pollution liability

Everything Your Clients Need to Know Regarding Pollution Liability

A single pollution spill can cost millions in mitigation and cleanup. Pollution liability insurance protects business assets from losses related to e

For many industries, the threat of an environmental disaster through pollution spills or discharges is a looming risk. Businesses in the manufacturing, energy production, and transportation sectors have significant risk exposures to pollution claims, potentially costing millions of dollars in cleanup expenses, regulatory penalties, and environmental mitigation. Unlike many business insurance policies that specifically exclude coverage for pollution events, pollution liability insurance forms the backbone of risk management for at-risk business interests.

Pollution Liability Insurance: When Business General Liability Isn’t Enough

Most businesses operate under the protection of many forms of liability insurance. Typically, business policies, such as commercial general liability insurance or Business Owners’ Policies (BOPs) exclude coverage for certain risks, particularly pollution events. Many business owners are surprised to find out that this is a serious gap in coverage, particularly when environmental risks are an inherent part of certain business operations in manufacturing, energy production, transportation, or construction sectors.

To address the shortcomings of general liability insurance, specific policies that cover against pollution claims were developed. Sometimes referred to as Environmental Impairment Liability (EIL) insurance, pollution liability insurance programs are designed not only to fill coverage gaps in business insurance policies but to enhance liability protections for industries. A pollution liability insurance policy is a critical risk management component for business owners involved in industries that use toxic or hazardous materials or conduct operations that are environmentally sensitive. These specialized insurance policies may also benefit businesses without obvious pollution risk exposures

Coverages Under Pollution Liability Insurance Policies

Environmental liability insurance policies offer a broad range of coverages for business owners in environmentally risky industries like energy production or manufacturing. Pollution liability insurance typically provides robust coverage against:

  • Property damage caused by pollution discharges or spills.
  • Bodily injury resulting from an environmental discharge.
  • Expenses associated with mitigation and cleanup
  • Expenses associated with legal claims (attorney fees and judgements)
  • Expenses associated with regulatory penalties imposed by local, state, or federal environmental protection agencies.

Certain coverages are available as add-ons or endorsements to the pollution liability insurance policy. These may include such aspects as business interruption, coverage for discharges not regulated as hazardous substances, reputational damage, and transportation of hazardous materials. An insurance firm experienced in environmental risks can help business owners determine the best policies and coverage types to meet specific exposure needs.

Specific Needs for Pollution Liability Insurance

While not every business owner needs pollution liability insurance, there are several possible scenarios where companies outside environmentally-risky industries can benefit from this insurance protection. For businesses that contract their services to other companies or to state or federal agencies, proof of pollution liability insurance may be required as part of the contracting process.

Another scenario is a business that owns an industrial site, but the property owner is not engaged in a hazardous industry. Pollution or hazardous waste left on the property by previous owners could be discovered years into the future, potentially putting the new owner on the hook for expensive cleanup and mitigation expenses. Here, the benefits of pollution liability insurance serve to protect business owners from unexpected or unforeseen risks.

As part of a risk management strategy, pollution liability insurance can help protect your industry clients from the risks associated with environmental spills. This specialized form of insurance supplements other business-oriented liability policies, creating a blanket of protection for business assets.

About U.S. Risk

U.S. Risk, LLC. is a wholesale broker and specialty lines underwriting manager providing a wide range of specialty insurance products and services. Headquartered in Dallas, Texas and operating 16 domestic and international branches, U.S. Risk and its affiliates would like to help you access a world of new markets and products. For more information, contact us today at (800) 232-5830.

community associations

Community Association Risk Management

Community associations are an integral part of the home ownership experience for many Americans. These associations are tasked with maintaining properties to established standards, resolving property owner disputes, and minimizing losses. Risk management, then, is a critical aspect of the community association role. In this guide, we will explore community associations insurance and how it forms the foundation of a more comprehensive risk management program for community-oriented associations across the country.

