The modern business world depends on computers as an integral part of daily operations. From managing inventory and personnel to communicating with customers, manufacturing processes, and vendors, computer infrastructure can rightly be considered the foundation of today’s business environment. Unfortunately, this dependence on computer systems has led to a sharp rise in cyber crimes; cybercriminals have infiltrated systems, resulting in the theft or loss of data and costing companies untold billions in expenses. To help manage the risks associated with cyber crimes, more and more companies are turning to an innovative insurance solution – that of cyber captives.
Cyber Captives: An Attractive Insurance Option
Computer-based risks are a high priority for most businesses, especially those that rely on computer systems to deliver goods and services. In recent years, some of the largest corporations in the world have been impacted by cybercriminals. Some of these hacking attacks or data breaches have resulted in the theft of millions of customer records, which often include personally-identifying information like credit card details, Social Security numbers, and telephone numbers.
To protect against the liabilities of a data breach, many companies have sought to obtain insurance coverage tailored to cyber risks. However, many of these companies have found that the traditional insurance market is unwilling or unable to provide adequate coverage. In some cases, cyber insurance coverage is too expensive, forcing companies to scramble for affordable solutions. To respond to this emerging need, the captive market has become an attractive option. Industry analysts suggest that as many as 7% of captive owners indicate an interest in underwriting computer risks through a captive insurance solution. Some of the greatest interest in cyber captives comes from industries like retail, health care, and financial services companies, all of which have experienced highly-publicized and reputation-damaging data breaches.
Benefits of a Cyber Captive
Successful companies always keep a careful eye on costs. Overhead costs, including the annual premiums associated with insurance coverage, are skyrocketing, necessitating more cost-efficient practices and systems. Affordable pricing is only one of many benefits associated with cyber captives; captives can also:
- Provide broader and more tailored insurance protection than traditional insurers can offer.
- Offer coverage for such aspects as business interruption, forensic investigations, customer credit monitoring/notification, and damage to intangible assets.
- Allow for coverage that is typically excluded in commercial insurance policies.
- Give companies access to reinsurance markets by assuming higher deductibles and coverage limits, then funding those costs through a captive.
- Provide greater flexibility in control and payment of liability claims as compared to traditional insurers.
Commercial insurance solutions lag behind in providing the specialized and tailored coverage companies need in the face of cyber risks. When those insurers do offer cyber coverage, the expenses can be prohibitive. By creating and managing a cyber captive, companies have the ability to slash expenses and gain valuable coverage at the same time – coverage that may simply not be available on the commercial insurance market.
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.