Last year’s Sony Pictures cyber attack represented a game-changer in the recent string of data breaches- but what will that mean for insurers?
With repercussions ranging from entertainment industry rumours to potential matters of national security, the breach – which has plagued other high-profile companies like Target, Home Depot and Dairy Queen – is a strong reminder of just what’s at risk when hackers attack, and a test of the strength of cyber liability insurance.
Though cyber insurance products have been circulating since the mid-1990s, industry analysts have expressed concern that low levels of loss data and widespread appetite for the risk may lead to insufficient pricing. And in the wake of a particularly large event — like the Sony hack — would policy limits be enough?
In this case, the answer appears to be yes.
Sony Pictures CEO Michael Lynton revealed that the cyber attack would be completely covered by insurance and will not mean any more cost-cutting for the company.
“I would say the cost is far less than anything anybody is imagining and certainly shouldn’t be anything that is disruptive to our budget,” Lynton told Reuters. Though declining to reveal the exact cost of the breach, he confirmed it is “well within the bounds of insurance.”
The attack reached into huge amounts of data, including email, sensitive employee data and pirated copies of new movies, and famously limited the release of the comedy ‘The Interview’ — which depicts the assassination of North Korean leader Kim Jong-Un — to independent theaters and video-on-demand services.
All told, some experts have put the cost of the breach at $100 million. That figure could include computer repair or replacements, lost productivity and any steps taken to improve security and prevent a future attack. According to Lynton, cyber insurance will cover all such expenses.
Experts warn that more attacks against other companies will follow, and the FBI reportedly told Lynton that 90 per cent of corporate America would have fallen victim to the attack levied against Sony.
