Cloudy Coverage?

Cyber policies may fall short for cloud computing.

The ability to outsource a company’s technology infrastructure to a third party via cloud computing may seem like a dream come true—until the cloud arrangement breaks down. In April 2011, many Web sites that used Amazon’s cloud services business for hosting went down when Amazon encountered technical difficulties.

Businesses that rely on cloud computing risk losing revenue or facing extra expenses if the cloud provider experiences problems, says Robert Parisi, network security and privacy practice leader at insurance brokerage Marsh.

In response to that situation, Marsh recently rolled out a CloudProtect endorsement, which will cover a company’s losses or additional expenses resulting from problems experienced by its cloud service provider. CloudProtect also covers the cost to the company of switching to a new provider. And Parisi says Marsh has put together insurers that are willing to provide up to $5 million of coverage for the various primary and excess layers of coverage.

“If the cloud provider fails, there’s going to be a loss of revenue, there’s going to be extra expense,” he says. “You can’t have it continue to be at this $100,000 sublimit. What we’ve done is say look, that’s failing to recognize the way the world works today.”

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