Industry first offers cover for outsource and data breach risk
24 April 2008
The number of firms now outsourcing core processes and services has prompted Lloyd’s insurer Kiln and international broker Lockton to offer a new insurance product which goes further than simply covering physical loss risks.
Traditional insurance policies cover physical damage to a firm’s operation but Kiln and Lockton’s Business Resilience Insurance cover goes further. The policy protects against loss of income as a result of serious data breaches (Data Breach Reputation Guard) and direct losses from a disruption to an outsourcing and off-shoring agreement (Outsource Protector).
The rise in number and severity of serious data breaches have an impact on a company's profits and reputation, so the policy covers a loss of net profit and any related expenses if the firm is hit by a serious data breach.
The Outsource Protector element of the product protects the insured when there is a failure in the outsourcing firm’s ability to perform their role.
Emily Freeman, Executive Director of Lockton’s technology and media team, explains: “Non-performance risks arise when the vendor is unable to fulfil the contract due to political violence, force divestiture, licence cancellation terrorism and other causes.”
“Outsource Protector will reimburse the named insured for abandonment and relocation costs as well as extra contractual costs of working during the period of indemnity as a direct result of a variety of force majeure perils defined in the policy.”
Dan Trueman, Special Risks Underwriter at Kiln, says the product has been driven by the demands of modern businesses.
“It is a market first,” he adds. “It goes beyond the old concept that clients just need cover for physical losses. It is a product which seeks to protect against non-physical damage losses which attack the revenue stream and often over which companies have little or no control.
“I think it is a first step in the industry’s efforts to mirror the way that business is moving and the new risks which come with a lengthening supply chain when it comes to core systems.”
Last updated on 29 Dec 2009
