Emerging Risks: Unprotected Digital Assets

Emerging Cyber RisksUnprotected digital assets present an exposed risk in property and casualty insurance that few in the industry have noticed. However, founder and director of IoT Insurance Observatory Matteo Carbone believes it is “the single most important emerging risk for P&C insurance professionals.”

While losses from exposure of some digital assets such as personally identifiable information are protected by cyber liability insurance, there currently is an enormous need for protection that includes all digital assets—including cryptocurrency.

Similar to physical assets, digital assets are valuable because of the key role they play in conducting business. A digital asset is any content such as images, documents, or data owned by an individual or business that is digitally stored in databases, drives, or the cloud. Digital asset loss occurs when such content is corrupted, exposed, or destroyed because of a network security failure due to either an outside network breach or inside negligence by an employee. “Digital assets already have more value than physical ones,” Carbone argues. “The higher the digital asset relevancy, the bigger and more articulated the need to protect it.” Unfortunately, insurance solutions that protect the loss of digital assets are lagging while insurers scramble to offer coverages that keep up.

According to the second annual cybersecurity survey from Ovum, conducted for FICO, the number of U.S. companies with cybersecurity insurance is on the rise, but less than a third say their insurance covers all cyberrisks.

According to FICO, “Last year, U.S. companies had the lowest levels of cyber insurance coverage of all the countries surveyed. This year, coverage has increased. However, only a quarter — just 26 percent — of firms said their insurer based their premiums on an accurate analysis of their risk profile. Most firms said premiums are based on an inaccurate analysis, on industry averages, or on unknown factors.”

The report does have a positive side in that 76 percent of U.S. companies have raised the importance of cybersecurity to the point where it requires insuring at some level. What is clear is that expert insurance advisors have never been more necessary for companies that want to not only get their cyber coverage up to speed but also provide for what might emerge in the near future.

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