While strengthening a company’s cybersecurity posture can make a considerable difference, companies must also prepare for the unfortunate inevitability of a successful cyberattack. Recognizing this risk, companies have turned to cyberinsurance as a tool for mitigating their cybersecurity risks. Unfortunately, uncertainty still exists regarding how courts will interpret this relatively new type of insurance policy. Accordingly, contractual alternatives such as arbitration or mediation are often the most efficient means for resolving cyber coverage disputes.
Cyberinsurance, as an industry, is experiencing rapid growth. With 25 to 50 percent annual increases in premiums, 2015 set a record with $2.75 billion in gross premiums written. This is expected to double by 2020 and may get as high as $20 billion by 2025. One feature of this rapidly expanding market is that not all exposures have been properly identified, turned into language and priced into the policy. Terms and conditions are negotiable and the forms are revised frequently. This means there is little value in court precedents in interpreting these policies and from the cases so far it is clear that there have been unintended consequences from policy wordings to date.
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