Community Associations 101

With over 370,000 associations in the United States, representing over 50% of all owner-occupied houses in the country, Community associations are groups formed by members of a specific geographical area. They are often comprised of homeowners elected in a formal leadership structure. Community associations may go by names like:

  • Homeowners’ associations (HOAs)
  • Neighborhood associations
  • Condominium associations
  • Master associations

No matter what they are called or how they are structured, these associations serve one common purpose: to protect the rights, property, and financial interests of property owners. Membership in an association may be mandatory for homeowners of a particular development, and dues may be collected to pay for common services like legal services, maintenance, and landscaping. These associations are characterized by a set of rules, both for homeowners and for the operation and responsibilities of the association itself.

Community associations insurance is a critical aspect of the role these associations play in property owners’ lives. This insurance protects against a broad range of liability risks. Developing a risk management plan around community associations insurance ultimately works to minimize or eliminate unexpected losses.

The Risk Management Plan for Community Associations

To develop a risk management plan for property owner groups, community associations have several factors to consider. These include:

  • Identifying applicable risk exposures, such as properties, liabilities, personnel, and income.
  • Evaluating risk control and/or risk financing to mitigate potential losses. Risk financing includes the purchase of community associations insurance and other insurance protections.
  • Understanding the relationship between risk control and risk financing.
  • Implementing risk control practices.
  • Monitoring risk management practices and making improvements as needed.

Developing a risk management plan for a community association may require the assistance of professionals such as attorneys, property managers, insurance agents, and accountants or tax professionals. Community associations are particularly susceptible to liability risks, often brought in the form of legal claims by homeowners in the property being managed. A single legal challenge may result in steep expenses, including attorney defenses and judgements against the association. A community associations insurance policy helps to cover the costs of legal claims and many other liability exposures.

The Role of Community Associations Insurance

In addition to protecting associations from the risks of legal claims, community associations insurance also provides comprehensive coverage for such factors as:

  • Property damage
  • Catastrophic losses
  • Personal injury claims
  • Theft, fire, and vandalism
  • Professional mismanagement or conduct claims

Optional coverages may be available, including hired and non-owned auto insurance for associations that utilize vehicles owned by the individual members, equipment breakdown coverage, and employee benefits liability. Each community association is different, and each must determine what risk exposures they face. With the help of an experienced insurance professional, community associations insurance can be tailored to the unique needs and risks of an association. With this insurance, and with a risk management plan to support insurance protections, community associations may continue to perform their role of protecting homeowner investments from losses.

About U.S. Risk

U.S. Risk, LLC. is a wholesale broker and specialty lines underwriting manager providing a wide range of specialty insurance products and services. Headquartered in Dallas, Texas and operating 16 domestic and international branches, U.S. Risk and its affiliates would like to help you access a world of new markets and products. For more information, contact us today at (800) 232-5830.

nursing home

Common Patient-Care Risks Faced by Nursing Homes

With over a million seniors receiving care from facilities like nursing homes and memory care centers, the long-term healthcare industry is experiencing significant growth. Residents and their families rely on compassionate and accurate care at these facilities. To improve risk management and to supplement the protection of skilled nursing home insurance, it is important for caregivers and facility managers to understand common risks associated with patient care. In this guide, we will explore common risks associated with residential care facilities.

The Impact of Care Risks in Nursing Homes

At-risk individuals receive care in residential facilities like skilled nursing homes, senior centers, and assisted living facilities (ALFs). With an aging population and with a range of underlying health conditions, America’s seniors face increase risks due to a variety of operational hazards in care facilities. The costs associated with these hazards can be steep. For fall injuries alone, one study published in 2012 put the cost of a fall injury at $31,507 per hospital admission.

Injuries and illnesses in long-term care facilities result in steep expenses for nursing homes and for their residents. In addition to hospitalization costs and other healthcare expenses, premiums of skilled nursing home insurance are on the rise, leading to skyrocketing overhead expenses.

Patient Risks: An Overview

Aging individuals receiving care in residential facilities like nursing homes face a wide range of risks. These risks include:

  • Slip and fall injuries
  • Medication errors
  • Neglect or negligence
  • Bedsores
  • Abuse by caregivers or by fellow residents
  • Choking hazards
  • Malnutrition
  • Dehydration
  • Elopement

Risks are exacerbated by a persistent problem in long-term care facilities – insufficient staff. Staff members are often asked to do more with less, and with these high workloads, errors in care delivery can and do happen. Staffing shortages increase the odds of a serious or fatal incident as well as open up a facility to liability claims. Even the most comprehensive skilled nursing home insurance policy is no match for the increased number of negligence or neglect claims brought on by short-staffed facilities.

