Brokers see soaring demand from companies for insurance against cyber attacks

When Brian Rosenbaum started pitching cyber insurance to companies in 2006, he was met with blank stares from risk managers and resistance from information technology experts, who insisted their networks were impenetrable.

All of that has changed in the past year and a half said Rosenbaum, who heads the cyber insurance division of Aon Corp.’s Canadian brokerage arm.

“We’ve reached a threshold where people are now coming to us instead of us going to them,” said the vice president.

Insurance brokers say the frequency of high-profile data breaches is causing a surge in demand for insurance products that protect against losses stemming from cyber attacks.

On Thursday, U.S. prosecutors charged five people with stealing 160 million credit and debit card numbers from companies including 7-Eleven Inc., JC Penney and French retailer Carrefour, calling it the largest data breach in the country’s history.

Other victims of data breaches in the past few years include Sony’s PlayStation Network, financial institution Citigroup and a number of Canadian government departments.

A breach can be costly. Companies face notifying clients that their personal information has been compromised, offering credit protection services, hiring a crisis management firm and defending against lawsuits.

Aon has placed more cyber insurance policies in just the last 18 months than it did in the previous five years, said Rosenbaum.

“People are beginning to understand that this is a risk that can affect any business.”

Financial institutions, online retailers, hotels and restaurants, health-care companies and educational institutions are driving the demand because of the volume of personal and financial data they collect, said Rosenbaum.

Global insurance broker Marsh Inc. said the number of organizations that purchased cyber insurance in the U.S. shot up by 33 per cent from 2011 to 2012.

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