Specialty Insurance Blog

Cyber risk Incidents

Small and medium sized organizations are victims of employee errors and hacker attacks, and need Cyber Risk/Data Breach Insurance.  Larger companies and the government are not the only targets, and smaller companies are perceived as less secure. 

Here are some incidents: 

Actuary:  A hacker found his way into the network and proceeded to erase the entire server.  While some backups existed, the cost to replicate the data exceeded $10,000.

Accountant:  A hacker found his way into an accountant’s system and stole tax filing information, but the accountant did not know his system had been breached.  The hacker used the information to file bogus tax returns for a number of the accountant’s clients, and these returns generated tax refunds to the hacker.  The breach was discovered when the accountant’s clients were blocked from filing their correct returns by the IRS (because the IRS already had a return on file).

Ag Products Company:  Cyber thieves accessed the bank accounts of an ag products company in Oregon and stole approximately $223,000.  The thieves initiated three wire transfers to the Ukraine on three consecutive days, each just under the Company’s per day wire limit of $75,000.  Neither the company nor the Company’s bank noticed anything for almost two weeks, and the money is gone.

Classic Employee Error:  An employee lost a laptop while traveling.  The laptop contained names, addresses, birth dates and social security numbers for company employees.  The company reported the breach to their state and, as required, notified all employees and paid for one year of credit report monitoring to mitigate future issues.

See additional examples here, here, here and here.

Cyber risk insurance is an essential coverage and is not expensive.  It is not difficult to explain to potential clients, although the details can be complex.  As a wholesale broker, we provide cyber risk insurance to all types of organizations through retail insurance agents and brokers.

Specialty Insurance Expertise: Tennant Risk Services
Supporting Insurance Entrepreneurship: Tennant Capital Partners

 

Bank Account Theft & Cyber Insurance

Another example of a bank account takeover triggers the question:  Did they have Cyber Risk Insurance?  It appears not.  Brian Krebs of Krebs on Security reported that another small business is the victim of a bank account takeover (see here).  The cyber thieves initiated three wire transfers to the Ukraine totaling approximately $223,000, and the victim is seeking to hold the bank responsible.  No mention of cyber risk insurance.
 
As a follow-up to a prior post on bank account takeovers (see here), an escrow firm in Missouri lost its case for recovery of funds from its bank.  It lost $440,000 as a result of bank account takeover and cyber heist (report here, prior post here).

Why no mention of cyber risk insurance?  Cyber risk insurance is an essential coverage and is not expensive.  It is not difficult to explain to potential clients, although the details can be complex.  As a wholesale broker, we provide cyber risk insurance to all types organizations through retail insurance agents and brokers.

Specialty Insurance Expertise: Tennant Risk Services
Supporting Insurance Entrepreneurship: Tennant Capital Partners

Surplus Lines Insurance – Best Practices

Placing business in the excess & surplus lines insurance market (E&S insurance) has many of the same characteristics as the standard insurance market, but also has a few key differences.  The most significant difference is the use of wholesale brokers.  Successfully utilizing the E&S market through a wholesale broker with the proper licensing and expertise will smooth the process and enhance the retail producer’s business prospects.  These best practices are suggested:

• Communicate, don’t assume – When in doubt, communicate expectations
• Document (& Document & Document) – You have heard this before
• Time & information – The underwriter needs time & information to properly assess risk
• Check the coverage – Is it what your customer expects?
• Bind in writing – Always
• Expect compliance requirements – And follow them
• Use an expert – As a partner

Tennant Risk Services is a specialty E&S wholesale broker, and delivers expertise, markets and exemplary services in the placement of professional liability insurance (E&O, D&O, EPL, Cyber).  Review our expectations here.

Specialty Insurance Expertise: Tennant Risk Services
Supporting Insurance Entrepreneurship: Tennant Capital Partners

Insurance Agents E&O – Custom Coverage

Some insurance agents and brokers do not realize that their insurance agents E&O policy does not cover all of their services.  Insurance agents are always looking for an edge, and differentiation strategies can lead to a variety of value added services (see our prior post).  Some of these value added services may not fit within the standard definition of covered services in an insurance agents/brokers E&O policy.  An example:

An insurance agency specialized in a specific class of business, and also provided value added services to its clients including risk management, compliance and training services.  The insurance agency requested insurance agents E&O coverage without realizing that there was a shortfall in the standard coverage.  The value added services did not completely fall within the standard definition of covered services, so a customized solution was provided in the E&S market.

The coverage provided by your insurance agents & brokers E&O policy should match the services you are providing to ensure proper protection should claims arise.  We have experienced an increase in inquiries from insurance agents & brokers with deficient coverage.  Let us know if we can review your own insurance agents & brokers E&O coverage.