Improving Patient Safety: A Top-Down Approach

Even though nursing home residents face numerous risks, many of these risks can be minimized or eliminated by facility staffers. It requires adopting a safety-oriented approach that begins with stakeholders identifying common risk exposures, then developing plans to mitigate those risks. Hazard reduction programs supplement the protection of skilled nursing home insurance while improving conditions for caregivers and residents alike.

Risk-reduction practices include:

  1. Evaluating patient rooms and common areas for slip and fall risks, including loose or slippery flooring, uneven transitions between carpeted and solid-surface walkways, cables and equipment that can cause tripping injuries, and the presence of moisture that can lead to falls.
     
  2. Adopting medication cross-checking and medication management systems to prevent medication errors. Medication errors involve as many as 27% of all facility residents on average and can lead to severe illness or death. By managing medications more effectively, patient safety is improved and expenses related to these errors is reduced.
  3. Elopement risks commonly affect facility residents with cognitive declines such as dementia or Alzheimer’s disease. Safety-oriented nursing homes have added automatic door locks, video monitoring systems, and frequent patient checks to reduce the chance of residents wandering away from their care centers.
  4. Training is an integral part of safety in nursing homes. Caregivers must receive regular safety training that includes risk-mitigation practices, patient care and handling techniques, and identifying signs of abuse or neglect.
  5. Managers must evaluate skilled nursing home insurance policies to ensure that the coverage reflects the risk exposures of a given facility. These evaluations can reveal coverage gaps, allowing managers and owners to adjust coverage limits or to gain additional insurance protections.

Skilled nursing home insurance is only one part of a broad risk management approach. By gaining an understanding of risks associated with patient care, nursing home managers and staff can improve conditions for residents. Long-term care facilities have a duty to keep residents safe from injuries and illnesses; failures to adequately protect residents can mean significant liability risks as well as increased regulatory scrutiny.

About U.S. Risk

U.S. Risk, LLC. is a wholesale broker and specialty lines underwriting manager providing a wide range of specialty insurance products and services. Headquartered in Dallas, Texas and operating 16 domestic and international branches, U.S. Risk and its affiliates would like to help you access a world of new markets and products. For more information, contact us today at (800) 232-5830.

gender equality

Promoting Gender Equality in the Recruitment Industry

Gender inequality has long been an issue plaguing the business world. Disparities in pay rates and in opportunities for advancement have led to numerous legal challenges; while progress has been made to level the playing field, true gender equality in the workplace continues to be an elusive target. For staffing agencies, promoting gender equality is part of a broad risk management strategy – a strategy that includes staffing insurance and adherence to state and federal hiring practices. Here, we will explore promoting gender equality in the recruitment industry with tips on how to transform the modern workplace.

The Case for Gender Equality

Equal treatment of genders in the workplace remains a distant goal despite many advances in recent years. Women tend to face the largest economic and advancement hurdles; women are often expected to balance work life with childcare and domestic activities, resulting in:

  • Lower pay
  • Fewer opportunities for advancement
  • Disparities in work hours and work availability

In the managerial and leadership ranks, women tend to be poorly represented. According to information compiled by the United Nations, women held only 28% of managerial positions in the world as of 2019.

Why is improving gender equality important? First, it provides economic opportunities to be shared among all workers. Second, it can create stronger, more robust workplaces; when equality is part of the picture, staff tend to be more satisfied with their employment and the attrition rate drops. Finally, for many companies, including staffing agencies, gender equality reduces the number of discrimination and civil rights violation claims. Staffing insurance often provides coverage against such claims, but high numbers of legal challenges can strain even the most comprehensive insurance coverage.

Improving Gender Equality: Tips for Staffing Agencies

There are many ways staffing agencies can promote a more equitable workplace, and one of the most important tips is centered on the posting of job descriptions. It is estimated that women tend not to apply for jobs unless they meet all of the posted criteria – knowledge, skills, and abilities – while men are more likely to apply for jobs even if they do not possess all of the criteria listed. To level the playing field, recruiters should make efforts to use neutral language in job descriptions and to make clear which skills are essential and which are preferred for candidates.

