What's Happening?
A recent outage at Amazon Web Services (AWS) lasting approximately 15 hours has been classified as a 'moderate incident' by cyber analytics provider CyberCube. The outage has highlighted the systemic risks
associated with cloud service provider concentration. Although the incident is not expected to result in catastrophic losses for the cyber insurance market, it underscores the need for businesses to review their cloud-provider dependencies. The outage has prompted discussions about the adequacy of current insurance policies, particularly in terms of system failure contingent business interruption (CBI) coverage and the associated costs of incident response and data restoration.
Why It's Important?
The AWS outage serves as a critical reminder of the vulnerabilities inherent in relying heavily on a single cloud service provider. For the insurance industry, this incident is another 'near miss' that could erode confidence in cyber insurance products if not addressed. The event highlights the importance of diversifying cloud platforms to mitigate risks and the need for more responsive insurance policies that can effectively cover business interruption losses. The incident also raises questions about the complexity and responsiveness of current insurance products, which may deter policyholders from filing claims due to the burdensome recovery process.
What's Next?
The AWS outage presents an opportunity for the insurance industry to reassess and potentially enhance the value proposition of their products. Insurers may need to consider incorporating parametric solutions to make policies more responsive and attractive to clients. Businesses are likely to review their cloud service strategies to prevent similar disruptions in the future. The incident may also prompt further discussions within the industry about the need for clearer policy language and more efficient claims processes to build trust with policyholders.
