Cyber insurance should be on the Board agenda…

One of the messages from leading expert in data protection liability Tom Allen (pictured right) at a recent seminar hosted by Sapphire Underwriters (part of the Heritage Group).

Tom was addressing an audience from the local Guernsey business community on issues surrounding data protection insurance. He warned of the anticipated tightening of regulations with the forthcoming introduction of a revised EU Directive – the General Data Protection Regulations. He cited figures from the Lloyd's Risk Index 2013 which reveals that cyber security now sits squarely towards the top of the board room agendas, now seen as the third highest risk issue facing businesses compared with it ranking only 12th in the 2011 index. (Lloyd's risk index is based on a global survey of over 500 C-suite and board level executives conducted by Ipsos MORI for Lloyd's during April and May 2013).

With this growing concern, Tom explained, insuring against potential damage is something that should be a priority for the business community. Cyber insurance specialists are offering increasingly integrated cyber products, including those that provide cover for data breach costs, forensic analysis and crisis public relations services in one package. The drivers for this burgeoning insurance offering are numerous – ranging from regulation, to reputational risks and the negative media coverage a cyber breach can attract, and of course the punitive costs of the remedial actions required to rectify the situation after a crisis has occurred - now thought to be around $5.5m on average.

Delegates also learned of the various factors taken into consideration in the underwriters' risk assessment process. Tom stressed that this was as much about culture as an operational risk exercise:

“It's not only down to operational efficiencies but whether there is true risk awareness within an organisation. There is a huge difference between having a perfectly scribed risk management manual gathering dust on a shelf and ensuring that its content forms an integral part of a business's day-to-day approach.”

Changing work patterns were cited as one of the many factors increasing a company's vulnerability to cybercrime – the BYOD phenomenon (bring your own device) and cloud computing technologies being two of the more obvious ones.

Nigel Brand, Head of Professional and Financial Lines at Sapphire Underwriting (pictured left) commented:

“Tom is one of the UK's leading underwriting minds on this subject. It was a great opportunity to hear how he sees things panning out in this relatively embryonic industry in the near future. Sapphire underwriters has been established to offer quality service in this field to the offshore market and I am sure we will be working closely with Tom in the coming months.”