San Antonio—[Updated 9/25/19, 1:22 p.m. See below.] Cybersecurity is a fast growing area of the insurance industry as insurers capitalize on the smattering of fear-inciting headlines, from the Equifax and Facebook breaches to the ever-present risk of ransomware.
Large companies like Nationwide Mutual Insurance offer businesses liability coverage if their customers’ data is stolen. As a part of a deal with Apple and Cisco Systems, the insurer Allianz offers an “enhanced” cybersecurity insurance policy to people that use those companies’ products. Many in the industry are still trying to figure out exactly how to measure risk and price the insurance, as Axios reported last month.
A new San Antonio company, CyberFortress, is planning to offer a type of cybersecurity insurance that’s focused on small businesses, in part because the current insurance options are more targeted toward large enterprises, according to CEO Huw Edwards. Edwards founded the company in January while working at Jungle Disk, a data backup and cybersecurity company that he and Jungle Disk CEO Bret Piatt spun out of cloud computing business Rackspace in 2016, through their investment firm Porthcawl Holdings. CyberFortress plans to begin offering insurance coverage in 2019, as the San Antonio Business Journal first reported Monday. [Updated to clarify who founded CyberFortress.]
Unlike some of the larger insurers, which might focus on liability coverage for data breaches, CyberFortress will initially only cover small businesses for events like loss of cash—if, for example, an e-commerce company’s website is hacked, preventing them from making sales, or if an employee of a startup makes a large, fraudulent payment to a phishing scheme, Edwards says. Insurers do offer coverage like that to businesses, but it can often take months for a claim to be filed and approved, he says.
While a larger business with plenty of free cash flow might be able to handle a loss like that, it’s harder for smaller companies to survive a similar circumstance, he says. Edwards wanted to develop an insurance business that would enable them to quickly reimburse the customer if there is an interruption to the business, allowing it to continue operating.
“Time is of the essence, not so much to contain the breach or hack, but to survive,” Edwards says. “In a small business, if they can’t weather two weeks, or the next month of payrolls, it may not matter whether they get made whole in the long term.”
CyberFortress plans to measure the risk of its customers by using system that’s based on each business’s cybersecurity situation, which would determine the cost of the premium. A company that runs its website on an old version of WordPress with outdated plugins, which it hosts on a self-managed server, might be considered high-risk, Edwards says. A company that uses WP Engine to run its website, and has Amazon Web Services host its infrastructure, would be considered less of a risk.
The company is still developing its plans and policies, and may offer others with reinsurance providers it plans to use. Edwards was the CFO and chief strategy officer for Jungle Disk, but is now stepping away from those positions to run CyberFortress. Both companies are portfolio businesses of a holding company that Edwards and Piatt operate, Porthcawl. Edwards said CyberFortress has received a seed round of funding from Jungle Disk and Jungle Disk investors, and the company will look into further funding in the coming months.
