One company, New York-based Parametrix Insurance Services LLC, is focusing on businesses that have experienced a cloud outage. When a business's cloud-computing provider or cloud-based applications service goes down, Parametrix sells insurance designed specifically to mitigate the risks of downtime events, compensating them for any losses, including lost revenue and the cost of recovery.
There are about 50 brokers who sell Parametrix policies, which cover outages at major cloud providers such as Amazon.com Inc.'s Amazon Web Services, Microsoft Corp.'s Azure, and Alphabet Inc.'s Google Cloud, as well as e-commerce platforms on which a retailer may rely. ComTech-Leavitt Insurance Services Inc. of St. George, Utah, joined the list of brokers offering the policy this week.
Downtime insurance is a newer industry. However, unlike the cybersecurity insurance industry, which has exploded in response to the rise of ransomware attacks, few companies offer insurance for an event caused by a software, network, or other flaw, according to cloud industry analysts.
Outages aren’t uncommon. Amazon Web Services, for example, experienced at least three outages in December, causing disruptions at other businesses and demonstrating how regional digital infrastructure issues can have far-reaching consequences.
According to ThousandEyes, a Cisco Systems Inc. company that monitors cloud and internet performance, the number of cloud outages increased by only 3% in 2021 compared to 2020. The number of outages lasting 30 minutes or longer, on the other hand, has nearly tripled.
According to the company, policy premiums for Parametrix's insurance can range from thousands to hundreds of thousands of dollars per year. Coverage typically ranges from $100,000 to $5 million, but in some cases can go up to $10 million. While the policies are created and managed by metrix, payouts are backed by reinsurance companies such as Hannover Re and certain Lloyd's of London underwriters.
"In general, most businesses will know how much they lose in a downtime event," said Neta Rozy, co-founder and chief technology officer at Parametrix. "However, if that is not the case, we have benchmarks based on industry, company size, and a few other parameters, and we can recommend coverage per hour."
Coralogix, a Tel Aviv-based data analytics firm, purchased a Parametrix policy in August 2021. AWS is used by the company.
Customers of Coralogix are mostly cloud and internet service providers. The company monitors their software applications in real time, records performance, and sends out alerts if a potential problem is detected. If Coralogix's service is unavailable due to an AWS cloud outage, the data analytics company promises to refund a portion of its customers' monthly fees for the time the Coralogix service was unavailable.
Coralogix CEO Ariel Assaraf declined to say how much customers will be reimbursed. However, "being able to get paid by our insurance whenever there's a cloud outage mitigates that risk," he said.
According to Trevor White, a research manager at the technology research and advisory firm Nucleus Research, the use case for Parametrix's insurance will be very specific.
Big businesses aren't typically reliant on a single cloud platform, and many companies' operations aren't significantly impacted by a few-hour cloud outage, he claims.
However, he believes that the insurance could be useful for businesses that run on a single vendor's cloud platform and operate in a competitive, time-sensitive environment, such as a restaurant, retailer, or computer-services provider.
Ms. Rozy of Parametrix believes that virtually every business requires technology-downtime insurance.
While many cybersecurity policies cover cloud downtime caused by a cyberattack, Craig Lowery, a vice president, analyst at technology research and advisory firm Gartner Inc. who covers cloud computing, said he hasn't come across many insurers offering policies that cover cloud downtime caused by non-cyber events.
Several insurance companies, including Chubb Ltd., provide cybersecurity policies that, among other things, cover data-restoration costs and legal fees in the aftermath of a data breach. Cyber insurance policies may also cover lost revenue if a company's operations are disrupted for an extended period of time due to a cyber event.
For payment on business interruptions caused by a cybersecurity incident, the business would have to be affected for a period of time that could range from eight hours to 24 or more hours, depending on the policy.
After a one-hour waiting period, Parametrix pays out. It stated that its policies can be used in conjunction with cyber insurance for clients who have purchased cyber insurance policies with business-interruption provisions that do not kick in until eight or more hours of downtime.
"I see this as bridging the gap caused by cyber policy waiting periods," said Joseph Weipert, co-owner and senior vice president at ComTech-Leavitt.