By John O’Donnell

Editor's Note: This post originally appeared on WillisWire, Willis' in-house blog. Click here for the original post.

Shoppers aren’t the only ones feeling the jitters after the recent string of high-profile cyber events at large retailers. The cyber insurance marketplace is nervous, too. Underwriters are evaluating retailers with increased scrutiny, and upward pricing pressure appears to be compounded after each publicly reported breach. Current market conditions are very fluid.

For retailers, the demand for cyber insurance coverage has surged in 2014, with first-time buyers lining up and existing buyers considering higher limits.

Renewals Pricier for Retail Than for Other Sectors

For other sectors, abundant capacity and broad terms and conditions have created favorable conditions for buyers. However, retail trends remain the outlier currently.

Paid claims are hitting both the first- and third-party coverage offered on cyber policies. In the immediate wake of large public breaches, it has not been unusual to see renewal quotes rising 10-20%. Fortunately for buyers, however, pricing can usually be negotiated down closer to +5% –or even flat–if competition can be cultivated for the placement.

Retailers can still prove to be attractive risks to insurers if they can demonstrate a clean loss history, detailed incident response planning and a commitment to quality security controls.

For some retailers, cyber insurance programs placed before 2014 may contain a combination of coverage and pricing that is no longer in line with current market appetites. Finding carriers willing to renew existing structures may prove challenging.

Meanwhile, incumbent carriers may seek some combination of pricing increases, retention increases, and limit decreases. Prospective and existing buyers alike can anticipate continued underwriter inquiries into their security controls. Underwriters will be focused on encryption protocols and point of sale (POS) devices.

Smart Shopping for Retailers

Retailers are encouraged to shop broadly before binding their insurance programs. Individual carrier appetites for retailers vary considerably and the differences in terms can be significant. In addition, we recommend retailers include cyber insurance actively in their breach incident response plans.

If you have an insurance program in place, do not leave it sitting on the sidelines. Do your best to have your preferred vendors and firms lined up and approved by your insurance carrier in advance.

Finally, always be aware of the specific terms and conditions of your insurance policy, most notably your notice requirements.

John O’Donnell is a Senior Broker with Willis North America’s FINEX Cyber and E&O Practice. Based in New York, he works with organizations to develop strategic cyber risk management programs. He delivers specialized consulting to firms in the retail, health care and higher education sectors.

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Willis: Retailers shopping for cyber coverage face tight market

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