As more and more high-profile cyber attacks are identified,businesses are increasing their investment in cyber insurance tohelp mitigate their risk exposure in the event their data ishacked. According to U.S.-based insurance broker Marshin its latest report, Benchmarking Trends: Cyber Attacks Drive InsurancePurchases for New and Existing Buyers, client spending onstandalone cyber insurance increased 32% for the first half of2015. Pricing for cyber insurance also increased – especially forindustries that have experienced significant cyberlosses. 

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Across specific business lines, spending grew significantly.(See Figure 1) Power and utility companies increased theirgrowth rate 100%, nearly doubling their take-up rates for the sameperiod in 2014. Universities and other education-based institutionssaw a growth rate of 155% – a 90% change in their cyber insurancetake-up rates over the previous year. Marsh notes that "schoolsettings are ripe for cyber attacks due to the hefty amount ofstudent and staff personnel information that is stored in a varietyof places." 

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Related: Demand for cyber risk insurance market on the rise

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Following the Anthem hack earlier this year, spending byhealthcare organizations increased to 41% in 2015, up from 37% in2014. Based on the type of information health care providers hold,they are prime targets for cyber criminals who understand theopportunities shared data exposures present. There are also threatsthat exist because of individuals filing false healthcare claimswith stolen data.

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The hospitality and gaming industries, as well as the financialsectors experienced a 5-8% increase in cyber purchases for thefirst half of 2015 too. While financial institutions are alreadytargets of cyber attacks, a new warning from Standard & Poor'sstated that banks could run the risk of having credit ratingsdowngraded if an organization is unprepared for a cyberincident.

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Marsh chart
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Retailers

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(Photo: WaveBreak Media/ThinkStock)

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In the communications, media and technology (CMT) sector,companies with revenues over $1 billion purchased 50% more cybercoverage for the first six month of 2015 ($55.8 million) thanduring the same period in 2014 ($38 million). More sophisticatedattacks have prompted companies in the CMT sector to escalate cyberspending, with most purchasing an average of $18.1 million in cyberlimits.

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The retail sector, which has already seen a number ofhigh-profile cyber attacks at Home Depot, Target, Michaels, andLord & Taylor, experienced a 32% rise in the cost of cyberinsurance. The average price increase was 19% for other businesssectors. Healthcare firms experienced rate increases similar to theretail sector because of changes in the program structure,especially in the area of managed care.

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The high-profile cyber breaches have gotten the attention ofbusinesses, which are now being far more proactive in their riskmanagement strategies. Corporate leaders recognize that it is nolonger just an IT problem and that the most effective programs areimplemented enterprise-wide. While overall capacity in themarket is abundant at $500 million per risk on average, largecompanies purchased only $30.4 million in coverage limits duringthe first half of 2015.

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According to Marsh, it is vital for organizations to assesstheir vulnerabilities, determine how they would respond in anactual cyber breach, and be proactive in preparing for thiseventuality. Network security firm, FireEye, says attackers arequick to adapt as businesses change their cyber strategies.Companies are learning sooner if there has been a breach, butFireEye says hackers continue to utilize new techniques for eachphase of an attack. 

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See related story: The 10 most expensive data breaches to date

How can you transform your risk managementpreparedness and response strategy into a competitiveadvantage? Introducing ALM's cyberSecure — Atwo-day event designed to provide the insights and connectionsnecessary to implement a preparedness and response strategy thatchanges the conversation from financial risk to competitiveadvantage.  Learnmore about how this inaugural event can help youreduce risk and add business value.

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