The GDPR and US Companies

The EU's cyber regs will impact U.S. companies that handle the data of EU customers.
By: | July 17, 2017 • 4 min read

The final countdown is on for U.S. companies to meet a new set of data privacy rules or face heavy fines.

The General Data Protection Regulation, GDPR, which kicks in on May 25, 2018, will be implemented by the European Union, but it also touches companies from other countries, including the United States, that access data from EU-based users.


According to experts, the GDPR brings challenges to U.S. companies as its approach to data privacy is considerably different from the view taken by American legislation.

Umair Javed, an associate in the Washington, D.C. office of Wiley Rein, pointed out that European governments put a strong focus on the rights of individuals to have their privacy protected, which includes the right to request that data collected by companies is erased from their databases.

In the U.S., however, the emphasis skews toward freedom of speech, and authorities have adopted a looser approach to the monetization of consumer data by companies.

“It could all mean a balancing act for U.S. companies,” Javed said.

The GDPR has significantly expanded the definition of personal data. — Matthew McCabe, U.S. Critical Infrastructure Cyber Leader, Marsh

The GDPR mandates that firms which collect or process data from EU-based users report any breaches in a timely manner and establish a Data Privacy Officer charged with making sure that the organization complies with the rules.

Experts said that the DPO function can be assigned to a dedicated manager, added to the responsibilities of a risk manager, data security officer or other function within the company, or delegated to a third party, depending on the size of the organization and the volume of data it processes.

The GDPR applies not only to companies who are based or have offices in a member of the European Union, but also to those that are headquartered elsewhere, but have access to data from EU-based customers, suppliers or business partners.

Matthew McCabe, US Critical Infrastructure Cyber Leader at Marsh

According to Javed, the application of the law takes into account mostly the location where the data is collected, rather than the place of origin of the company that collected or processed the data.

The new rules also considerably broaden the scope of user information whose privacy must be protected by companies. Data to be encompassed by the GDPR includes personal banking information, biometric data, geo-location data from mobile phones, medical information and several other data categories.

Under the new regulations, a company that is based in the U.S. could be fined by an EU government for a breach of the GDPR even if, for example, it does not have an office in the EU, but sells goods via a website that is accessible in Europe, and where there is an option to pay in Euros or British Pounds.

“The GDPR has significantly expanded the definition of personal data,” said Matthew McCabe, U.S. Critical Infrastructure Cyber Leader at Marsh.

Failure to meet GDPR requirements may result in fines of up to $23 million or 4 percent of a company’s annual worldwide turnover. Consult Hyperion estimates that European banks alone could be hit with $5.4 billion in fines in the first three years after the implementation of the directive, with penalties approaching $300 million per breach.

In a global survey released in April by Veritas, one out of every five companies expressed fears that GDPR fines could put them out of business.

Considering the stakes involved, it should not come as a surprise that many companies have started to prepare themselves in anticipation of the arrival of GDPR. According to a survey released in January by PwC, 92 percent of U.S. organizations interviewed deemed GDPR compliance a top priority in 2017. Three out of four planned to spend $1 million or more in the process.

Michael Born, a vice president at the Global Technology and Privacy Practice at Lockton, said that many companies are not there yet, and could be caught shorthanded by the May 2018 deadline.

In any case, the arrival of GDPR should provide a further boost to demand for cyber insurance, as many such policies are designed to cover the liabilities created by the new regulation.

“Coverages included in cyber policies are designed to cover the kinds of exposures created by the GDPR,” Born said.

“But buyers must make sure that wordings are broad enough to cover not only GDPR exposures, but also those created by data privacy legislation in the U.S. and elsewhere.”

“The data breach response and notification requirements imply a very mature role to be played by cyber insurance,” McCabe said.


“Cyber insurance can also work as a point of assessment of how companies are complying with the GDPR, and the insurance market can also provide expert advice to companies. The big question will be whether fines and punishment issued by the authorities under the GDPR will be insurable.”

“If a global company gets a maximum fine, they will not have enough cyber insurance to cover it,” Born added.

