Using Cyber Insurance to Mitigate Risk: Finding an Insurer and Navigating the Application Process (Part One of Three)

Historically, PE sponsors have focused their compliance and risk management efforts on issues typical to the private funds industry (e.g., conflicts of interest and improper expense allocations). Amid a recent spate of high-profile cyber attacks, however, PE sponsors are focusing their efforts on cybersecurity and taking out cyber liability insurance to protect their businesses and portfolios. Although insurance does not mitigate all of an organization’s cyber risk, it is an important element of a multi-pronged approach to managing that perpetual risk. The Private Equity Law Report interviewed legal and insurance industry experts about the current state of the cyber insurance market and what companies need to know about this risk-management tool. This first article in a three-part series describes the trend toward increased adoption of cyber insurance, explains how to find the right insurer and provides actionable advice on navigating the application process. The second article will address how much coverage is necessary and how companies can be savvier about having the right terms in place. The third article will discuss techniques for managing the cyber liability policy after it has been issued, as well as how to work with the broker and insurer in the event of a cyber breach. See “Surveys Show Cyber Risk Remains High for Investment Advisers and Other Financial Services Firms Despite Preventative Measures” (Jul. 20, 2017); and “Cyber Insurance Coverage, Pre-Breach Mitigation Efforts and Post-Breach Response Plans Can Reduce Harm to Fund Managers From Cyber Attacks” (Jan. 19, 2017).

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