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Cyber Liability - The Risks

Published: 16/07/12

New risks – know the facts

At Flint our primary aim is to ensure that you have the right cover for your needs and an important part of this is looking at potential or emerging risks. This is not simply a way for us to sell more insurance or to cause undue concern – but we wouldn’t be doing our job if we didn’t alert you to new risks.

Only recently Jonathan Evans, MI5 Boss, publically stated that MI5 is battling "astonishing" levels of cyber-attacks on UK industry.

Cyber liability – increasing risk

So that brings us to two independent sets of research on cyber liability done within months of each other by respected insurers.

The first was Zurich who asked European risk managers (58% from the UK), from companies of all size (two thirds from large organisations) about their attitudes and practice towards cyber liability. More than 90% surveyed believed that cyber risks posed a threat to their organisation, however, less than 10% actually purchase cyber insurance products as part of their over-all cyber risk management programme.

The second, done by Marsh and published in partnership with Chubb insurance, revealed that 69% of the communications, media and technology (CMT), financial services, insurance and law delegates questioned said their concern about cyber risk has increased over the previous 12 months.

However, over half (54%) did not know if their organisation had been subjected to a cyber attack in the same period.

Results of the Marsh survey showed that just 41% of respondents said their organisation had estimated the financial impact of a cyber attack although 25% felt that such an attack could cost their organisations in excess of $5m [£3.23m].

Only 21% of respondents stated that their organisation currently purchased cyber insurance cover and a mere 11% of respondents felt confident that their current cyber insurance provision met their organisational needs.

Know the risks

Cyber risks range from minor data breaches to wholesale business interruption after malicious attack. There’s also the risk of reputational damage from the wrong kind of social media exposure.

Generally policies will cover the following:

  • first party damage to data
  • business interruption
  • privacy and security liability, including notification and credit monitoring costs
  • brand reputation
  • cyber extortion
  • technology professional liability
  • multimedia liability
  • Payment Card Industry Data Security Standard (PCI DSS) compliance
  • cyber terrorism


A cyber incident has the potential to be extremely damaging and therefore expensive. Damage repair is costly, specialist and can be time consuming. You then have to get the business back on track, which might include notifying customers and other suppliers. Forensic inspection and Legal costs including the means to defend a privacy breach action brought by regulators may be required.
There are a number of stand alone policies on the market and some with modular structures so that firms can buy only relevant cover. Policies especially for SME’s are also available; so companies for all sizes should be considering the risks.

There are a number of high profile cases, notably in April 2011 Sony reported it had been hacked through its Sony PlayStation Network. More than 100 million accounts including Personal Identifiable Information were compromised. Then there’s HMRC - phishing emails reported in August 2011 to the UK tax office, HMRC, rose by nearly 300 per cent to 24,000 for the month alone. Hackers send genuine-looking emails to taxpayers saying they are due a tax refund. Anyone who replies is directed to a fake site, which collects their personal details and uses them for fraud.

These are attacks on large organisations, but smaller firms are still at risk. Attacks by insiders are less frequent but tend to take much longer to repair so companies should consider taking out insurance that specifically covers the acts of employees and sub-contractors.

If you would like to discuss your exposure to cyber liability – contact Dawn Charlesworth on 0845 371 1452 or email dawncharlesworth@flintinsurance.co.uk.



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