In a world where everything has gone digital, it’s safe to say an interruption in service is inevitable. No matter how much you prepare or safeguard from hacking, power outages or an old fashion hardware failure, the one universal truth in this digital age is at some point your system will fail. While many in the industry use the ‘build for failure’ mantra, many more still need an extra bit of assurance.

Now there is a solution, cloud insurance. Tech Target says cloud insurance is an approach to risk management in which a promise of financial compensation is made for specific potential failures on the part of a cloud computing service provider. The insurance may be included as part of a service level agreement with the provider or it may be purchased separately through a third-party insurance company who works with the provider.

When considering a move to the cloud, the first thing a company should review is its insurance policies. The importance of time spent with a broker and outside insurance counsel, to discuss and understand the potential scope of coverage under a company’s insurance policies as it relates to cyber and privacy risks, is amplified when thinking about moving to the cloud. Companies should not assume that their insurance companies will agree that coverage for cyber risks related to the cloud are provided by traditional forms of insurance.

That’s why the International Association of Cloud & Managed Services Providers or MSP Alliance announcement in April is important. The new cloud and management services insurance program, brokered by Lockton Affinity, offers comprehensive protection for cloud and managed service providers (MSPs) worldwide. The MSP Alliance Cloud and Managed Services Insurance Program includes limits of liability options, which range from $1,000,000 to $10,000,000 per claim, and include deductibles from $2,500 to $10,000 per claim. It also includes online self service via link from your vendor page. Coverage can be bound within 24-72 hours, certificates of coverage are available on demand, as well as coverage options that include technology E&O, cyber liability, contractual liability, general liability and property.

However, MSP Alliance isn’t the first to offer cloud insurance. Up-start CloudInsure offers what it describes as a “Cloud Insurance platform designed to specifically address emerging liabilities within the cloud environment. Through our innovative underwriting models and proprietary analytics, we bring insurance solutions that move at the pace of cloud technology.”

A 2011 GIGAOM article outlines some of the advantages of cloud centric insurance noting, “Cloud providers also stand to benefit from an insurance system. Not only will the availability of policies allay some cautious potential customers’ concerns about moving to the cloud, but insurance policies for providers will help offset the cost of dealing with an outage. Those service credits cost money, after all, as do steps taken to investigate and resolve outages and implement improvements to prevent future incidents.”

Come back next week when we discuss what companies should look for when considering insurance for cloud-related risks, and what questions should be asked, in the second half of our 2-part blog.

RiverMeadow enables Carriers, Service Providers, Enterprises and SMBs to deliver and consume the incredible benefits of cloud computing with minimal cost and complexity. To learn more about RiverMeadow’s services contact us at

Photo Credit: kevin dooley