Lloyd’s of London specifies cyber crime as a major insurance issue

Cyber Liability InsuranceCyber crime is an issue of immense concern according to Lloyd’s of London, one of the world’s leading insurance and reinsurance providers. Risk modeling firms are becoming more concerned over what they are calling “the huge potential cost of data loss.”

In the wake of the attack against Sony Online Entertainment, in which hackers made away with the financial data of more than 100 million user accounts, those concerns seem to be warranted. A study from the Ponemon Institute found that in 2010, the cost of data breach rose for the third consecutive year. Lloyd’s insists that the risks are becoming too dire for the world’s insurance industry to ignore.

As society becomes more technology based, crime is evolving to adapt accordingly.  Businesses are adapting as well by making improvements to their IT security systems. However, Lloyd’s officials point out that most companies make use of third-party security firms, many of which have somewhat ambiguous histories. Lloyd’s suggests that there is an as yet unrecognized risk from such firms and they may be responsible for some of the seemingly lax securities used by some of the world’s largest companies.

Graeme Newman, specialist MGA CFC Underwriting for Lloyd’s, notes that “data represents a whole new world of liability risk and business in Europe.” He adds that one way companies can protect themselves from breaches in security is through cyber insurance products, which offer protections against cyber, privacy and social media related risks.

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