Should your firm invest in cyber risk insurance?

Firms have increasingly been turning to cyber risk insurance in order to better manage cyber threats and any resulting legal liability from data breaches. But how useful is this tactic? Herein, I analyze the impact of cyber attacks on firms, some of the applicable U.S. law shaping private sector responses to data breaches, and the extent to which cyber risk insurance helps mitigate the cyber threat. Ultimately, I argue that firms must take a proactive stance toward managing cyber attacks not only for their wellbeing, but also to enhance overall cybersecurity and help secure critical national infrastructure. (C) 2012 Kelley School of Business, Indiana University. All rights reserved.