Staffing agencies must also implement bias training for their staff. Unconscious bias, or ingrained practices that influence perceptions of gender, pervades the business world. Today’s staffing agencies have diversity and inclusion specialists available to them to facilitate bias training. Recognizing that bias exists and doing what it takes to erase those biases is a major step toward gender equality in the workplace.

Interviews are often the most challenging aspect of the recruitment process for candidates. Prospective employees want to know their employer represents them and their values, yet interviewers are not always representative of candidates’ values. For example, a woman being interviewed by a man may reinforce certain perceptions, leading to feelings of discomfort or intimidation. Instead, recruiters should strive to provide a diverse interview panel with all genders represented if possible. This can promote comfort between candidates and the interview team.

Finally, accountability is a critical component of promoting gender equality in the workplace. Without tracking metrics, how are we to know if our efforts are achieving the desired results? Establishing quantitative and qualitative measures, then periodically reviewing the data to ensure we are meeting those measures, has a powerful effect on balancing gender in the workplace. With data analysis, and with the coverage of staffing insurance, recruiting agencies gain strong risk management protections as they promote equality for all candidates.

About U.S. Risk

U.S. Risk, LLC. is a wholesale broker and specialty lines underwriting manager providing a wide range of specialty insurance products and services. Headquartered in Dallas, Texas and operating 16 domestic and international branches, U.S. Risk and its affiliates would like to help you access a world of new markets and products. For more information, contact us today at (800) 232-5830.

data breach

The Actual Costs of a Data Breach in 2021

2020 was a banner year for cyber criminals. As the coronavirus halted normal business operations across industries, shifts to remote work environments and a growing reliance on digital communication resulted in significant risk exposures for businesses of every size and type. Cyber criminals were successful in penetrating corporate and government computer systems around the world. The costs associated with a single criminal data breach can be staggering – and those costs are expected to increase in 2021. Without the protection of cyber insurance, business owners face out of pocket expenses that can negatively impact operations. 

Data Breaches: An Overview

Cyber crimes can take many forms. In some cases, criminals will gain unauthorized access to computer systems and steal data. In other attacks, sensitive personal information and business data will be held hostage, only to be released after a ransom is paid to the criminals. No matter the type of cyber attack, business owners have experienced substantial financial impacts. In a single attack on a Canadian financial services firm, the company was forced to spend about $53 million to recover stolen information. A European manufacturing firm faced costs as high as $75 million for a cyber attack that crippled operations.

According to a report compiled by IBM and the Ponemon Institute, the average cost associated with a data breach was nearly $4 million in 2020. In the United States, the average cost is even higher, approaching $8 million. While cyber insurance serves to recoup many of the costs faced in the wake of a criminal data breach, preventing attacks from occurring in the first place is a powerful risk management approach.

Four Categories of Financial Loss

In the wake of a data breach or ransomware attack, business owners may be on the hook for hundreds of thousands or even millions of dollars in unexpected expenses. Monetary losses associated with cybercrimes fall into four broad categories:

Detection – costs resulting from identifying and reporting a cyber attack as well as the expenses arising from audits, investigation, and mitigation.

Notification – costs associated with informing customers and stakeholders of a cyber attack.

Response – expenses that arises from the company’s response to an attack, including beefing up computer security, additional monitoring of computer systems, and providing affected customers with legal advice, credit monitoring services, and even discounts. 

Business losses – cyber crimes often interrupt business operations, resulting in significant expenses. Lost revenue is only one of many potential effects of a data breach.

The role of cyber insurance in protecting businesses from financial hardships after a data breach cannot be overstated. This insurance provides reimbursement for many of the expenses associated with cyber crimes and offers a blanket of liability protection for business owners.

Hidden Costs Associated with Data Breaches

Lost revenue and the expenses associated with recovering data after a cyber crime are well known to business owners. Data breaches often come with a wide range of hidden costs, however, and these costs can strain even the most comprehensive cyber insurance policy. Hidden costs associated with a data breach include:

  • Legal liabilities
  • Forensic data recovery
  • Supply chain interruptions
  • Reputational harm
  • Intellectual property theft
  • Lost control over critical business infrastructure and networks
  • Increases in cyber insurance premiums after a cyber attack

In many cases, business owners discover that calculating hidden costs or intangible losses is difficult at best. Simply determining what is lost and how much it costs adds even more expense to the equation, as many companies hire third-party cyber security professionals to conduct valuation and damage analysis in the wake of a data breach. Cyber criminals continue to target healthcare operations, financial services firms, and government entities even as world economies recover post-pandemic. It is clear that cyber insurance is an essential risk management tool in 2021 and beyond. 

