A new insurance partnership between Liberty International Underwriters and CyberRiskPartners’ CloudInsure will provide insurance backing for cloud providers and the businesses that utilize them. The two companies hope the new platform will reinforce cloud companies’ commitment to protect the data stored in a cloud by outside businesses, and in turn help boost the cloud industry.
Oliver Brew, vice president of technology for LIU, says recruiting new business can be a challenge for cloud providers because of concerns over data security. Businesses worry that if they store their data with a cloud provider and a breach occurs, they will not be compensated for the loss of that data or the recovery and breach response costs. In fact, traditional cyber liability policies usually exclude losses incurred by a third party, such as a cloud provider.
Brew says the idea behind CloudInsure is that a cloud provider can fund the insurance for their business customers so the business can have peace of mind related to the cloud.
“One of the most precious assets of any company, regardless of size, is their data assets. If they are not confident that it is secure, they will be reluctant to take advantage of the savings and benefits of a cloud,” says Brew.
New York-based CyberRiskPartners, the holding company for CloudInsure, develops and manages risk mitigation platforms for cloud companies and developed CloudInsure to provide a more efficient risk-transfer option for these providers.
David Kimmel, CEO of CyberRisk Partners, says they began working on CloudInsure several years ago because current cyber liability policies do not address all of the potential costs that are associated with a data loss in the cloud particularly if that information is held by a third party. The product was not backed by any insurance capacity, however, until LIU signed on recently.
“Cloud computing has been around for a long time and it’s now an established business practice. Our premise has always been there needs to be a risk transfer solution with it,” he says. “This market keeps getting bigger and bigger and is clearly going to be a growth market in the 21st century.”
The LIU/CloudInsure coverage applies to any loss, theft and liability of the data stored within the cloud, whether the loss occurs from a hacking, virus or subsequent liability event. Cloud providers and their business clients will also have access to all of LIU’s privacy breach resources including claims handling and pre- and post-breach services.
The platform will offer insurance capacity of up to $10 million per risk and coverage through LIU for cloud providers if their systems fail to deliver, as well as to the businesses that store personal data with that cloud provider.
The coverage does not apply if a covered business has a data breach of information not stored with the insured cloud provider.
Kimmel says cloud companies have been specifically asking for a program like this one so they have insurance to back up their product.
“When security is the number one issue to cloud adoption, some companies don’t join clouds,” says Kimmel. “Roughly 60 to 70 percent of risk managers who use cloud services have said they would buy cloud insurance if it was offered.”
Brew says LIU began working with the CloudInsure product because they see a lot of potential in this market.
“The cloud market is on the cusp of exponential growth and we want to be leading the charge in terms of innovation and bringing products to market through non-standard, non-traditional channels to help businesses secure their data,” he says.
Brew says insurance is a natural piece of the cloud computing puzzle, but so far carriers have failed to come up with effective products for a variety of reasons:
“For one, companies in this space in particular are inherent risk takers and the fast-pace of technology development has outpaced innovation and development in the insurance sector,” he says. “And second, I think until recently there hasn’t been a critical mass big enough to have an insurance sector focused on it.”
To be eligible for the CloudInsure platform, cloud providers will have to be evaluated and vetted by the two entities. LIU and CloudInsure will also make sure the customers that its cloud providers work with have secured their data in a manner that is “in line with our ambitions,” says Brew. In other words, the cloud customers need to also be vigilant about following data security practices.
Kimmel says they expect to see demand from small- to middle-market commercial businesses, particularly those in the financial services, energy and healthcare industries, because they stand to lose so much from data breaches.
CloudInsure and LIU will also work with several large cloud providers to understand their risk models and make sure they can offer the most effective coverage. This will also help to provide more actuarial data about the young industry.
Kimmel says he expects as this sector grows, more insurance capacity will enter the marketplace, but there will need to be specific programs like CloudInsure to address the risk.
“If it’s going to be a significant line of business for the insurance sector, there needs to be an industry-wide solution and capacity,” he says. “The fundamental premise of the cloud is really starting to add value to business and it’s going to need a real risk transfer market.”