partner login

BMS News

Brand value: The future is Apple

The big news this week is that Apple has joined the highest echelons of corporate life with a market capitalisation in excess of $500 billion. It is now worth (based on this measurement at least) more than Microsoft and Google combined, or about the same as Poland (GDP $530 billion).

Perhaps, slightly surprisingly is that Apple’s market capital is not based solely on brand. It holds $30 billion in cold cash and $67 billion in long-term investments. It also has hard assets of $138 billion. However, that still leaves $265 billion in intangibles and perfectly illustrates the challenge facing risk managers today and in the future.

Historically, insurance has been purchased to cover buildings, contents, stock, equipment and even traditional liabilities such as Employers Liability of Public/Products Liabilities. This reflected the value of those tangible assets. But as we have commented on elsewhere on our site, these days there is so much more value in intangible assets (such as intellectual property rights and goodwill) than in tangible assets. And insurance just hasn’t kept pace with the change in where the majority of the value lies.

Most risk managers can lay their hands on their “All Risks” material damager and business interruption insurance, but how many have an “All Risks” Intangible Asset Protection? The challenge for risk managers and brokers alike is to design insurance programmes to provide this protection. It may require new tools (like Data Breach coverages, Intellectual Property protection and Cyber Insurance) and new understanding, but if risk managers really do want to live up to their name it needs to be tackled right now.

China’s Cyberwar Skills

Rupert Alabaster, Director BMS Professional & Financial Servicesresponds with his thoughts following  the  US report on China’s cyberwar skills, a risk to military  – profiled by BBC News, 8 March 2012. Rupert will be establishing a regular blog on the themes of Cyber Risk, Intangible assets and the insurance market.

There is more and more talk of the next confrontation being fought in cyberspace rather than with soldiers. Certainly, there is a concern that key infrastructure from utilities and government through to emergency-responder networks and banking systems maybe targeted.

And it will not obviously be one nation state versus another, at least on the surface. Rather all sorts of cyber groups may be at work infiltrating systems, manipulating, stealing and changing data.

As more and more companies become aware that it is not just a lone hacker sitting in their bedroom that could be interested in what is on their servers, there is a much heightened focus on cyber security. In turn, risk managers are being asked to buy cyber insurance as protection against security breaches. But – and it is a big but – cyber insurance policies are not all the same and few, if any, are specifically designed to protect against a coordinated attack on behalf of a State.

The problem is that most cyber policies carry a version of the traditional War/Terrorism exclusion. They vary in their language but generally the intent is not to cover coordinated State or politically motivated attacks. And with the US declaring that State coordinated cyber attacks could constitute an act of war (BBC News, 1 June 2011) you can bet that underwriters will look closely at this exclusion in the event of a big claim.

Cyber is not only the new front for war and criminal activity, it is also at the vanguard of new risks being identified and insurances designed. It is early days and the present crop of coverages have a long way to go before risk managers can sleep easy at night.

Click to view the BMS Wholesale, Professional and Financial Services homepage