Cyber Risk Insurance – Security in the Digital Age
- Guntis Zoldners
- Nov 8
- 3 min read
When we shifted to our digital world, so did criminals. With the internet, our work became easier than ever, and so did theirs. The internet brought opportunities for cybercriminals – hackers, fraudsters and extortionists.
Cyber Risk Insurance, sometimes also called Cyber Liability Insurance, is becoming increasingly popular among companies facing ever-growing digital threats.
In this article, we’ll explain what cyber risk insurance is, what it covers, the difference between first-party and third-party coverage, and how Business Interruption Insurance fits into an overall cybersecurity strategy.
What is Cybercrime
Cybercrime is any malicious activity in the digital environment – from phishing emails and ransomware to data leaks and system paralysis. Such attacks can affect large companies, small offices or even individual professionals.
Why do you need Cyber Risk Insurance?
Just as we insure our properties against fire, flood or theft, digital assets – data, software, websites and customer information – are also valuable assets worth protecting.
What is Cyber Risk Insurance
Cyber Risk Insurance is a type of insurance policy which covers financial losses and recovery costs if a company experiences:
a data breach,
a system outage,
a ransomware attack, or
other cybercrime.
What support does Cyber Risk Insurance provide?
A cyber policy provides both practical assistance at the time of an incident and financial protection afterwards.
Support from IT specialists and data recovery teams,
Legal and communication advice,
Costs of informing customers in the event of a data breach,
Compensation for lost income or downtime.
A good cyber insurance policy helps a company return to normal operations faster and minimize reputational damage.
First-party and third-party coverage – what’s the difference?
This type of insurance is usually separated into two types: first-party coverage and third-party coverage.
What is first-party coverage?
Protects the company from direct losses that occur after an incident.
Coverage may include:
investigation and forensic costs,
data recovery and system recovery,
loss of revenue during business interruption,
assistance in negotiating with ransomware attackers,
rebuilding reputation and customer trust,
customer awareness and account monitoring.
According to CFC Underwriting, more than 96% of cybercrime claims are first-party costs.
What is third-party coverage?
Protects a company in cases where a claim is received from customers, business partners or regulators.
This may include:
legal defense and attorneys' fees,
settlements or compensation,
liability for customer data security breaches.
(Note: Some penalties are not covered by insurance by law and are always assessed on a case-by-case basis.)
What is Business Interruption (BI) Coverage
Cybercrime can completely paralyze a company's operations - from a few hours to months.
Business Interruption Coverage (BI) provides compensation for loss of income while systems are restored.
In modern policies, it also includes long-term consequences, such as:
loss of customer trust,
customers switching to competitors,
costs of restoring reputation.
Many insurers now offer coverage that applies for a period of up to six months or even a year after an incident.
Looking to the future
Digital risks are becoming increasingly complex and no industry is completely protected. Knowing what coverage is available to you can help you stay in control even in times of crisis.
The Perks team will help you assess your company's risks, compare insurers' offers, and choose a solution that really works when you need it most.
Want to find out how cyber risk insurance can protect your company? Schedule a free consultation with a Perks broker. Together we will find the safest solution for the digital world.
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