Cyber Crime and Cyber Terrorism

FIRST-PARTY CYBER LIABILITY
First-party insurance refers to a policy which provides protection for the asset owned 
by the insured organization and in reference to cyber risks typically includes a data 
breach of a company’s own information and services (e.g., website hacked and defaced 

---

224
CHAPTER 16
The rise of cyber liability insurance
or Denial of Service (DoS) attack). Additional first-party liability can include business 
interruption caused by a network or system failure, loss or damage to digital assets, 
theft of digital assets (including money), cyber extortion and reputational damage.
THIRD-PARTY CYBER LIABILITY
Third-party cyber liability refers to a policy which provides protection against cyber 
risks which puts at risk customer or partner information the organization is con-
tracted to keep safe. For example, a website hacked which results in the exposure 
of customer credit card details or an IT Cloud provider who experiences an outage 
resulting in the loss of client information. This form of cover also provides indem-
nification against the losses incurred through investigations, defense costs and fines 
resulting from a breach and can include the costs associated with notifying and com-
pensating customers affected by the breach.
Both forms of liability can be equally damaging with first-party liabilities impact-
ing upon the capability of the primary business to operate, whilst third-party liabili-
ties may impact their clients and customers which may affect the entire reputation 
and brand of all those involved. Organizations therefore need to take account of an 
array of cyber risks, understand their exposure to them and then evaluate the poten-
tial for using insurance as a control mechanism. As we become more connected and 
rely increasing on cyberspace to provide services the need to protect against losses 
increases with it.