Cyber security due to a multitude of data breaches is a major concern of companies and one that is going to become increasingly significant. Corporate data from customer information to intellectual property can all be stolen to the extreme detriment of a company.
Given the potential losses due to cyber breaches, captive insurance companies can be very powerful risk management tools. “Putting resources into prevention is a necessity. Nevertheless, companies are going to suffer losses when they are hacked, and all the cyber security measures available are not going to stop all the technologically sophisticated criminals. In these situations, cyber insurance is regularly extremely useful in enabling companies to respond and mitigate their financial exposure,” explains Joseph McNulty, a partner at FFO Business Management & Family Office an international authority on captive insurance companies. “The objective of the insurance is to help businesses quickly address the breach, restore operations, and deal with all the often diverse financial costs. Captive insurance companies can fill a very important role when it comes to cyber insurance. Risks that are currently not insured or underinsured can be addressed by using a captive. There is also the possibility of getting highly customized coverage and lower pricing.”
According to Frank Seneco, president of the advanced planning boutique Seneco & Associates and author of Maximizing Personal Wealth: An Advanced Planning Primer for Successful Business Owners, “Captive insurance companies are increasingly being used to address cyber risk. The versatility of the captive gives senior executives the opportunity to create customized risk management solutions. For example, a company can be cost-effectively insured for revenue loss due to technology failures. The captive can provide answers for multiple related problems such as the losses from hackings and the hit to their reputations.”
“The advantages of captives to deal with cyber security risks are considerable. The senior executives in just about every company should therefore consider them. A captive insurance company can be used in conjunction with traditional insurance coverage, or it can be used to replace that coverage. It all depends on particular situation,” says McNulty.
This article was written by Russ Alan Prince from Forbes and was legally licensed through the NewsCred publisher network.