“Should companies be considering buying enough cyber insurance to cover a 4 percent annual turnover fine?  I do not think that is appropriate to all the companies that might be subject to it. A lot of companies may adopt a wait-and-see attitude to check what the regulatory bodies actually do when it comes to issuing fines and penalties for violations before they make a final deliberation.”

Rodrigo Amaral is a freelance writer specializing in Latin American and European risk management and insurance markets. He can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

High Net Worth

To the High Net Worth Homeowner: Build a Disaster Resiliency Plan You Can Be Proud Of

Having a resiliency plan and practicing it can make all the difference in a disaster.
By: | September 14, 2018 • 7 min read

Packed with state-of-the-art electronics, priceless collections and high-end furnishings, and situated in scenic, often remote locations, the dwellings of high net worth individuals and families pose particular challenges when it comes to disaster resiliency. But help is on the way.


Armed with loss data, innovative new programs, technological advances, and a growing army of niche service-providers aimed at addressing an astonishingly diverse set of risks, insurers are increasingly determined to not just insure against their high net worth clients’ losses, but to prevent them.

Insurers have long been proactive in risk mitigation, but increasingly, after the recent surge in wildfire and storm losses, insureds are now, too.

“Before, insurance was considered the only step in risk management. Now, our client families realize it is one of the many imperative steps in an effective risk management strategy,” said Laura Sherman, founding partner at Baldwin Krystyn Sherman Partners.

And especially in the high net worth space, preventing that loss is vastly preferable to a payout, for insurers and insureds alike.

“If insurers can preserve even one house that’s 10 or 20 or 40 million dollars … whatever they have spent in a year is money well spent. Plus they’ve saved this important asset for the client,” said Bruce Gendelman, chairman and founder Bruce Gendelman Insurance Services.

High Net Worth Vulnerabilities

Laura Sherman, founding partner, Baldwin Krystyn Sherman Partners

As the number and size of luxury homes built in vulnerable areas has increased, so has the frequency and magnitude of extreme weather events, including hurricanes, harsh cold and winter storms, and wildfires.

“There is a growing desire to inhabit this riskier terrain,” said Jason Metzger, SVP Risk Management, PURE group of insurance companies. “In the western states alone, a little over a million homes are highly vulnerable to wildfires because of their proximity to forests that are fuller of fuel than they have been in years past.”

Such homes are often filled with expensive artwork and collections, from fine wine to rare books to couture to automobiles, each presenting unique challenges. The homes themselves present other vulnerabilities.

“Larger, more sophisticated homes are bristling with more technology than ever,” said Stephen Poux, SVP and head of Risk Management Services and Loss Prevention for AIG’s Private Client Group.

“A lightning strike can trash every electronic in the home.”

Niche Service Providers

A variety of niche service providers are stepping forward to help.

Secure facilities provide hurricane-proof, wildfire-proof off-site storage for artwork, antiques, and all manner of collectibles for seasonal or rotating storage, as well as ahead of impending disasters.

Other companies help manage such collections — a substantial challenge anytime, but especially during a crisis.

“Knowing where it is, is a huge part of mitigating the risk,” said Eric Kahan, founder of Collector Systems, a cloud-based collection management company that allows collectors to monitor their collections during loans to museums, transit between homes, or evacuation to secure storage.

“Before, insurance was considered the only step in risk management. Now, our client families realize it is one of the many imperative steps in an effective risk management strategy.” — Laura Sherman, founding partner, Baldwin Krystyn Sherman Partners

Insurers also employ specialists in-house. AIG employs four art curators who advise clients on how to protect and preserve their art collections.

Perhaps the best known and most striking example of this kind of direct insurer involvement are the fire teams insurers retain or employ to monitor fires and even spray retardant or water on threatened properties.

High-Level Service for High Net Worth

All high net worth carriers have programs that leverage expertise, loss data, and relationships with vendors to help clients avoid and recover from losses, employing the highest levels of customer service to accomplish this as unobtrusively as possible.

