Cyber security has long been a priority for the finance and investment industries.
Regulators stress the importance of robust security protocols, detailing best practices to establish a culture of consumer protection and compliance. These practices include Cyber insurance for financial advisors, as evidenced by the Securities and Exchange Commission’s recommendation for all registered investment advisors to include this coverage as part of their cyber security program.
And Cyber Insurance isn’t only for large firms. The Financial Industry Regulatory Agency (FINRA), which regulates the activities of broker-dealers, has issued guidance for small firms with fewer than 150 registered representatives. FINRA’s cyber security checklist recommends that small firms develop plans for identifying and protecting against cyber threats, as well as a plan for response and loss mitigation—which includes Cyber Insurance coverage.
ProWriters can serve the needs of any of your clients, regardless of size. Larger enterprises have access to custom Cyber Liability Insurance terms and customized coverage thanks to our partnerships with more than 50 of the top cyber markets. Small and midsize businesses benefit from broad liability coverage and never pay for more coverage than they need.
Beyond Compliance: The Need for Cyber Insurance for Financial Advisors
Compliance with SEC and FINRA recommendations is only one reason financial advisors need a cyber security insurance plan. Simply put, a data breach can be devastating.
Registered investment advisors (RIA) have a responsibility to protect their clients’ data and their assets. Considering that RIAs cumulatively manage $4.7 trillion in client assets, and that total continues to grow, they represent a tempting target for hackers. In short, RIAs have what hackers want the most: Money and information that can be sold for more money.
And criminals have been successful. In 2016, the White House reported that the financial and securities industry had more data breaches than any other. And consulting firm PwC notes there are only two types of financial services firms: those that have fallen victim to a cyber attack, and those that will.
PwC also reports that more than half of investment firms experienced fraud in 2019 and 2020, with most of the losses attributable to cyber crime. Of the companies that experienced fraud, 1 in 10 lost more than $50 million.
Investors are becoming savvier to the risks associated with cyber crime and their investments while demanding more information and assurance that their assets will be protected. As large investors perform their due diligence to determine the best RIAs to place their assets with, most are looking for evidence of Cyber Insurance for financial advisors.
Ultimately, as investors of all sizes seek RIAs that have both adequate resources and protections to manage cyber attacks, as well as the resources and coverage necessary to recover from an incident, firms cannot afford to pass on Cyber Insurance for financial advisors.
What Does Cyber Insurance Cover?
Cyber liability is complex and presents myriad risks. As a leading Cyber Insurance company, ProWriters offers flexible Cyber Liability Insurance coverage designed to cover privacy, data, and network exposures. In most cases, these breaches aren’t covered by Professional Liability or Commercial General Liability Insurance, leaving your company vulnerable.
With that in mind, cyber insurance for financial advisors specifically includes:
First-Party Cyber Insurance
First-party cyber liability insurance covers the internal costs of a cyber incident. It’s designed to protect against cyber attacks and data breaches that occur at your place of business.
Internal costs of a data breach include:
- Breach detection.
- Investigation of the scope of the breach.
- Breach containment and protection of unaffected data.
- Payment of ransom/extortion demands.
- Business disruption.
- Loss of revenue, productivity, and intellectual property.
- Damaged equipment.
- Breach notification.
Third-Party Cyber Insurance
Third-party Cyber Insurance for financial advisors covers external costs that arise from the incident. If clients hold you responsible for losses due to a data breach, this coverage protects against those expenses.
These external costs of a data breach include:
- Court costs and legal fees.
- Settlements and judgments.
- Sanctions and fines.
- Loss of customer assets.
ProWriters provides your clients with additional protection and business-saving services, including:
- Multi-media coverage to protect intellectual property, online advertising, and address copyright infringement, libel, or slander claims.
- Access to cyber risk management tools and vendors.
- Access to vendor panels that include legal, PR, and security experts for insight into handling security incidents.
- Loss prevention services.
Get Your RIA Clients the Cyber Coverage They Need
Take the first step toward helping your RIA clients secure Cyber Liability Insurance by requesting a quote. Our two decades of experience offer a streamlined, simplified process that eliminates hassles and gets your clients the coverage they need.
RIA in a Box clients also have access to ProWriter’ platform to request quotes from Axis, Tokio Marine HCC, CFC, Coalition, Corvus, At-Bay and other leading insurers based on their own individualized needs. This simple integration makes it easy for firms to understand why they need coverage and compare providers and plans to make the best selection for their needs.