When we share our Enterprise Risk Management (ERM) With A Captive Insurance Company (CIC) Strategy with mid-market and small business owners, we stress business survival, and cyber-attack is one of the critical risks we highlight. Captive Insurance Companies are ideal for addressing cyber-attack because policies can be written with few exclusions and the favorable tax treatment of small CICs enable businesses to amass significant loss reserves to provide liquidity in the event of a breach. CIC insurance policies can be customized to address the cost of a cyber breach, business interruption (lost revenue) and reputational damage.
And, this evolving risk is more and more ominous. The Denver Post recently reported that “60% Of Small Companies That Suffer A Cyber Attack Are Out Of Business Within Six Months.” On October 23, 2016, Gary Miller of GEM STRATEGY MANAGEMENT authored the article that points out the growing threat that mid-market and small businesses face.
In his article, Miller points out that:
The U.S. National Cyber Security Alliance found that 60 percent of small companies are unable to sustain their businesses over six months after a cyber attack. According to the Ponemon Institute, the average price for small businesses to clean up after their businesses have been hacked stands at $690,000; and, for middle market companies, it’s over $1 million.
One might think that cyber criminals only focus on large companies, like Target. Or perhaps North Korea will attack your business if you make a movie about their bumbling head of state. This simply isn’t the case. Miller makes it clear that:
Small and mid-sized businesses are hit by 62 percent of all cyber-attacks, about 4,000 per day, according to IBM. Cybercriminals target small businesses because they are an easy, soft target to penetrate. They steal information to rob bank accounts via wire transfers; steal customers’ personal identity information; file for fraudulent tax refunds; and, commit health insurance or Medicare fraud.
CLICK HERE to read the entire article in the Denver Post.
Miller provides a list of steps small and mid-market businesses should take to protect themselves. One of his recommendations is to purchase cyber insurance. We certainly agree. Many businesses should have cyber-attack and its effects insured both commercially and via a captive insurance company, resulting in layered holistic coverage designed to ensure the company’s survival.
Miller concludes his article:
Cybercrime is now the world’s largest business running in the trillions of dollars. So far the “bad guys” are winning. So business owners need to do more than hope and pray that their businesses won’t be next.