About U.S. Risk

U.S. Risk, LLC. is a wholesale broker and specialty lines underwriting manager providing a wide range of specialty insurance products and services. Headquartered in Dallas, Texas and operating 16 domestic and international branches, U.S. Risk and its affiliates would like to help you access a world of new markets and products. For more information, contact us today at (800) 232-5830.

workers' comp profitability

Is Workers’ Comp Profitability Shifting?

The workers’ compensation insurance sector has faced significant challenges over the past two years. The coronavirus pandemic, coupled with economic uncertainty, has influenced the growth and development of the sector. While claims frequency has been lower than anticipated and profitability has been strong, shifts in the market in 2021 and beyond have industry analysts concerned about future profits even as economic recovery is well underway in the United States.

A Banner Year in the Pandemic

As the coronavirus pandemic descended upon American businesses in the early part of 2020, insurance industry analysts foresaw a grim outlook of high claims and expensive losses related to workers’ compensation insurance. Although claims experienced an early uptick due to worker infections from COVID-19, quarantine orders and business lockdowns both combined forces to slow the claims frequency. In fact, the workers’ compensation insurance market experienced strong profitability throughout most of 2020 because lower claims greatly outpaced pandemic-related losses, according to a study compiled by Fitch Ratings

Strong profits in 2020 built on an already strong workers’ comp insurance market. According to Fitch, this segment of the commercial insurance market has been the most consistent since 2015, owing to strong loss reserves and earned premium. 

Changes in 2021?

Underwriting performance may influence significant shifts in profitability in 2021 for the workers’ compensation insurance sector. Claims activity began to normalize as businesses reopened and stay-at-home orders were relaxed. The rollout of vaccines designed to fight COVID-19 also saw many people finally able to return to the workplace. Fewer workers and more stringent workplace safety standards during the pandemic served to keep claims to a minimum; as workers return and standards relax, common workplace risk exposures are driving up claims. 

Other factors may contribute to declining profits. Fitch analysts suggest that increased business activity is only one driving factor; others include:

  • Competitive pricing within the workers’ comp sector.
  • Falling premium revenue.
  • Reductions in underwriting exposure. 

Unlike many other insurance sectors, workers’ compensation insurance has not pushed higher premium rates. In fact, it is the only major commercial insurance sector to have not increased premiums significantly, and in some cases direct written premiums have dropped by 9% when compared to 2020 figures. 

One issue that bears monitoring is the health care implications for workers exposed to or infected by the coronavirus. In certain cases, workers sickened on the job have experienced severe illnesses; chronic conditions and damage to major internal organs from these virus cases may result in higher claims severity as well as catastrophic claims or ongoing long-term care expenses for the employers of infected workers. 

Volume declines, flat premium activity, and ongoing economic hardships in the business sector continue to put strains on the workers’ compensation insurance sector. Analysts hope that a resurgent economy will help to minimize slides in profitability. For new, workers’ comp insurers will have to monitor the markets closely to detect emerging trends. 

About U.S. Risk

U.S. Risk, LLC. is a wholesale broker and specialty lines underwriting manager providing a wide range of specialty insurance products and services. Headquartered in Dallas, Texas and operating 16 domestic and international branches, U.S. Risk and its affiliates would like to help you access a world of new markets and products. For more information, contact us today at (800) 232-5830.

Directors and officers liability insurance is becoming increasingly challenging to both purchase and maintain.

State of the Public D&O Market

Directors and officers liability insurance is becoming increasingly challenging to both purchase and maintain.

While SPAC’s, often referred to as a “blank check company,” have become very popular, the speed and intense pressure to have the SPAC go public in a short window of time presents risks.

SPAC Coverage Considerations

While SPACs, often referred to as a “blank check company,” have become very popular, the speed and intense pressure to have the SPAC go public in a short window of time presents risks.

