SEC Commissioner Emphasizes the Importance of Cyber Insurance

SEC Commissioner Emphasizes the Importance of Cyber Insurance

Cyber risks are a growing concern among businesses of all kinds. In a recent speech given at the New York Stock Exchange, SEC Commissioner Luis A. Aguilar emphasized that cyber security should be a number one priority of businesses and regulators alike and warned companies, and more specifically their directors, to “take seriously their obligation to make sure that companies are appropriately addressing those risks.”

The New York Stock Exchange’s Governance Services Department hosted the Cyber Risks and the Boardroom Conference where Commissioner Aguilar expounded on the responsibility of corporate directors to consider and address the risk of cyber-attacks. The commissioner made it clear that despite all efforts to prevent a cyber-attack, companies should prepare “for the inevitable cyber-attack and the resulting fallout.”

In 2014, there have been high-end data breaches of large companies, with data, personal records and financial information stolen and sold on the black market before the company has even discovered a breach occurring. In May, eBay discovered that hackers had infiltrated their system and stole personal records of 233 million users.

Domino’s Pizza was also hacked, with over 600,000 Belgian and French customers’ records affected. These hackers demanded $40,000 in ransom from the pizza chain in exchange for not selling the data, which included names, addresses, emails, and phone numbers.

Just last week, August 5, 2014, the largest data breach in history occurred when a Russian crime ring stole more than 1.2 billion Internet usernames and passwords.

While many companies are concerned about the threat of cyber-attacks, and have implemented security protocols to reduce them, it is clear to security experts that all vulnerabilities are nearly impossible to eliminate. For this reason, a growing segment of companies that collect personal data are including Data Breach and Cyber Peril insurance in their risk financing strategy. These insurance contracts are complex and vary by insurer, but are worth considering given the financial costs associated with notification expenses, litigation and harm to one’s reputation.

If you have any questions or would like to discuss your insurance options, please contact us.

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