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Mar 2024

GDPR fines can reach $23m; insurability limited

Source: Middle East Insurance Review | Jul 2018

The civil fines for non-compliance with the EU General Data Protection Regulation (GDPR), which came into effect on 25 May, can reach up to EUR20m ($23.2m), or up to 4% of a group’s annual global turnover if higher, but organisations across Europe should not expect to have their insurance cover them, according to a guide titled ‘The price of data security’ by Aon and DLA Piper. 
 
Given the size of the potential financial impact of GDPR non-compliance, it is important for organisations to understand how the insurability of fines, legal and other costs and liabilities following a data breach is approached in different jurisdictions. 
 
There are only a few jurisdictions where civil fines can be covered by insurance – even then there must be no deliberate wrongdoing or gross negligence on the part of the insured. Criminal penalties are almost never insurable. GDPR administrative fines are civil in nature, but the GDPR also permits European Member States to impose their own penalties for personal data violations. If those penalties are criminal, they almost certainly would not be covered by insurance.
 
While there are only a few jurisdictions where GDPR fines are insurable, insurance against legal costs and liabilities following a data breach is widely available across Europe and may provide valuable cover to organisations, said Mr Prakash Paran, partner and co-chair, global insurance sector at DLA Piper. Essentially, insurance should still be part of an organisation’s risk management strategy.  
 
GDPR not only applies to organisations located within the EU, but also to organisations that offer goods or services to, or monitor the behaviour of, European data subjects, even where those organisations are located outside of the EU. M 
 
EUR1 - $1.16
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