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The Increased Cyber Liability Threat for Real Estate Industry


The Increased Cyber Liability Threat for Real Estate IndustryThe real estate industry just as any other sector is increasingly vulnerable to cyber crimes. All segments representing the various aspects of the industry – from property managers, brokers/ agents, title agents, developers, appraisers, multi-service real estate firms and others – are exposed to the emerging trend of cyber liability risks that we have seen over the last several years. In fact, back in December, we wrote about how cyber threats are among the top risks cited by property managers.

The risk for real estate firms stems from the significant amounts of confidential third-party information, either in the form of personally identifiable information (PII) or confidential corporate information, that cyber criminals would like to get their hands on. For example, rental applications, credit reports, leases and rental agreements contain personal information of applicants and tenants — the type of information targeted by cyber criminals. You also have Real Estate Investment Trusts (REITs) that typically operate income-producing real estate. Additionally, some REITs also engage in financing real estate. Depending on the REIT structure (public versus private) and type of investor (individual, corporation, etc.) information is held electronically or in hard copy by these trusts and can include tax records, federal identification numbers, social security numbers and other confidential information. Again, valuable information for criminals.

When a data breach occurs – whether a result of hacking, a stolen laptop, or other means, the fallout can be significant. There are notification costs involved, forensic expenses, regulatory fines, network interruptions that can impact daily business operations, crisis management, third-party liability costs and much more. Without the appropriate measures in place to mitigate and transfer risk, including securing Cyber Liability insurance, a large real estate firm’s balance sheet can be damaged and for a smaller firm such a risk can be crippling.

More Companies Buying Cyber Liability

Cyber Liability insurance, also known as Privacy & Network Security coverage, provides protection to help businesses safeguard against sensitive data breaches, computer hacking, dumpster diving, computer viruses, employee sabotage or error, and pilferage of information.  Coverage can be designed to provide for:

  • Third-party claims arising from a failure of the insured’s network security or a failure to protect data.
  • Regulatory actions in connection with a security failure, privacy breach or the failure to disclose a security failure or privacy breach.
  • Payment of customer notifications, public relations and other services to assist in managing and mitigating a cyber incident.
  • Cost for forensic investigations, legal consultations and identity monitoring for victims of a breach.
  • Network business interruption insurance in the event of a material interruption of your business operations caused by a network security failure by reimbursing for lost income and operating expenses.

With high-profile cyber breaches making headline news over the last year, including those occurring at Anthem, Sony, Home Depot, Target, and others, and cyber attacks continuing to escalate, the demand for Cyber Liability insurance is on the rise. In fact, industry analysts report that spending on cyber attack liability insurance nearly doubled between 2013 and 2014, to about $2 billion. We’re even seeing smaller companies also insuring their risks, in part, because of mandates from companies with which they do business.

Axis Insurance Services provides the real estate industry and others with Cyber coverage and can customize a plan that addresses your specific exposures. Give us a call at (877) 787-5258 to discuss how we can help you reduce your risk in the event of a cyber loss.

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Blogged on: March 11, 2015 by Mike Smith
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