Ransomware on the Rise

Spotlight on Ransomware

Spotlight on Ransomware

Ransomware has become increasingly sophisticated, specialized and often incredibly difficult to prevent. This form of cybercrime involves hackers breaking into computer networks and locking up digital information until the victim pays for its release. Larger companies have been the primary target assumably because they have deeper pockets, but cybercriminals are increasingly attacking smaller organizations because they typically have less security in place. While ransomware is on the rise, there are ways to dramatically reduce if not eliminate the threat.

Download this post as a U.S. Risk White Paper (PDF).

Ransomware Trends

  • Payments are soaring. The average ransomware payment nearly tripled last year as compared to two years prior.
  • Paying a ransom doesn’t guarantee data recovery. One survey found ransom was paid in about one-third of cases. However, only a tiny percentage got all their data back, and nearly a third couldn’t recover more than half the encrypted data.
  • There is a rise in double extortion. This is when an attacker seizes data and demands payment. If payment isn’t made, the attackers will publish the data in an attempt to damage or embarrass the victim. In an increasing number of cases, it seems the demand for payment is really in return for not leaking stolen information online.
  • Cost of ransomware recovery has doubled, with the average total cost of recovery estimated to be ten times the average ransom payment.
  • Lawsuits being filed over small incidents are growing: more cases are seeking early settlements.

Proliferation of Ransomware

Experts predict there will be a ransomware attack every 11 seconds in 2021 and that the global cost associated with ransomware recovery will exceed $20 billion. By 2025, organizations will invest more than $1 trillion in their cybersecurity.

Ways to Reduce Your Risk

The most basic approach should include developing a companywide focus on security, an incident response plan and a separate backup system for data. In every ransomware event to date, it appears at least one (or more) of the following causes was to blame: no endpoint detection and response (EDR) strategy, ineffective backup solution/implementation, and open remote desktop protocol.

  • Implement Social Engineering/Phishing training to all employees, at least annually
  • Implement email filtering solutions
  • Implement Multi Factor Authentication (MFA) in the following areas:
    • Privileged User Accounts
    • Remote Access to Computer Systems by Employees
    • Remote access to Computer Systems by Vendors and Independent Contractors
  • Implement Endpoint Detection & Response (EDR)
  • Implement a Patch Management Program
  • Implement Daily Backups and Encrypt Backups
  • Implement Network Segmentation both physically and virtually
  • Disable all Remote Desktop Protocol ports (RDP) and Remote Desktop Gateways (RDG)
  • Implement Use of Net Generation Antivirus Software (NGAV)
  • Implement External Penetration Testing, at least annually

The Final Safety Net

While cyber insurance cannot act as a replacement for the security measures all companies should be implementing, it can help organizations with a financial safety net as well as proactive risk mitigation and management resources.

Top 10 Cyber Insurance Trends

  1. Cyber claims are growing in number and complexity
  2. External attacks are causing the most expensive losses, but internal accidents are occurring more frequently
  3. Business interruption is becoming the main cost driver behind claims
  4. Remote work and COVID-19 have heightened exposures
  5. Ransomware incidents are becoming more frequent and financially damaging
  6. Business compromise email attacks are surging
  7. Regulatory exposure is increasing around the globe
  8. Class action litigation is rising
  9. M&As are introducing cyber risk
  10. Nation state-sponsored attacks are increasing

Glossary of Terms

Multi Factor Authentication (MFA)
An electronic authentication method in which a device user is granted access to a website or application only after successfully presenting two or more pieces of evidence (or factors) to an authentication mechanism. MFA protects the user from an unknown person trying to access their data such as personal ID details or financial assets.

Endpoint Detection & Response (EDR)
Also known as endpoint threat detection and response (ETDR), EDR is a cyber technology that continually monitors and responds to mitigate cyber threats.

Patch Management Program
Patch management is the process of distributing and applying updates to software. These patches are often necessary to correct errors (“vulnerabilities” or “bugs”) in the software.

Network Segmentation (physical and virtual)
Network segmentation is an architectural approach that divides a network into multiple segments or subnets, each acting as its own small network.

Remote Desktop Protocol (RDP) or Gateway (RDG)
A Windows server role that provides a secure encrypted connection to the server via RDP. It enhances control by removing all remote user access to the system and replaces it with a point-to-point remote desktop connection.

