Germany’s €50bn cyber cost necessitates specialist cover says broker

“More and more companies have online business models,” he said. “If they are paralysed by a hacker attack this has enormous consequences. If customer data is stolen they have high costs from informing clients, problems with credit card companies and much more. The cover for hacker attacks is as important as a fire insurance,” he added.

One of the main advantages of specialist cyber cover is that companies do not have to lose precious time working out which of their conventional policies will respond when an incident occurs.

“Companies may have a surety insurance, which includes hacker attacks. In addition they have a liability insurance, and electronic insurance and so on,” said Mr Erichsen. “But in case of loss they have to check twenty files and have to look for the contracts.”

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In the burgeoning cyber policies immediate assistance from experts is included, he said. Business interruption without a preceding property claim can also be covered, Mr Erichsen continued. “This is hard to cover by conventional property insurance.”

He believes that the aforementioned assistance services are attractive for many companies. “Imagine that the screen turns black, the data has disappeared. Companies have to restore this data, they have the official obligation to report, they have to calm down the staff and inform clients,” he said. “Especially small companies are often unable to cope with that.”

These smaller-sized companies in particular can benefit from new cyber coverages, he said, because in most cases they do not have sophisticated safety systems, Mr Erichsen pointed out.

“But even the best safety systems could be hacked. Plus, even a company with a turnover of €50m cannot afford to spend an annual amount of €500,000 on IT services,” he suggested.

However, the better cyber policies are not cheap, conceded the broker. “As a rule of thumb you could say that a company with an annual turnover of €50m and a covered sum of €1m has to pay €10,000,” Mr Erichsen explained. Currently the insurers Hiscox, Chubb and AIG are offering cyber policies, but German insurers are still reluctant to join the market, he added. However, he believes that this is to change soon.

“In the US, 7% of companies had cyber cover in 2007, in 2011 it was 14%,” he said on the growing demand for cover in North America. “There was a premium volume of $800m from cyber policies in 2011, in 2012 we will see $1bn.”

However, there remain some exclusions to specialist cyber policies including own damage due to wilful or malicious actions or neglect, Mr Erichsen said. “But companies can negotiate that this restriction refers only to the management. Otherwise, hacker attacks committed by employees would be excluded.”