UNDERSTANDING CYBER INSURANCE: THE BASICS

In today’s digital age, businesses of all sizes are increasingly reliant on technology and data, which makes them more vulnerable to cyber threats. From ransomware and phishing attacks to data breaches and business interruption, cyber risks are growing in both frequency and impact. This is where cyber insurance plays a crucial role. Claims covered under a cyber policy are broad, but typically fall into three core categories:

• Liability (such as privacy lawsuits and regulatory defence)

• Internal Financial Loss (including extortion, notification expenses, data recovery, business interruption, and cybercrime)

• Emergency Incident Response (covering urgent costs incurred in reacting to a cyber event).

  
  

  

  Cyber attack events are becoming more common and sophisticated by the day

  
  

Cyber insurance provides both financial protection and support services to help businesses manage and recover from these potentially devastating incidents. Here's a breakdown of the main coverage areas you should understand.

Privacy Breach Notification and Crisis Management

Cyber incidents, whether caused by ransomware, phishing scams, malware, or other forms of attack, often result in the exposure of sensitive data or confidential information. This section of the cyber insurance policy is designed to cover the key costs involved in managing and responding to such breaches.

Coverage typically includes:

• Immediate incident response services.

• Notification expenses to affected clients, vendors, or other stakeholders.

• Digital forensic investigations .

• Reputation management support.

• Credit and identity protection services for individuals whose personal data may have been exposed.

This coverage is crucial in containing the damage, meeting regulatory requirements, and maintaining customer confidence after a privacy breach.

Privacy & Security Liability

Covers legal liability from data breaches or cybersecurity failures.

This section protects your business from third-party claims arising from:

• Loss, theft, or mishandling of personal or confidential data

• Breaches of privacy laws or failure to notify affected parties

• Inadequate privacy or network security controls

• Cyber incidents that harm third-party systems

• Failure to follow your own privacy policies or notices

It helps cover legal costs, damages, and regulatory penalties if your business is held responsible for a privacy or security lapse.

Social Engineering

Covers losses from deceptive or fraudulent instructions that lead to the transfer of funds.

This section provides protection when cybercriminals trick staff into transferring money — often by impersonating a trusted employee, vendor, or customer. These attacks typically involve phishing, email compromise, or spoofed payment requests.

This coverage is usually subject to a lower sub-limit than other parts of the policy.

Cyber Extortion

Protection against ransomware and digital extortion threats

Cyber extortion refers to threats made against your business’s IT systems, typically demanding a ransom to prevent or halt a cyber attack — such as data encryption, system shutdowns, or information leaks.

This coverage can include:

• Ransom payments (where legally permissible)

• Negotiation and mediation services to handle the threat

• Crisis management support to minimise operational and reputational damage

• Security response costs to neutralise the threat

• Forensic investigation expenses 

Business Interruption

Covers income loss and extra expenses when operations are disrupted by a cyber event.

If your business is forced to halt or slow down due to incidents like ransomware, system failure, or vendor outages, Business Interruption (BI) coverage helps protect against lost profits and additional costs needed to restore normal operations.

• Loss of Gross Profit or Revenue while your business is unable to operate due to a system compromise or outage.

• Increased Operational Costs incurred to keep the business running or speed up recovery — such as renting temporary systems, outsourcing, or hiring extra support staff.

• Extended Period of Indemnity Some policies continue to provide financial support as businesses can take time to fully recover.

• Contingent Business Interruption (CBI)Protection if a third-party IT provider or cloud service  suffers a cyber incident that disrupts you

• System Restoration & Reboot Delays

Data Recovery & System Damage

This section covers the costs associated with restoring IT systems and data that have been lost, damaged, or destroyed. It includes expenses for retrieving, repairing, or replacing data, software, and hardware. Coverage also extends to removing malicious software and restoring affected systems to operational status.

Regulatory Defence and Fines

This section covers the legal defence costs and any regulatory fines incurred as a result of a cyber incident, including privacy breaches or security violations.