Cyber losses spur rise in business interruption coverage

The rise in cyberattacks is spurring consumers to purchase business interruption coverage, an historically overlooked and underutilized risk management tool. Business interruption insurance is used to pay expenses and cover salaries for the period of time it takes for the business to resume normal operations.

A cyber-induced business interruption can occur when a company has a system failure or impairment due to a failure of network security that results in a loss of income. This particular coverage is used to cover lost net profit before taxes and extra expenses arising out of the interruption. Because it typically takes less time to recover from a cyber-related disruption than other disasters,  coverage in this area is easier to come by, cheaper to purchase and faster to take effect. In fact, business interruption coverage for cyber liability can be placed in as little as four to 12 hours.

It’s important to note that of the 70 individual carriers that offer this cover, their terms can vary quite a lot, particularly the period of indemnity. For instance, an online retailer may require an extended period of indemnity to recoup the loss of consumer confidence that can stymie online purchasing once a breach becomes public.

Many cyber insurers are also now offering contingent business interruption in the form of expanded coverage for disruption by vendors.


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