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Risk Insider: Martin Eveleigh

Cyber Risk Insurance: An Ever-Evolving Coverage

By: | March 28, 2017 • 3 min read
Martin Eveleigh is Chairman of Atlas Insurance Management, which he formed in 2002. He specializes in designing alternative risk transfer programs – particularly risk pools – and captive structures. He can be reached at [email protected]

The evolving category of cyber risk insurance continues to receive increased awareness each year, as more and more security breaches continue to surface. Across all industries, the number of cyber attacks, and the costs associated with them, are increasing.

First, the bad news.

The 2015 Verizon Data Breach Investigations Report identifies the top three industries affected by data breaches as Public, Information and Financial Services; while the 2015 Ponemon Institute Research Report indicates that Health, Education and Pharmaceuticals are the most costly per capita. The overriding message from both reports is that no company is immune to cyber attacks.

There were 79,790 known security incidents globally in 2014 with 2,122 confirmed breaches producing loss. The reports also show a 23 percent increase in the total cost of breaches since 2013 and a 12 percent increase in the per capita cost.

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The Ponemon Report identifies three main reasons contributing to higher costs of data breaches in 2015:

  1. Cyber attacks are more frequent and costly.
  2. Data breach costs are impacted by lost business.
  3. Costs associated with detection of data breaches are increasing.

With risk increasing, it is no longer a question of whether a business will be subject to some level of cyber attack, but when and how. Knowing this, what can businesses do to mitigate the risk and damage?

Professional cyber security consultants agree preparation is key. In addition to developing a compliance work plan, companies should identify unpatched vulnerabilities in software and install test patches regularly. Also, certain industries are now mandating specific regulatory compliance criteria be met, and the insurance industry is taking note.

Creating a More Sound Cyber Risk Policy

Despite the best efforts at prevention, however, the risk of cyber attacks and breaches is great. A company can spend thousands, if not millions, on a security system and firewalls; but one employee opening a phishing email can compromise all defenses and allow criminals inside your system undetected, which is why a robust cyber insurance policy is critical to a company being properly protected.

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Unlike other coverage forms, there is no established standard cyber insurance form utilized by carriers in the standard commercial insurance market. To be protected, businesses need to know whether coverage is provided, and at what level, for:

  • regulatory actions
  • incident response costs
  • credit and identity monitoring
  • transmission of viruses
  • business interruption and extra expenses
  • extortion expenses
  • data loss and restoration

A careful review of coverage is critical because a particular coverage that may be most important to your business could be excluded or limited in scope or amount. A captive is an excellent vehicle for providing coverage for cyber risks, as it has the flexibility to tailor coverage to the specific needs of your business.

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Cyber risk is certainly here and rapidly increasing, but you can reduce its risk to your business with the right combination of security and proper insurance. And for insuring cyber risk, a captive just may be your best solution.

More from Risk & Insurance

More from Risk & Insurance

The Profession

Curt Gross

This director of risk management sees cyber, IP and reputation risks as evolving threats, but more formal education may make emerging risk professionals better prepared.
By: | June 1, 2018 • 4 min read

R&I: What was your first job?

My first non-professional job was working at Burger King in high school. I learned some valuable life lessons there.

R&I: How did you come to work in risk management?

After taking some accounting classes in high school, I originally thought I wanted to be an accountant. After working on a few Widgets Inc. projects in college, I figured out that wasn’t what I really wanted to do. Risk management found me. The rest is history. Looking back, I am pleased with how things worked out.

R&I: What is the risk management community doing right?

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I think we do a nice job on post graduate education. I think the ARM and CPCU designations give credibility to the profession. Plus, formal college risk management degrees are becoming more popular these days. I know The University of Akron just launched a new risk management bachelor’s program in the fall of 2017 within the business school.

R&I: What could the risk management community be doing a better job of?

I think we could do a better job with streamlining certificates of insurance or, better yet, evaluating if they are even necessary. It just seems to me that there is a significant amount of time and expense around generating certificates. There has to be a more efficient way.

R&I: What was the best location and year for the RIMS conference and why?

Selfishly, I prefer a destination with a direct flight when possible. RIMS does a nice job of selecting various locations throughout the country. It is a big job to successfully pull off a conference of that size.

Curt Gross, Director of Risk Management, Parker Hannifin Corp.

R&I: What’s been the biggest change in the risk management and insurance industry since you’ve been in it?

Definitely the change in nontraditional property & casualty exposures such as intellectual property and reputational risk. Those exposures existed way back when but in different ways. As computer networks become more and more connected and news travels at a more rapid pace, it just amplifies these types of exposures. Sometimes we have to think like the perpetrator, which can be difficult to do.

R&I: What emerging commercial risk most concerns you?

I hate to sound cliché — it’s quite the buzz these days — but I would have to say cyber. It’s such a complex risk involving nontraditional players and motives. Definitely a challenging exposure to get your arms around. Unfortunately, I don’t think we’ll really know the true exposure until there is more claim development.

R&I: What insurance carrier do you have the highest opinion of?

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Our captive insurance company. I’ve been fortunate to work for several companies with a captive, each one with a different operating objective. I view a captive as an essential tool for a successful risk management program.

R&I: Who is your mentor and why?

I can’t point to just one. I have and continue to be lucky to work for really good managers throughout my career. Each one has taken the time and interest to develop me as a professional. I certainly haven’t arrived yet and welcome feedback to continue to try to be the best I can be every day.

R&I: What have you accomplished that you are proudest of?

I would like to think I have and continue to bring meaningful value to my company. However, I would have to say my family is my proudest accomplishment.

R&I: What is your favorite book or movie?

Favorite movie is definitely “Good Will Hunting.”

R&I: What’s the best restaurant you’ve ever eaten at?

Tough question to narrow down. If my wife ran a restaurant, it would be hers. We try to have dinner as a family as much as possible. If I had to pick one restaurant though, I would say Fire Food & Drink in Cleveland, Ohio. Chef Katz is a culinary genius.

R&I: What is the most unusual/interesting place you have ever visited?

The Grand Canyon. It is just so vast. A close second is Stonehenge.

R&I: What is the riskiest activity you ever engaged in?

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A few, actually. Up until a few years ago, I owned a sport bike (motorcycle). Of course, I wore the proper gear, took a safety course and read a motorcycle safety book. Also, I have taken a few laps in a NASCAR [race car] around Daytona International Speedway at 180 mph. Most recently, trying to ride my daughter’s skateboard.

R&I: If the world has a modern hero, who is it and why?

The Dalai Lama. A world full of compassion, tolerance and patience and free of discrimination, racism and violence, while perhaps idealistic, sounds like a wonderful place to me.

R&I: What about this work do you find the most fulfilling or rewarding?

I really enjoy the company I work for and my role, because I get the opportunity to work with various functions. For example, while mostly finance, I get to interact with legal, human resources, employee health and safety, to name a few.

R&I: What do your friends and family think you do?

I asked my son. He said, “Risk management and insurance.” (He’s had the benefit of bring-your-kid-to-work day.)

Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at [email protected]