In today’s highly-connected business world, the risks associated with data breaches loom large. The loss or theft of customer data, including personally-identifying information, credit card details, and Social Security numbers can result in thousands or even millions of dollars in liability claims. Data breaches can also create lost business opportunities for affected companies, dramatically eroding public confidence. Cyber insurance solutions, such as those developed by Caitlin Morgan Captive Services, represent a foundational approach to risk management. Captive insurance agencies continue to play a growing role in protecting business assets against the risks posed by cyber criminals.
Cyber Risks in Business Operations
Some of the largest companies in the world were the victims of cyber attacks in recent years. These companies ranged from retailers like Target and Home Depot to multinational financial services firms like Equifax and JP Morgan Chase. Social media platforms including Instagram and Facebook also saw data breaches, negatively impacting business operations. Data breaches not only drive customers away from a given business, but these cyber crimes can also cost millions of dollars in unexpected expenses, such as:
- Customer credit monitoring
- Business interruption expenses
- Forensic services to determine the extent of a breach and its perpetrator(s)
- Affected party notification costs
- Crisis management/public relations/reputation management expenses
- Liability claims and associated legal fees and settlement costs
The simple fact is that no business can afford a data breach, and insurance protection is critical as cyber criminals become both more prevalent and more skilled.
The Captive Insurance Solution
Protecting against cyber risks has become the leading security priority in the business sector; unfortunately, affordable cyber insurance protection can be hard to come by. Faced with inadequate or expensive insurance choices, many companies are turning to captive insurance solutions like Caitlin Morgan Captive Services as a result. A recent study conducted by academic research firm Aon suggests that a substantial number of surveyed business owners indicated interest in underwriting cyber security risks through a captive. Captive insurance solutions can provide many benefits, and may provide insurance coverages not available in the commercial insurance market. These benefits include:
- Allowing business owners to diversify risk portfolios.
- Giving companies the chance to build up financial reserves.
- Providing coverage for future risks, including lost revenue or loss of inventory – options that may not be available in the traditional insurance market.
- Providing for higher coverage limits/higher deductibles than traditional insurance solutions, and allowing funding through captives to gain access to reinsurers that offer cyber insurance products.
- Allowing for flexible protection against emerging risks, such as the use of artificial intelligence and blockchain technologies by cyber criminals.
Companies that choose captives as a means of insuring against cyber risks also gain improved control over claims. Of course, there are significant potential tax benefits as well. Captive insurance models serve to give companies better insurance coverage at lower costs, reducing overhead expenses while providing superior protection against the liabilities and losses of a data breach.
About Caitlin Morgan Captive Services
Caitlin Morgan Captive Services provides clients with captive insurance solutions supported by years of experience in establishing the successful formation and implementation of a wide range of captives. To learn more about how we can help you, please contact us at (317) 575-4440.