Startup sells insurance coverage for cloud outages


As more businesses and consumers rely on cloud computing, even a temporary service disruption can have far-reaching effects, with the potential to shut down services, wreak havoc on e-commerce operations, and harm to corporate reputation.

One company, Parametrix Insurance Services LLC, based in New York, is targeting businesses affected by a cloud outage. Parametrix sells insurance specifically to mitigate the risk of downtime events, compensating businesses for any loss, including lost revenue and the cost of recovery, when their cloud provider or application service based on the cloud goes down.

Some 50 brokers offer Parametrix policies, which cover outages at major cloud providers, such as Inc.

Amazon Web Services, Microsoft Body

Azure and Alphabet Inc.

Google Cloud, as well as e-commerce platforms that a merchant may depend on. Commercial insurance agency ComTech-Leavitt Insurance Services Inc. of St. George, Utah, joined the list of brokers offering the policy this week.

Breakdown insurance is a relatively new field. But unlike the cybersecurity insurance industry, which has taken off with the rise of ransomware attacks, few companies offer insurance for an event caused by software, network or other issue, say analysts who follow. cloud activity.

Breakdowns are not uncommon. Amazon Web Services, for example, suffered at least three outages in December, causing disruption to other businesses and underscoring how far-reaching regional digital infrastructure issues can be.

The number of cloud outages only increased 3% in 2021 compared to 2020, according to ThousandEyes, a Cisco Systems Inc.

company that performs cloud and internet performance monitoring. But the number of outages of 30 minutes or more nearly tripled.

Premiums for Parametrix insurance policies can range from thousands of dollars per year to hundreds of thousands of dollars per year, according to the company. Coverage typically ranges from $100,000 to $5 million, but can go up to $10 million in some cases. While Parametrix originated and oversees the policies, the payouts are backed by reinsurance companies like Hannover Re and some Lloyd’s of London underwriters.

“Typically, most companies will actually know how much they’re losing during an downtime event,” said Neta Rozy, Parametrix co-founder and the company’s chief technology officer. “But, otherwise, we have benchmarks based on industry, company size and a few other metrics and can recommend coverage per hour.”

Neta Rozy, co-founder and chief technology officer of Parametrix.


Parametric Insurance

Coralogix, a Tel Aviv data analytics company, signed up to a Parametrix policy in August 2021. The company runs on AWS.

Coralogix customers are mainly cloud and internet service providers. The company monitors its software applications in real time, logging performance and issuing alerts if it detects a potential problem. If the Coralogix service is unavailable due to an AWS cloud outage, the data analytics company agrees to reimburse its customers a portion of their monthly fees for the period of Coralogix service unavailability. .

Coralogix chief executive Ariel Assaraf declined to say how much customers are being reimbursed. But, he said, “for us, being able to get paid by our insurance every time there’s a cloud outage mitigates that risk.”

Trevor White, head of research at technology research and consulting firm Nucleus Research, believes Parametrix’s insurance use case will be very specific.

Large enterprises are generally not dependent on a single cloud platform, and many enterprises’ operations are not significantly impacted by a cloud outage lasting just a few hours, he said.

But, he said, for businesses running on a single-vendor cloud platform and operating in a competitive, time-sensitive environment, such as a restaurant, retailer or IT service provider, the Insurance could prove invaluable.

Parametrix’s Rozy thinks that virtually every business needs technology outage insurance.

Craig Lowery, vice president and analyst at technology research and advisory firm Gartner Inc.

which covers cloud computing, said that while many cybersecurity policies cover cloud downtime resulting from a cyberattack, he has not come across many insurers offering policies that cover cloud downtime due to to non-cybernetic events.

Several insurance companies, such as Chubb ltd.

, offer cybersecurity policies that cover, among other things, data restoration costs and legal costs following a data breach. Cyber ​​insurance policies can also cover loss of revenue if a business’s operations are interrupted for a period due to a cyber event.

For the payment of business interruption caused by a cybersecurity incident, the company should be affected for a period which, according to the policy, could range from eight hours to 24 hours or more.

Parametrix pays after a one-hour waiting period. It said its policies can act as a cyber insurance add-on for customers who have purchased cyber insurance policies with business interruption clauses that do not come into effect for eight hours or more. unavailability.

“I see this as a bridge because of the wait times on cyber policies,” said Joseph Weipert, co-owner and senior vice president of ComTech-Leavitt.

Write to John McCormick at

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