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The Rising Tide of Business Interruption in Cyber Insurance: Protecting Your Business

In today's digital age, where businesses heavily rely on technology, the threat of cyberattacks looms larger than ever before. While companies have been diligently investing in cybersecurity measures to safeguard their assets, one often overlooked aspect of protection is Business Interruption (BI) coverage in cyber insurance policies. Recent years have seen a dramatic surge in BI losses due to cyber events, with costs soaring from an average of $152,000 in 2018 to a staggering $707,000 in 2021. In this blog post, we'll explore the significance of Business Interruption coverage in cyber insurance and its crucial role in safeguarding your business.

Business Interruption coverage in cyber insurance is designed to cushion the financial blow caused by a network disruption. It aims to reimburse a business for the income lost during the downtime resulting from a cyber event. Unlike traditional Property Insurance, which also includes Business Interruption coverage, cyber policies typically have shorter waiting periods, ranging from 6 to 12 hours. Moreover, the nature of cyber disruptions is often complex and intangible, requiring specialized skills to assess and quantify the losses accurately.

The scope of Business Interruption coverage in cyber insurance largely depends on whether it's a standalone policy or an endorsement to an existing policy. Endorsed coverage typically only comes into play when cyber events involve malicious intent. These include:

  • Unauthorized Access: When an unauthorized entity gains access to your computer systems.
  • Introduction of Malicious Code: The deliberate injection of malicious code or malware into your network.
  • Denial-of-Service (DoS) Attack: An attack that overwhelms your systems, rendering them inaccessible.

While these events are undoubtedly critical, they do not encompass all potential cyber threats. Standalone policies often provide broader coverage, including protection against events like Human Error, System Failure, or Reputational Harm.

In an era where cyberattacks are becoming increasingly sophisticated and damaging, it's vital to ensure that you have cyber insurance options that include Business Interruption coverage. Furthermore, having coverage with limits sufficient to meet the growing demands of cyber events is paramount. As we've seen, ransomware claims alone, which made up 87% of claims with a BI component in 2021, had an average BI loss of $756,000.

In conclusion, the surge in Business Interruption losses resulting from cyber events in recent years underscores the importance of comprehensive cyber insurance coverage. As businesses continue to rely heavily on technology, the risk of cyberattacks remains a constant threat. To safeguard your business from the potentially devastating financial consequences of a cyber event, it's crucial to not only have cyber insurance but also to ensure that Business Interruption coverage is included with adequate limits. If you'd like to explore your options further or discuss stand-alone coverage, we would be delighted hop on a call with you. Protecting your business in the digital age is a top priority, and we're here to help you navigate the evolving landscape of cyber insurance.