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Cyber-insurance market grows

Cyber attacks are on the rise and interest in insuring against them is growing, according to a new Guy Carpenter Emerging Risks report.

With several major US retailers reporting credit and debit card hacks last year, the Organisation of American States dubbed it “the year of the mega-breach”.

Guy Carpenter says cyber crime is also becoming a concern for companies that once felt they had relatively little exposure.

This is supported by the World Economic Forum’s annual global risks report, which puts cyber attacks in the top five for likelihood.

The Guy Carpenter report cites US retailer Target as an example of the impact cyber crime can have on businesses.

Late last year a hacker stole 40 million credit and debit card accounts via malware installed on the chain’s point-of-sale systems. The criminal also stole the personal details of up to 70 million customers.

Target has incurred $US88 million ($99.8 million) of expenses, including business interruption, reputational damage, data recovery, system upgrades and legal claims. 

These are partially offset by expected insurance recoveries of $US52 million ($59 million).

Cloud-based computing is another concern, the report says.

The Washington-based Centre for Strategic and International Studies says that although it is still in its infancy, the cyber-insurance market’s potential is vast, with cyber crime costing the global economy $US445 billion ($504.5 billion) annually. 

“While many companies have in the past counted on their general commercial liability policies for coverage, they are increasingly taking out standalone contracts,” Guy Carpenter says.

The average limits bought for cyber risk grew to $US11.5 million ($13 million) for all industries and all company sizes last year, slightly up on the average of $US11.3 million ($12.8 million) in 2012.