By Erik Holm
The number of U.S. companies buying insurance to protect against
a cyber attacks and data breaches jumped 33% last year at insurance
broker Marsh Inc., making cyber risk one of the fastest growing
lines of coverage, the company said Thursday.
Businesses that purchase the coverage are buying more of it,
with the average company getting $16.8 million in cyber insurance
last year, an increase of nearly 20% from 2011, according to a new
report from the company.
With revelations of cyber attacks dominating the news in recent
months, the Marsh report is the latest sign that corporate America
is growing more concerned about the potential damages that can
arise when companies lose control of customer information.
The U.S. Department of Energy, Twitter Inc. and several news
outlets, including The Wall Street Journal, have recently revealed
attacks by hackers. News Corp. (NWS, NWSA) owns Dow Jones &
Co., publisher of this newswire, and The Wall Street Journal.
This week, J.P. Morgan Chase & Co. (JPM) came under a
so-called "denial of service" attack, the latest bank to suffer
from an assault that increases the volume of website hits so that
actual customers can't access the site.
The Iranian government was thought to be behind an earlier
series of attacks against U.S. banks in recent months. Iran has
denied any involvement with the attacks.
Meantime, Army Gen. Keith Alexander, head of the Defense
Department's U.S. Cyber Command, this week told a Senate panel he
was concerned cyber attacks would grow in the year ahead.
Insurance companies and brokers have been trying to sell add-ons
to standard commercial insurance policies to cover such risks for
more than a decade, but have only gained traction with the product
in recent years.
"From the guys managing the help desk to the board, they're now
all aware of the risks," said Bob Parisi, network-security and
privacy-practice leader for Marsh, a unit of Marsh & McLennan
Cos. (MMC). "It's one of the fastest growing lines of insurance out
there."
A rise in concern by regulators has also helped fuel demand for
the product. President Barack Obama last month signed an executive
order aimed at bolstering computer-network protections and noted
the "rapidly growing threat from cyberattacks" in his State of the
Union address.
The Marsh report mirrors findings from a survey conducted by
American International Group Inc. (AIG) that found more corporate
executives are concerned about cyberattacks and data breaches than
property damage and investment risk. The poll found 85% of the
survey participants were very or somewhat concerned with cyber
risks, compared with 80% who were concerned with property damage
and 76% concerned about securities and investment risks.
Mr. Parisi estimated that insurers collected about $350 million
to $450 million in premiums on cyber-insurance policies last year.
He said roughly 20% of U.S. businesses buy the coverage, indicating
room for substantial growth.
According to the Marsh report, the services industry, which
includes legal, accounting, and personal-services firms, had a 76%
increase in the number of clients purchasing cyber insurance, the
largest of any sector last year. It was followed closely by the
education sector, which saw a 72% rise.
Write to Erik Holm at erik.holm@dowjones.com
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