Cloud Outage Insurance

Prompt financial compensation for third party computing failures

Cloud outage insurance is a tech-enabled parametric insurance product that provides companies with rapid financial compensation for the downtime of business-critical cloud-based services. This includes computing power, data storage, ecommerce platforms, payment gateways and similar services.

Parametric insurance involves designing policies to pay pre-ordained sums at pre-agreed data-driven triggers, completely bypassing the traditional route of protracted claims assessment and a requirement to prove the loss.

Therefore, the sum insured per hour, waiting period, and limit for the outage duration and the third-party services to be insured are all determined by the client, based on analysis of the potential lost revenue, system recovery costs, customer requests for compensation and SLA obligations.

The requisite data triggers are provided by monitoring your cloud service providers via independent services that detect failure events as soon as they occur. When an outage happens, both the client and insurance broker are notified immediately, and the claims process can begin.

What types of events does cloud outage insurance cover?

Downtime is downtime. Almost all causes of downtime can be covered, from human error to cyber to cyber-attacks to hardware malfunctions.

Excluded causes include: service degradation, planned maintenance, government and regulatory actions, or war.

How is the premium calculated?

The amount of the premium for cloud failures is decided by several parameters:

1. Cloud-IT provider

2. Type of services

3. Redundancy between regions

4. Coverage amount per hour

5. Waiting time

6. Maximum duration of coverage

Does the client have to prove any damage?

The client does not have to prove any damage, due to the parametric nature of the insurance. The policyholder must, however, sign a sign a declaration of damage in order to be indemnified.

The insurance company only compensates customers who have suffered a financial loss.

What is the difference between cyber insurance and cloud outage insurance?

Due to its parametric nature, with the policy terms designed around paying pre-ordained sums at pre-agreed data-driven triggers, cloud outage insurance can have a very short waiting period and pay a pre-agreed sum of money because there is no requirement to prove a loss.

Cyber insurance is different, in that it provides a rapid practical response in terms of sending relevant experts to help you through your crisis – after that, there is a requirement to assess the losses from the business interruption, and pay-outs follow in due course.

Cloud outage focusses on a wider range of cause of downtime, whereas cyber insurance is mainly focussed on hacker attacks. 

Is a pay-out made when customers use multiple regions and the downtime occurs in only one?

If customers have redundancy between regions so that they can still operate, they are not compensated.

Which companies need cloud outage insurance?

• Any company whose business activities are depend on third-party cloud services (e.g. SaaS company).
• Companies that have SLA commitments that depend on the availability of cloud IT services Third Party.
• Companies that experience direct revenue loss suffer due to outage events, such as. eCommerce, entertainment and payment platforms.

Don't third-party providers compensate their customers themselves after outage events?

Providers commonly issue credits following downtime events due to the lack of service provided, but they do not compensate their clients for financial losses.

In summary

Parametric cloud outage insurance can help companies protect revenue streams and ensure business continuity, with prompt payments based on pre-agreed data triggers and no requirement to prove a loss.