How Recent Data Breaches Have Affected the Cyber Insurance Market for Fund Managers
Hedge Fund Law Report
As cyber thieves, malware agents and other bad actors become increasingly savvy and data breaches – as exemplified by recent high-profile cases involving Target and WannaCry – continue to multiply, the need for sophisticated technology capable of safeguarding firm and client information grows ever more acute. If a cyber breach occurs, the potential ramifications for a firm are almost incalculable, including possible litigation from clients who feel that their sensitive information has not been properly protected, as well as possible enforcement action by regulators that are paying increasing attention to cybersecurity issues. The insurance industry has responded to the current climate, providing myriad options to corporate clients and offering plans that focus on minimizing operational and reputational damage. In the last few years, investment managers have devoted resources to identifying vulnerabilities from a cyber perspective and adopting safeguards to address these risks, with more advisers purchasing cyber insurance than ever before. To help readers understand these issues and determine which cyber insurance options might be best for them, Hedge Fund Law Report interviewed Graig Vicidomino, associate director of Crystal & Company. This article sets forth Vicidomino’s thoughts on trends in the market for cyber insurance for fund managers, including with respect to costs, scope of coverage and benefits of these policies. For more on cybersecurity, see “Surveys Show Cyber Risk Remains High for Investment Advisers and Other Financial Services Firms Despite Preventative Measures” (Jul. 20, 2017); and “Navigating the Intersection of ERISA Fiduciary Duties and Cybersecurity Data Breach Protections” (Jun. 29, 2017).