“What allows you to do your job best is when you develop that relationship with a client, where it’s the same people that are interacting with them on every front for their risk management,” said Steve Bitterman, chief risk services officer for Vault Insurance.

Site visits are an essential first step, allowing insurers to assess risks, make recommendations to reduce them, and establish plans in the event of a disaster.

“When you’re in a catastrophic situation, it’s high stress, time is of the essence, and people forget things,” said Sherman. “Having a written plan in place is paramount to success.”


Another important component is knowing who will execute that plan in homes that are often unoccupied.

Domestic staff may lack the knowledge or authority to protect the homeowner’s assets, and during a disaster may be distracted dealing with threats to their own homes and families. Adequate planning includes ensuring that whoever is responsible has the training and authority to execute the plan.

Evaluating New Technology

Insurers use technologies like GPS and satellite imagery to determine which homes are directly threatened by storms or wildfires. They also assess and vet technologies that can be implemented by homeowners, from impact glass to alarm and monitoring systems, to more obscure but potentially more important options.

AIG’s Poux recommends two types of vents that mitigate important, and unexpected risks.

“There’s a fantastic technology called Smart Vent, which allows water to flow in and out of the foundation,” Poux said. “… The weight of water outside a foundation can push a foundation wall in. If you equalize that water inside and out at the same level, you negate that.”

Another wildfire risk — embers getting sucked into the attic — is, according to Poux, “typically the greatest cause of the destruction of homes.” But, he said, “Special ember-resisting venting, like Brandguard Vents, can remove that exposure altogether.”

Building Smart

Many disaster resiliency technologies can be applied at any time, but often the cost is fractional if implemented during initial construction. AIG’s Smart Build is a free program for new or remodeled homes that evolved out of AIG’s construction insurance programs.

Previously available only to homes valued at $5 million and up, Smart Build recently expanded to include homes of $1 million and up. Roughly 100 homes are enrolled, with an average value of $13 million.

“In the high net worth space, sometimes it takes longer potentially to recover, simply because there are limited contractors available to do specialty work.” — Curt Goetsch, head of underwriting, Private Client Group, Ironshore

“We know what goes wrong in high net worth homes,” said Poux, citing AIG’s decades of loss data.

“We’re incenting our client and by proxy their builder, their architects and their broker, to give us a seat at the design table. … That enables us to help tweak the architectural plans in ways that are very easy to do with a pencil, as opposed to after a home is built.”

Poux cites a remote ranch property in Texas.

Curt Goetsch, head of underwriting, Private Client Group, Ironshore

“The client was rebuilding a home but also installing new roads and grading and driveways. … The property was very far from the fire department and there wasn’t any available water on the property.”

Poux’s team was able to recommend underground water storage tanks, something that would have been prohibitively expensive after construction.

“But if the ground is open and you’ve got heavy equipment, it’s a relatively minor additional expense.”

Homes that graduate from the Smart Build program may be eligible for preferred pricing due to their added resilience, Poux said.

Recovery from Loss

A major component of disaster resiliency is still recovery from loss, and preparation is key to the prompt service expected by homeowners paying six- or seven-figure premiums.

Before Irma, PURE sent contact information for pre-assigned claim adjusters to insureds in the storm’s direct path.

“In the high net worth space, sometimes it takes longer potentially to recover, simply because there are limited contractors available to do specialty work,” said Curt Goetsch, head of underwriting for Ironshore’s Private Client Group.


“If you’ve got custom construction or imported materials in your house, you’re not going to go down the street and just find somebody that can do that kind of work, or has those materials in stock.”

In the wake of disaster, even basic services can be scarce.

“Our claims and risk management departments have to work together in advance of the storm,” said Bitterman, “to have contractors and restoration companies and tarp and board services that are going to respond to our company’s clients, that will commit resources to us.”

And while local agents’ connections can be invaluable, Goetsch sees insurers taking more of that responsibility from the agent, to at least get the claim started.

“When there is a disaster, the agency’s staff may have to deal with personal losses,” Goetsch said. &

Jon McGoran is a novelist and magazine editor based outside of Philadelphia. He can be reached at [email protected]