Insurers face business interruption claims after global tech outage
By Noor Zainab Hussain
July 19 (Reuters) -Insurers could face a raft of business interruption claims after a worldwide tech outage crippled industries from travel to finance on Friday, insurance industry experts said.
A software update by global cybersecurity firm CrowdStrike CRWD.O appeared to have triggered systems problems that grounded flights, forced some broadcasters off air and left customers without access to services such as healthcare or banking.
"Insurers are bracing for hundreds, if not thousands, of claim notifications from organizations that are impacted by the CrowdStrike event," said Ryan Griffin, a partner focused on cyber at insurance broker McGill and Partners.
However, not all businesses would get insurance cover for their lost time and money.
A typical business interruption policy within a regular commercial insurance program would not provide coverage against losses stemming from Friday's outage, said Marcos Alvarez, head of insurance at ratings agency DBRS Morningstar.
And not every cyber insurance policy likely has coverage for business interruption; such coverage would have to be bought separately at extra cost.
"Some cyber insurance policies exclude non-malicious events, and there are waiting periods and deductibles that businesses will have to consider before making a claim with their insurance carriers," said Nir Perry, CEO at CyberWrite, a cyber insurance risk platform.
Perry said economic damages could reach tens of billions of dollars in such events, and added the outage should be considered an example of an "event that can produce what could be defined as an insurance catastrophe."
The event could also bring with it legal claims for CrowdStrike and Microsoft MSFT.O. A defective update by CrowdStrike, designed to protect Microsoft Windows systems, triggered the global IT outage.
CrowdStrike and Microsoft did not immediately respond to requests for comment.
"Airlines (and other industries) might have rights under their contracts that allow them financial or other remuneration based on the CrowdStrike outage," said Sam Levine, senior vice president - professional and cyber solutions at specialty insurance broker CAC.
The outage caused major issues for travelers around the world – grounding planes for hours.
Travel insurer InsureMyTrip said it anticipates an increase in travel insurance claims, with the most from travel delay and missed connection policies. More than 1,600 customers may be impacted as they depart for or return from trips on Friday, it said.
Industry experts also said that force majeure would not apply for the event.
Force majeure clauses in contracts remove liability for unforeseeable and unavoidable catastrophes that prevent participants from fulfilling obligations.
"This is exactly what cyber insurance is meant to cover. ... This is not something that is outside of our control," said Meredith Schnur, U.S. and Canada cyber practice leader at broker Marsh.
Reporting by Noor Zainab Hussain in Bengaluru; additional reporting by Nathan Gomes and Akash Sriram; Editing by Leslie Adler
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
