Insurers monetise intangible assets for IP product

Trade secrets make up a huge proportion of the value to most modern businesses. An estimated 90% of the value of the S&P500 is intangible assets, of which only 15% are protected by patents or trademarks.

This means that of the S&P500’s current $32.1 trillion market capitalisation, $24.6 trillion (77%) is made up of unprotected intangibles, such as trade secrets. Examples of trade secrets include proprietary algorithms, designs, software code, formulas, and unique workflows and industrial processes.

Without insurance, if risk mitigation such as Non-Disclosure Agreement and data security fail, the victim’s only recourse is litigation which can be extremely costly, time-consuming and have an uncertain outcome. 

Insurance solution for trade secrets

Specialist insurer Chaucer is partnering with Crown Jewel Insurance, an insurtech and Lloyd’s Coverholder, to provide insurance for companies’ trade secrets.

The product is the first of its kind to offer protection for the potentially huge loss in value a business can suffer if its trade secrets are stolen and made public or leaked to a competitor.

As part of the underwriting process, Crown Jewel Protector identifies, values, and offers recommendations on how to protect a company’s trade secrets.

Mary Guzman, CEO and founder of Crown Jewel said the launch should allow for a trade secret protection ecosystem to develop.

It not only includes “insurance protection for a company’s most unique know-how, but the monetisation of those assets that will allow lenders and investors to support and fund innovation with a backstop that was not available until now,” she added.

Hayley Maynard, head of Innovation at Chaucer says: “Prior to the launch of this product there was no insurance available for businesses’ trade secrets, leaving the vast majority of their value unprotected.

”Crown Jewel Protector provides significant additional peace of mind for businesses that their most valuable assets are secure.”

Growing cyber exposure

As well as the threat of industrial espionage or disclosure by a trusted insider or a disgruntled employee, trade secrets are increasingly at risk of being misappropriated through cyber-attacks.

Should theft occur, Crown Jewel will supply forensic and legal experts to determine how the theft occurred, gather evidence of any misappropriation of trade secrets, and pursue recovery of the asset, injunctive relief, or both.

Under the insurance policy, should a loss of market share or income result from the misappropriation of an insured’s trade secret, the pre-agreed fair market value of the trade secret is payable.