With more businesses and consumers reliant on cloud computing, even a temporary service disruption can have far-reaching effects, with the potential to shut down services, wreak havoc on e-commerce operations and business reputations. damage.
One company, New York-based Parametrix Insurance Services LLC, is targeting businesses affected by a cloud outage. Parametrix sells insurance specifically to mitigate the risk of downtime events, to compensate businesses for any loss, including lost revenue and cost of recovery, when their cloud provider or cloud-based applications the cloud service is decreasing.
Some 50 brokers offer Parametrix policies, which cover outages at major cloud providers, such as Amazon.com Inc.
Amazon Web Services, Microsoft Body
Azure and Alphabet Inc.
Google Cloud, as well as e-commerce platforms on which a retailer can depend. Business insurance agency ComTech-Leavitt Insurance Services Inc. of St. George, Utah, this week joined the list of brokers offering the policy.
insurance is a relatively new Downtime area. But unlike the cybersecurity insurance industry, which has taken off with the rise of ransomware attacks, few companies offer insurance for an event caused by software, network or other glitch, analysts say. follow the cloud business.
Breakdowns are not uncommon. Amazon Web Services, for example, suffered at least three outages in December, with further disruptions prompting businesses and underscoring how regional digital infrastructure issues can have far-reaching effects.
The number of cloud outages increased by just 3% in 2021 compared to 2020, according to ThousandEyes, a Cisco Systems Inc.
company that performs cloud and internet performance monitoring. But the number of breakdowns of 30 minutes or more has almost tripled.
Insurance premiums for Parametrix insurance can range from thousands of dollars per year to hundreds of thousands of dollars per year, depending on the company. Coverage generally ranges from $100,000 to $5 million, but can extend to $10 million in some cases. While Parametrix creates and oversees policies, payouts are backed by reinsurance companies like Hannover Re and some Lloyd of London underwriters.
“In general, most companies actually know how much they’re losing on downtime,” said Neta Rozy, Parametrix co-founder and the company’s chief technology officer. “But, otherwise, we have criteria based on industry, company size and a few other parameters and we can recommend coverage per hour. »
Coralogix, a Tel Aviv data analytics company, has a Parametrix policy in August 2021. The company runs on AWS.
Coralogix customers are mostly cloud and internet service providers. The company monitors their software applications in real time, recording performance and issue alerts if it spots a potential issue. If the Coralogix service is unavailable due to an AWS cloud outage, the data company promises to its customers to refund a portion of their monthly charges for the time the Coralogix service was unreachable.
Coralogix Chief Executive Ariel Assaraf declined to say how much customers are being reimbursed. But, he said, “for us to be able to charge through our insurance every time there’s a cloud outage mitigates that risk.” »
believes that the use case Trevor White, a research manager at Nucleus Research Technology and Consulting, for Parametrix Insurance is going to be very accurate.
Large companies don’t usually rely on a cloud platform and many companies’ operations aren’t significantly affected by a cloud outage of just a few hours, he said.
But, he said, for businesses running on a single-vendor cloud platform and operating in a competitive environment, such as a time-sensitive restaurant, retailer or provider-the-services IT insurance could prove invaluable.
Ms. Rozy of Parametrix believes virtually every technology business needs downtime insurance.
Craig Lowery, Vice President, Analyst, Technology Research and Consulting Gartner Inc.
which covers cloud computing, said while many cybersecurity policies cover cloud downtime that results from a cyberattack, he has not come across many insurers that offer policies that only downtime noncyber event coverage clouds.
Several insurance companies, such as Chubb ltd.
, Offers cybersecurity policies that cover data-restoration costs and legal fees as a result of a data breach, among others. Cyber insurance policies can also cover lost revenue if a business’s operations are interrupted for a period due to a cyber event.
For payment on business interruptions caused by a cyber security incident, the business should be affected for a period of time—depending on the policy—could range from eight hours to 24 hours or more.
Parametrix pays after a one-hour waiting period. It said its policies can serve as a cyber insurance add-on for customers who have purchased cyber insurance policies with business interruption provisions that do not start for eight hours or more of downtime.
“I see this as closing the gap due to waiting periods on cyber policies,” said Joseph Weipert, co-owner and senior vice president ComTech-Leavitt.
Write to John McCormick at [email protected]
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