Glossary

Cyber insurance

Cyber insurance (or cybersecurity insurance) is a specialized insurance policy designed to safeguard organizations from the financial repercussions of cyberattacks and data breaches. Cyber insurance steps in to cover the expenses incurred in the aftermath of a data breach or cyber incident. The Federal Trade Commission (FTC) also differentiates between first-party cyber insurance coverage that protects your data, including employee and customer information and third-party coverage. Third-party coverage generally protects a company from liability if an outside, third party brings claims against the organization.

Cyber insurance may include costs related to:

  1. Data breach response—These are expenses associated with investigating the breach, notifying affected parties, and complying with legal requirements

  2. Data recovery—The cost of restoring lost or compromised data and systems

  3. Business interruption—Compensation for income losses due to downtime caused by the cyber incident

  4. Ransomware payments—Coverage for ransom payments in cases of ransomware attacks

  5. Legal and regulatory compliance—Assistance with legal defense costs and fines resulting from regulatory non-compliance

When looking for insurance coverage, providers typically require the following:

  • Risk assessment—Companies must undergo a thorough assessment of their cybersecurity measures and vulnerabilities. This includes evaluating the strength of their security protocols, network infrastructure, and data protection practices.

  • Coverage assessment—Organizations should work with the insurance provider to determine the specific type and level of coverage needed based on their industry, size, and risk profile. This may include coverage for first-party and third-party liabilities.

  • Security practices and protocols—Insurance providers may require evidence of strong cybersecurity practices, such as regular security audits, employee training programs, and the implementation of industry-standard security frameworks like ISO 27001 or NIST Cybersecurity Framework.

  • Incident response plan—Having a well-documented incident response plan is often a requirement. This plan outlines the steps a company will take in the event of a cyber incident, including how they will mitigate damages and notify affected parties.

  • Risk management measures—Companies may be asked to implement specific risk management measures recommended by the insurer to reduce their vulnerability to cyber threats.

  • Incident history—Insurers may inquire about a company's past history of cyber incidents and how they were handled.