies can benefit from cyber insurance coverage. We will examine the various loss events and loss types covered by most cyber insurance policies. And we will also look at how companies can optimize their cyber insurance premiums to benefit from the coverage while also ensuring their coverage is proportionate to the losses companies are most likely to face—this is where Cyber Risk Quantification (CRQ) can be a game changer! CRQ analysis evaluates the potential financial impact of a particular cyber threat.

Cyber Insurance Coverage

MunichRe forecasts that global premiums on cyber insurance will more than double. By 2025, this figure is expected to rise to $22 billion.

Cyber insurance uptake is on the rise as companies increasingly rely on it as a tool to mitigate their financial risks and liability. And because cyber insurance policies are complicated, decision-makers are advised to take a deep dive into the insurance loss types to better understand the breakdown of the policy beyond the total coverage amount.

What we have found in working closely with CISOs, CFOs, and other decision-makers is that cyber insurance policies are examined at a high level, from the perspective of total coverage.

•   Is our company covered if we take out a €2 million policy for cyber risk?

•   Does more total coverage mean that our share of the risk is reduced?

•   Is a €5 million policy better than a €2 million policy?

It’s difficult to answer these questions without looking further into the company’s digital value chain and their cyber threat landscape. There are times when a company can optimize its cyber risk coverage by increasing the amount of total coverage, but it’s also possible to simply negotiate the retention amount per loss type.

Just like with other types of insurance products, cyber insurance is designed so that an individual incident is broken down by type of loss. Each loss type will have a retention and a maximum payout amount. Retention refers to the portion of a loss that an insured party is responsible for covering before the insurance policy begins to payout.

It literally pays to read the small print.

The information provided in your policy details precisely what incidents are covered, the exceptions, how to report them, and the various types of loss that are covered as well as the retention amount.

More total coverage doesn’t automatically mean you have a greater protection from financial loss.