PriyaPatel
TLDR:
Global tech outage prompted by a defective update from cybersecurity technology company CrowdStrike could lead to a surge in business interruption claims. Insurers are bracing for potentially thousands of claims from affected organizations. Not all businesses may be covered by typical business interruption policies or cyber insurance policies. The financial implications of the outage could reach tens of billions of dollars, making it an “insurance catastrophe.” Legal repercussions for companies involved are also possible. Travel insurers expect an uptick in claims, especially from travel delay and missed connection policies. Force majeure clauses may not apply in this situation. Cyber insurance is meant to cover events like these.
Analysis
The recent global tech outage caused by a software update from CrowdStrike has significant implications for businesses and insurers alike. Industry experts are anticipating a surge in business interruption claims as organizations impacted by the event seek compensation.
Ryan Griffin, a cyber partner at insurance broker McGill and Partners, stated that insurers are preparing for possibly thousands of claim notifications resulting from the incident. However, navigating the path to compensation may not be straightforward for all businesses, as typical business interruption policies may not cover losses from the outage. Additionally, not all cyber insurance policies include business interruption coverage, necessitating a separate purchase at an additional cost.
The financial ramifications of the outage could be substantial, with estimated economic damages reaching tens of billions of dollars. Nir Perry, CEO of CyberWrite, highlighted the severity of the situation, referring to it as an “insurance catastrophe.” The defective update from CrowdStrike, designed to protect Microsoft Windows systems, may also lead to legal consequences for the companies involved.
Travel insurers are bracing for an increase in claims, particularly related to travel delay and missed connection policies. InsureMyTrip expects more than 1,600 customers to be affected by the incident. Despite the widespread disruptions experienced by travelers globally, force majeure clauses, which typically remove liability for unforeseeable catastrophes, may not apply in this scenario.
Overall, the global tech outage underscores the importance of cyber insurance in mitigating the financial impact of unforeseen events. Meredith Schnur, cyber practice leader at broker Marsh, emphasized that cyber insurance is designed to cover incidents like these, reinforcing its value in times of crisis.
