A Lloyd’s underwriter has created a unique solution to the risks associated with the rise of Open Source software.

The world’s first cover against the misuse of Open Source code is now available. Lloyd’s underwriter, Kiln, has combined with broker Miller Insurance to launch the cover.

What is Open Source code?

Open Source is a free to access code system which can be used under a licence agreement. The idea behind Open Source is simple. Anyone can access the software from the internet without paying licence or maintenance charges. Programmers can review the source code and fix bugs or add features and then redistribute it. With all those people checking it, it is less likely to contain defects than many commercial packages, hence less susceptible to be attacked by hackers.

The code is free, but anyone who improves or upgrades the code or its capabilities is duty bound to provide those enhancements to other users free of charge.

What is Open Source Compliance Insurance?

Users of the code must adhere to very strict licensing rules. Open Source Compliance Insurance, available in the US and UK, provides up to $10m of cover should it be found that the company hasn’t complied with these licensing rules. It will also indemnify against loss of profits associated with the withdrawal or alteration of a product incorporating non-compliant code.

Kiln Risk Solutions underwriter Matthew Hogg, says the new IT environment brings with it new and intangible risks.

“The emerging Open Source model of worldwide collaborative technology introduces novel business risks that traditional insurance products can, but until now have not, addressed,” he adds. “Open Source Compliance Insurance will make it safe for large and small corporations to adopt and build upon important technological innovations.”

Standard Errors and Omissions cover excludes Open Source compliance, which can be a particular concern for privately-held technology companies seeking to be acquired.

“Not every company using Open Source is exposed to risks associated with licence infringement, but as adoption rapidly increases it is critical that companies take licences seriously and fully understand what constitutes violation and therefore exposure,” explains Daniel Egger, chief executive of Open Source risk management, which will partner both Kiln and Miller as the worldwide risk assessor and advisor under the facility.