Another Type of Hurricane Warning
Hurricane season started June 1; it’s expected to be active with one named storm in advance of the official beginning. Now there is a warning of another type of hurricane – a “cyber hurricane”.
According to Scott Stransky of AIR Worldwide, a cyber hurricane is an incident that takes down the cloud computing network disrupting businesses that depend on it. Possible causes include outside cyber attacks, internal errors or system failures (possibly due to storm damage from actual hurricanes). A study by AIR and Lloyd’s describes some of the impacts:
- A “very extreme” event resulting in cloud downtime of five and a half to 11 days could affect up to 12.4 million U. S. businesses.
- An incident taking one of the top three cloud service providers offline for three to six days would result in total losses between $5.3 billion and $19 billion, of which only $1.1 billion to $3.5 billion would be insured.
- An incident taking a smaller could provider (one of the 10th to 15th largest) offline for three to six days would result in losses between $300 million and $1.5 billion, between $40 million and $300 million insured.
For businesses that rely on the clould, these incidents would result in significant business interruption losses and possible loss of data. The standard business interruption sub-limit for “interruption of computer operations” is $2,500 annually although some Property policies will provide somewhat higher limits. Cyber policies can include coverage for first party loss with a waiting period for business interruption. In many cases these losses are not part of the basic policy but must be added by endorsement. It is important not to limit coverage to your own computer system if data is stored and/or services provided by the clould. Policies may exclude a total shutdown of the Internet or disruption due to system failure not under your control.
Just as you should be taking precautions against an actual hurricane, you should be reviewing your cyber insurance to be sure it responds to a cyber hurricane. If you haven’t purchased cyber insurance, Beacon can help you choose the best coverage.