Lloyd's of London Insurance Q&A

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The Offered Service(s)

1. What is the name of the insurance protection offered by Lloyd's?

• Internet Asset and Income Protection Insurance provides coverage for Cyber Damage, Cyber Revenue, and Extortion protection

2. What types of losses are specifically insured against?

• Cyber Damage covers the cost to repair and replace data and/or software to the same standard following a hacker damaging, destroying, altering, corrupting or misusing the customer's electronic device(s).
• Cyber Revenue Protection covers lost revenues following a service interruption or service impairment, caused by activities of a hacker specifically targeting the electronic device including by maliciously blocking access electronically to such electronic device.
• Extortion Protection covers the costs of a specialist consultant's assistance in a security crisis and any subsequent negotiation, including payment of a ransom demand.

3. Is there just one level of insurance protection or are there a number of offerings from Lloyd's?

• Counterpane has worked with leading insurance broker Frank Crystal & Co. and digital risk solution provider SafeOnline to design a custom insurance solution tailored to the needs of Counterpane and its customers. As such, Counterpane is able to offer several tiers of Internet Asset and Income Warranty Protection, from $100,000 to $5,000,000, depending on the need of the customer. In addition, Counterpane customers will be able to obtain up to $100MM in supplemental Internet Asset and Income Protection Insurance from Lloyd's of London, at preferential rates.

4. What is Counterpane's standard warranty of service offering?

• With the launch of this innovative insurance-backed risk solution program, Counterpane Internet Security's standard warranty of service will be backed by Lloyd's of London. Thus Counterpane will be the first Internet security service provider to offer its customers direct financial recourse in the event of loss due to a breach of security.
• In addition, Counterpane customers will be able to obtain up to $100MM in supplemental Internet Asset and Income Protection Insurance from Lloyd's of London, at preferential rates.

5. Why do I need this insurance on top of Counterpane's warranty?

• Counterpane has worked with leading insurance broker Frank Crystal & Co. and digital risk solution provider SafeOnline to design a custom insurance solution tailored to the needs of Counterpane and its customers. While many Counterpane customers will have sufficient protection through Counterpane's warranty (from $100,000 to $5,000,000 in protection, depending on the need of the customer), some customers will want greater levels of protection. As such, Counterpane customers will be able to obtain up to $100,000,000 in supplemental Internet Asset and Income Protection Insurance from Lloyd's of London, at preferential rates.

6. If I am a multi-billion dollar global enterprise, is $100 Million USD enough insurance protection? Why was $100 Million chosen as the top limit? Can I get more protection than $100 Million?

• If $100,000,000 in coverage were to prove inadequate to meet the needs of one of Counterpane's customers, Counterpane's leading insurance brokers would work directly with the company to secure additional insurance capacity.

7. Are there any limitations to the types of companies or businesses that Lloyd's will insure? If so, what are they?

• Lloyd's Internet Asset and Income Protection Insurance will be offered to all customers employing Counterpane Internet Security's 24-hour-a-day security protection services.

Relationship of Players

8. Why is Lloyd's the right insurer for Counterpane?

• Lloyd's is the world's leading insurance market. As such, Lloyd's has the specialist e-commerce Underwriters and the necessary insurance capacity required to offer innovative cutting-edge insurance solutions such as Counterpane's Internet Asset and Income Protection Coverage.

9. Is the relationship exclusive with Counterpane?

• Yes. Counterpane is able to offer its customers this exclusive insurance coverage because of Counterpane's unique Managed Security Monitoring service, which reduces its clients' exposure to the risk of a security breach.

10. What is the relationship of Lloyd's of London, Frank Crystal & Co. and SafeOnline?

• Frank Crystal & Co. and SafeOnline worked with Counterpane to design insurance products that would complement Counterpane's unique Internet security monitoring service. The companies then worked closely with underwriters at Lloyd's of London to gain backing for these innovative insurance programs.

Cost of Service Offered

11. How much do the premiums cost for this type of insurance?

• Due to Counterpane's unique Internet security service, customers will be able to obtain previously non-existent insurance coverage at preferential rates. Premiums are determined by the level of coverage desired and range from hundreds of dollars to thousands of dollars per month.

12. Is this insurance premium on top of Counterpane's monthly fee? So how much does the total package cost me per month?

• Yes, the premium is in addition to Counterpane's monthly service fees.
• Customers requiring protection in excess of $5MM will be able to obtain up to $100,000,000 in supplemental Internet Asset and Income Protection Insurance from Lloyd's of London, at preferential rates.

13. Are the premiums for the Lloyd's protection paid in advance or on what other payment terms is it available?

• Like most insurance policies, these premiums will generally be paid in advance, on an annual premium basis. Alternative payment terms may be available on a case-by-case basis.

