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Source: Getty

In The Media

Does Your Cyber Insurance Cover a State-Sponsored Attack?

Modern businesses face a level of cyber risk that vastly exceeds the protections they can rely on from either insurance or government relief. To address this shortfall, business leaders must work with insurers and policymakers to devise practical, long-term solutions.

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By Jon Bateman
Published on Oct 30, 2020
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Technology and International Affairs

The Technology and International Affairs Program develops insights to address the governance challenges and large-scale risks of new technologies. Our experts identify actionable best practices and incentives for industry and government leaders on artificial intelligence, cyber threats, cloud security, countering influence operations, reducing the risk of biotechnologies, and ensuring global digital inclusion.

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Source: Harvard Business Review

In 2017, Merck lost an& eye-popping $1.3 billion when it got caught in the crossfire of a Russian cyberattack targeting Ukraine. The event, later dubbed NotPetya, was the largest cyberattack in history, costing $10 billion worldwide — economic damage akin to a medium-sized hurricane, or a small war. Western governments vowed to hold Russia accountable, yet none stepped forward to support the companies that were hit by the attack.

Insurance was more helpful — to a point. The insurance industry sells policies specifically designed for cyber incidents, but their scope and scale remain limited. Cyber insurance paid for just 3% of NotPetya’s global damage, leading some NotPetya victims to turn to other insurance policies with more ambiguous terms. For example, Merck invoked property and casualty policies that covered all manner of hazards without explicitly mentioning cyber incidents. These policies had so-called “war exclusions,” which barred coverage for damages due to “hostile or warlike actions” by governments or their agents. Many insurers cited these clauses to push back on the claims, triggering high-stakes legal battles that continue to this day.

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This article was originally published in the Harvard Business Review.

About the Author

Jon Bateman
Jon Bateman

Senior Fellow and Co-Director, Technology and International Affairs Program

Jon Bateman is a senior fellow and co-director of the Technology and International Affairs Program at the Carnegie Endowment for International Peace.

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Jon Bateman
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Carnegie does not take institutional positions on public policy issues; the views represented herein are those of the author(s) and do not necessarily reflect the views of Carnegie, its staff, or its trustees.

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