A digital graphic of a lock, surrounded by binary code and the words “cyber security.” The first step in evaluating the viability of using a captive to cover cyber risks is to determine whether taking on additional risk is sensible given your company’s financial strength, capital objectives and tolerance for risk. (Credit: kras99/stock.adobe.com)

Most organizations today face exposure to cyber and technology threats as they continue to expand, grow and operate. Data privacy and security breaches, business interruption expenses, investigative and restoration efforts and harm to an organization’s reputation can be damaging and costly.

The FBI’s 2021 Internet Crime Report highlights an unprecedented increase in malicious cyberattacks last year alone. When losses increase across the industry, this causes rates to increase and coverage to be limited, all while limits decrease and insureds’ retentions increase. Because of this, it’s tempting to think that captives may be a solution to combat cyber insurance difficulties, since captives can help stabilize insurance costs and enhance coverage. But are cyber captives right for everyone?

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