Competitive Issues

14. Is anyone else offering this type of insurance?

• No, not at this time. Counterpane is proud to be the first Internet security service provider to offer its customers direct financial recourse in the event of a breach of Internet security. Lloyd's of London has recognized Counterpane's superior level of security protection by offering our customers levels of insurance protection that were previously unavailable: up to $100,000,000 in coverage without the restrictions and limitations typically found in policies available from other insurers.

15. If not today, who is likely to offer this type of insurance in the near term?

• We do not know of any other company that has the facilities or the ability to offer a service comparable to Counterpane's. Since Lloyd's of London offers Counterpane's customers this insurance protection based on Counterpane's superior level of security protection, we do not know who will be able to offer anything like this. We believe that Counterpane's exclusive ability to offer its customers insurance protection to complement its Internet security service will differentiate Counterpane from its competitors in the near term.

16. Is there any precedent for this type of insurance in other related industries?

• One precedent for this type of insurance is the FDIC deposit insurance offered by banks in the United States. In the U.S., customers' deposit accounts are automatically insured up to $100,000. While few people expect to need deposit insurance, customers have a little more "peace of mind" knowing that their money is 100% secure. Similarly, Counterpane is offering its customers exclusive insurance protection from Lloyd's of London so that they can be confident that their valuable data will be protected.

17. Do other managed security service players offer insurance?

• As far as we know, Counterpane is the only Internet security service provider to offer its customers the ability to obtain the breadth of insurance protection offered by Internet Asset and Income Protection.

18. Has anyone signed up yet for this insurance coverage?

• Counterpane Internet Security is in discussions with a number of customers, including Internet Service Providers (ISPs) and Application Service Providers (ASPs) to incorporate Internet Asset and Income Protection into their Internet security services.

Getting Started

19. Can I buy this insurance through Counterpane or do I have to go directly to Lloyd's?

• The Internet Asset and Income Protection Coverage is available through the leading insurance brokers Frank Crystal & Co. and SafeOnline, but exclusively to Counterpane's customers.

20. How is the initial level of risk assessed?

• The level of risk is assessed in conjunction with Counterpane's Baseline Security Assessment. This is assessment is required prior to engaging Counterpane's Managed Security service.

21. What is "enterprise risk rating"? How is it determined? Who does the determination?

• The enterprise risk rating is a proprietary tool utilized by SafeOnline to rate the security risks associated with a given company.

Referenceable Sources

22. Who may I contact as references about Lloyd's in this marketplace?

• For information about Lloyd's, send a request via email to lloyds@safeonline.com.

23. Who could I talk to about this concept of enterprise risk protection? Are there analysts who I may speak with?

• Jim Hurley
  Managing Director, Information Security
  Aberdeen Group, Inc.
  One Boston Place, Boston, MA 02108
  v: + 617.854.5234, f: +617.723.7897
  hurley@aberdeen.com

General

24. How do you (Counterpane) see the market opportunity improving because of this new insurance program? Can you quantify the increase in the market opportunity?

• Because this type of insurance is still an early market and a newly defined service area, it is difficult to estimate the overall market opportunity. Industry analyst Steve Hunt of Giga Information Group made the following observation "The current size of this market niche is anyone's guess. One thing for certain is that the security outsourcing market is huge. It is such a big market opportunity that you could consider it having nearly infinite value during the next three to five years. The key driver is extranets and e-business in general. Nearly every company in the world will be revising their security architectures to accommodate the unique demands of e-commerce. And that's a lot of opportunity for security outsourcing and consulting."
• Counterpane management believes that the availability of insurance that protects the assets, intellectual property, and income of e-businesses will mitigate their business risk and allow them to be more aggressive in rolling out Internet and Extranet services. Since this insurance is available exclusively to Counterpane-monitored companies, it will also accelerate the acceptance of Counterpane's Managed Security Monitoring service and further increase its clients' comfort in doing business on the Internet. The combination of Counterpane's Managed Security Monitoring service with either of these new insurance or warranty coverages, reduces the liability and risk to a level acceptable to Counterpane's customers.

25. Who are the customers for this type of insurance protection?

• Any company or organization conducting business over the Internet and internal networks is exposed to the risk of a breach of security and a consequent loss of valuable data or business interruption. Internet Service Providers (ISPs), Application Service Providers (ASPs), e-retailers, online exchanges, and other e-businesses could all benefit from the comprehensive risk management solution offered by the combination of Counterpane's Managed Security Monitoring and Lloyd's Internet Asset and Income Protection.

26. How many insurance claims would Lloyd's have to have made against it before the Company gave up and no longer offered this protection?

• There are no set guidelines. Lloyd's is the world's leading insurance market with a capacity to accept insurance premiums of 10 billion pounds, and Lloyd's has an "A" rating by AM Best for claims paying ability.