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Firms’ intangible assets still vastly unprotected: Aon & Ponemon Institute

26th October 2017 - Author: Staff Writer

Many enterprises lag behind the protocols for doing business in the tech-era; firms recognise the growing value of intangible assets but continue to disproportionately spend four times more budget on insurance for Property, Plant and Equipment (PP&E) risks, according to a report by Aon and the Ponemon Institute.

As historical tangible assets are transferred into intangible, digital assets, firms are increasingly under pressure to protect these from cyber attacks and other data leakage risks.

However, the first step in achieving proportionate protection of assets is recognising their real value by understanding the financial comparison between tangible property and network risk exposure – an area in which many businesses still lag behind.

The 2017 EMEA Cyber Risk Transfer Comparison Report found the relative insurance protection of certain tangible versus intangible assets to be disproportionate, highlighting the lack of proactivity among businesses surveyed; only 30% of businesses are “fully aware” of the legal and economic consequences of European Union General Data Protection Regulation (GDPR) which is set to come into force on the 25th May, 2018.

Dr. Larry, of Ponemon, said; “a better understanding of the relative financial statement impact will assist organizations in allocating resources and determining the appropriate amount of risk transfer resources to allocate to the mitigation of network risk exposures.”

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38% of businesses surveyed said they’ve experienced a cyber loss in the past 24 months, however only 15% of their probable maximum loss (PML) is covered by insurance.

This is in stark contrast to the policy limits purchased against physical assets like Property, Plant and Equipment (PP&E), where around 60% of PML is typically covered.

The report also shows that the impact of business disruption to information assets is 50 percent greater than to PP&E *.

Vanessa Leemans, Chief Operating Officer for Global Cyber Insurance Solutions at Aon, said; “we found that most organizations spend much more on fire insurance premiums than on cyber insurance, despite stating in their publicly disclosed documents that a majority of the organization’s value is attributed to intangible assets.”

The GDPR will introduce a 72-hour notification for all personal data breaches – except those unlikely to pose a risk to individuals.

Fines for non-compliance with the GDPR will increase to as much as €20 million or 4% of an organization’s global turnover (whichever is highest).

Insurance carriers are starting to see an increase in demand for cyber coverage as cyber exposure awareness becomes an enterprise-wide issue, but with the uncertainty that still surrounds cyber insurance both on the side of carriers and cedants, it’s not surprising that enterprises lag behind on cyber protection – however, it’s clear that with the speed of technological development, there’s no room for complacency.

Leemans concluded; “With 65% of EMEA organizations expecting their cyber risk exposure to increase over the next two years, cyber risk needs to be approached at an enterprise-wide level in order to achieve cyber resilience. This should include enterprise-wide education, assessment and quantification, preventive risk management, incident response plan, as well as cyber insurance.”

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