Next Generation Antivirus Software (NGAV)
Detects, responds to and prevents all kinds of cyberattack tactics, techniques and procedures (TTPs).

External Penetration Testing
External penetration testing is a security assessment of the perimeter systems. External penetration testing usually tests from the perspective of an attacker with no prior access to your systems or networks.

The Bottom Line

Preparation is key when it comes to cybercrime prevention and loss controls. A trusted insurance expert highly experienced in all the various forms of cybercrime and how to insure them needs to be brought into the process as early as possible to ensure coverage for critical risks, future potential claims management, and the latest developments in terms and conditions.

About U.S. Risk

U.S. Risk, LLC is a wholesale broker and specialty lines underwriting manager providing a wide range of specialty insurance products and services. Headquartered in Dallas, Texas and operating 16 domestic and international branches, U.S. Risk and its affiliates would like to help you access a world of new markets and products. For more information, contact us today at (800) 232-5830.

cyber attack

Lesser Known Costs Associated with a Cyber Attack

With the growing threat of cyber attacks on business interests around the world, cyber insurance has become an integral part of risk management. This insurance helps to cover the expenses associated with a cyber attack, such as a distributed denial of service (DDoS) attack, data theft, or hijacking of business infrastructure. There are many costs associated with cyber criminality; in this guide, we will explore some of the lesser-known or “hidden” costs business owners must be aware of as they plan their network defenses. 

A Wave of Cyber Crimes

Cyber attacks have been part of the digital economy for decades. Just as soon as businesses moved to computerized systems, criminals followed in an attempt to steal or destroy sensitive electronic records. The threat of cyber attacks has only grown in recent years; computer security analysts report that the coronavirus pandemic hastened cybercrimes against businesses, governments, and financial institutions to the tune of a 600% increase in reported attacks. 

A single attack on business networks can mean hundreds of thousands or even millions of dollars in expenses for victims. In fact, the average cost of a data breach in 2020 was $3.86 million. Without robust cyber insurance protections, business owners face staggering out-of-pocket expenses during network recovery operations and the reputational harm that follows a publicized attack. 

Visible vs. Hidden Costs

Companies that fall victim to cyber attacks typically report what is known as “cost per record”, or the average expenses associated with common recovery costs like customer notification, regulatory penalties or fines, and credit monitoring services for those affected by a data breach. These visible costs account for much of the average $3.86 million expense when cyber criminals are successful in their endeavors.

Lesser-known costs, however, have the potential to create negative outcomes for business owners who have experienced a cyber attack. The effects of a data breach, email spoofing campaign, or phishing attack can often be difficult to quantify for business owners, but these effects can have a significant financial impact on business operations. So-called “hidden” expenses include:

  • Reputational harm and subsequent recovery efforts
  • Intellectual property (IP) theft
  • Supply chain and business interruptions
  • Incident management 
  • Legal liabilities
  • Forensic data recovery and investigations
  • Loss of control of critical business infrastructure of both networks and equipment

A range of valuation processes influence calculation of these hidden costs. Assigning a specific value to an intangible loss in the wake of a data breach or other cyber attack can be daunting for even the largest corporations. This valuation or damage analysis is often conducted by specialized cyber security professionals and represents an unexpected expense to deal with after a cyber attack occurs. 

Another potential side effect of cyber attacks is the rising expenses associated with insurance protection. Cyber insurance policy premiums have increased, and businesses purchasing or renewing such policies after a data breach occurs can expect steep costs. According to Deloitte, cyber insurance policyholders may experience a 200% increase in premiums after a breach. Just as likely is the insurer dropping coverage altogether unless specific data security conditions are met. Faced with the prospect of rising costs, it is critical that business owners evaluate their existing cyber insurance coverage before a data breach can harm business operations. With cyber insurance in place, business owners can rest easier knowing that the organization’s assets are protected from the rising specter of cyber criminality. 

About U.S. Risk

U.S. Risk, LLC. is a wholesale broker and specialty lines underwriting manager providing a wide range of specialty insurance products and services. Headquartered in Dallas, Texas and operating 16 domestic and international branches, U.S. Risk and its affiliates would like to help you access a world of new markets and products. For more information, contact us today at (800) 232-5830.