Retail hikes

Target and Home Depot declined to comment on whether insurers had hiked rates or reduced coverage after massive breaches that exposed tens of millions of credit cards.

Target said in a filing that it expects insurance to cover just $90 million of the $264 million of costs related to its 2013 attack. Home Depot said it expects $100 million in payments toward $232 million in expenses from its 2014 breach.

"A lot of the carriers have gotten burned. They are coming back with harsher and more challenging penalties," said Bob Shaker, a manager at Symantec Corp’s breach response team.

Insurance buyers may be able to get more than $100 million in coverage by using a syndicate of insurers organized by a broker. Even so, some have warned they may not have adequate cover.

In the wake of last year's attack on Sony Pictures Entertainment, parent Sony Corp said its financial condition could suffer if it were attacked again, since current policies "might not cover all expenses and losses."

Sony spokesman Mack Araki said the company expects to recover "a significant portion" of the film studio attack's costs from insurers. He declined to elaborate or say if insurers had raised pricing or reduced the limits on its cyber coverage.

Offering advice

Retailers shopping for cyber insurance are coming under pressure to secure their payment systems, just as homeowners are encouraged to install locks on doors and windows.

Insurers are promoting newer technologies for securing payment card transactions that exceed credit card companies' requirements, such as tokenization and end-to-end encryption, said Ben Beeson, a partner with broker Lockton Companies.

"Retailers that don’t do that today are going to struggle to get insurance," Beeson said.

But the stringent conditions on coverage could lead to the next chapter of the cyber drama: courtroom battles.

"The restrictions and terms that we are seeing in the underwriting process now will become the claim disputes we see in two or three years," said Lynda Bennett, partner with Lowenstein Sandler. "We definitely expect more litigation."