Specialty Insurance Expertise: Tennant Risk Services
Supporting Insurance Entrepreneurship: Tennant Capital Partners

 

 

Cyber Risk Insurance Report

The Insurance Information Institute (III) has released a white paper on the growing cyber threat and implications for insurance (see here).  Key points:

• The cyber threat is growing
• “larger companies… tend to have a greater exposure to cyber risk”
• More companies are buying cyber risk insurance coverage, but the majority still do not.
• Legislation & regulation will likely increase, increasing the burden on companies to protect information

Our perspective:

• Cyber attacks are increasing, and the attacks are getting more sophisticated.
• Small businesses are prime targets, and we are continually surprised at the number of small companies that have actually had some sort of breach
• Any company with confidential data should be buying Cyber Risk Insurance
• While many companies buy Cyber Risk Insurance, many of those that do buy do not have adequate coverage

Cyber Risk Insurance is an essential coverage and is not difficult to explain to potential clients, but the details are complex.  As a wholesale broker, we provide Cyber Risk Insurance to all types organizations through retail insurance agents and brokers.

Specialty Insurance Expertise: Tennant Risk Services
Supporting Insurance Entrepreneurship: Tennant Capital Partners

 

Career Advice – For Insurance Entrepreneurs

Career advice is plentiful, but great career advice is hard to come by.  Here is a fascinating power point summary on your career from the founder of LinkedIn via BusinessInsider (see here).  Takes a different approach on career planning.  Key points sound very familiar to any entrepreneur:

• Develop a Competitive Advantage
• Build a Network
• Pursue Breakout Opportunities
• Take Risk (Intelligent Risk)
• Who You Know – is Important

What is unique about this summary is that the presentation treats a career as a startup.  It is long – 190 slides – and can apply to any career.  Apply this to specialty insurance!

Specialty Insurance Expertise: Tennant Risk Services
Supporting Insurance Entrepreneurship: Tennant Capital Partners

Partnership Agreements for Insurance Agents

Many insurance agencies are partnerships, and the structure of the partnership, embedded in the operating agreement or partnership agreement, can determine the survival of the partnership.  Entrepreneur Magazine has a basic, suggested partnership agreement as a starting point (see here).  While this is a good starting point, it does not really get to the crux of the issue for an insurance agency.

Insurance agents/brokers are sales organizations, and the partnership’s results will depend on the ability to sell insurance.  So a partnership agreement used by an insurance agency needs to separate out the shares allocated to the provision of capital from the shares allocated for future results – based on sales.  The partnership will only survive if the partners understand this and construct an agreement that reflects a balance over time.  The copy of the partnership noted does not do this.

Specialty Insurance Expertise: Tennant Risk Services
Supporting Insurance Entrepreneurship: Tennant Capital Partners

Small Business Bank Account Theft & Cyber Insurance

Criminal bank account takeovers are getting more sophisticated and brazen, and the right Cyber Risk insurance coverage is essential to protect at risk customers.  A recent incident is a fascinating example.  This was first reported by Brian Krebs of Krebs on Security  (see here).  In addition to the reporting, he also was the first to inform the victim about the theft.

Hackers stole the bank account access information of a construction company and then stole $900,000 in a coordinated series of wire and ACH transfers.  The criminals withdrew the cash and used 62 different mules to immediately fly the cash out of the country.  What was unusual about this cyberheist was the coordination of a large DDoS (distributed denial of service) attack at the company’s bank and a takeover of the company’s computers to prevent both organizations from seeing what was happening until the money was gone.

Cyber Risk Insurance is an essential coverage and is not difficult to explain to potential clients, but the details are complex.  As a wholesale broker, we provide Cyber Risk Insurance to all types organizations through retail insurance agents and brokers.

Specialty Insurance Expertise: Tennant Risk Services
Supporting Insurance Entrepreneurship: Tennant Capital Partners

 

Architect/Engineers E&O Market Fragmented

The architects & engineers (A&E) professional liability insurance (E&O) market is showing signs of tightening, finally.  We discussed professional liability market conditions in a prior post (here), and a recent article in Property Casualty 360 (see here) notes that the A&E market is tightening.  Key drivers noted include:

• Sluggish construction activity
• Reduced protections & risk management
• Claims activity

We have a somewhat different perspective.  While claims activity has increased and revenues have declined for architects & engineers, there are a large number of specialty underwriters available for all types of A&E accounts supporting a competitive market.  However, prior underwriting results are adding caution to the mix.  Day to day, tightening in the A&E market is driven more by tighter underwriting than overall rate increases.  The result is higher prices and reduced coverage for more complex or higher risk accounts and little or no increases for lower exposure, stable accounts.

Our characterization of the market is fragmented and in transition, not hard.

Use our wholesale specialty markets and professional liability insurance expertise to navigate the market for your A&E E&O accounts. 

Specialty Insurance Expertise: Tennant Risk Services
Supporting Insurance Entrepreneurship: Tennant Capital Partners 

 

Top Ways to Manage Cyber Risk

Cyber Risk protection requires a heavy dose of prevention and risk transfer through Cyber Risk Insurance.  Here are 10 ways to manage cyber risk from law firm Sherman & Howards (see here).  Our selection of the top are:

• Human Nature Is Your Greatest Risk
• Regularly Assess Your Cyber Risk
• Create A Culture Of Privacy
• Know Your Vendors
• Maintain Adequate Insurance

Cyber Risk Insurance is an essential coverage that all organizations need.  Use our wholesale broker expertise to find the best fit for your clients.

Specialty Insurance Expertise: Tennant Risk Services
Supporting Insurance Entrepreneurship: Tennant Capital Partners