A recent study published by global consulting firm Grant Thornton estimated that in 2015, cyber-attacks have represented a loss of USD 81 billion for businesses in Asia Pacific. Majority of the loss was experienced by China itself, which was as much losses experienced by businesses in Europe and United States. Financial hubs like Singapore and Hong Kong are also facing a great threat. In that context, it is not surprising that insurers are pushing cyber security insurances to cover these risks.
The reason behind companies’ increased exposure to cyber security liabilities is simple: data is becoming the backbone of modern business and these data are stored in the company’s server or on the cloud, which are vulnerable from piracy. Small and medium companies (SMEs) that are more and more involved in e-commerce are, of course, facing increasing liabilities.
The main cyber risk faced by companies is the loss of private data. It could be due to malicious break of network security or to wrong configuration of the system or unintended or accidental damages/lost. It is important to note that cyber breach is not only due to hackers or malicious criminal, it is mostly due to human errors or system problems. Its consequences for businesses are the breach of confidentiality agreement signed with client & loss of professional confidence and reputations, thus leading to financial compensation or loss of income.
Most companies do not have a contingency plan in case of piracy thus are more exposed to large scale damages. Actually, incident response plan (IRP) will help to significantly reduce the costs of collecting the data back.
To avoid possible liability lawsuit, Cyber insurance is necessary and will cover mainly two aspects:
1. Damage to equipment, loss of profit and expenses engaged following threats or extortion;
2. The liability toward third party following loss or destruction of private data, breach of confidentiality agreement following collect, usage of transfer of private data.
None of these risks are covered by public or commercial general liability so it is important to buy a specific insurance for that. Premium rates vary of course depending on nature and size of the business.
To learn more about our various insurance solutions for SMEs in Hong Kong, please visit our website.