An article in Friday’s American Banker looks at data breach insurance offerings for banks. The story seems to be that banks are more receptive than they have been in the past to the idea of buying into an insurance pool for covering costs associated with breaches of information security. This is in spite of seemingly obscure actuarial science behind data breach insurance products available in the market.
Banks are, however, gaining a better understanding of what’s covered, and coverages have broadened as providers learn the characteristics of breach-related expenses as incidents occur. Notably absent from the story is long-time provider of breach insurance to the payments industry, Royal Group Services:
Cyber insurance fills gaps in banks’ traditional liability and business insurance policies, which typically cover only physical losses and direct costs, such as robberies, fires and lawsuits.
Plenty of questions remain about how cyber policies are priced, but insurers and brokers say the market’s been expanding at a rapid clip anyway, thanks to heightened breach disclosure requirements and a patchwork of state regulations that requires banks to compensate clients for damages suffered as a result of data breaches.
Marsh, a major data-breach insurance broker, says around one-third of its financial institution clients hold such policies. It expects the market to grow 15% annually over the next few years, driven in part by regulatory pressures.
Last October, the Securities and Exchange Commission declared that public companies of all stripes must include the costs of data breaches in financial reports and disclose to investors the extent of their data-theft vulnerabilities. That, in turn, has raised awareness of related risks, insurers, brokers and attorneys say.
Industry sources peg the value of the overall cyber-insurance market – which includes healthcare providers and retailers, as well as financial institutions – at anywhere from $500 million to $1 billion a year in premiums paid.
Click here to read more from American Banker.