A global study from Aon and the Ponemon Institute revealed that organisations lacked significant insurance coverage for their intangible assets including cyber liability as well as intellectual property such as patents, trade secrets, copyrights, proprietary information and know-how.

While certain intangible assets only had 16% insurance coverage, traditional tangible assets like property, plant and equipment (PP&E) were found to have 60% insurance coverage. Surprisingly, this difference in coverage contrasted with the intangible assets incurring an average potential loss of $1.08bn and PP&E incurring losses of $795m.

Called the ‘2019 Intangible Assets Financial Statement Impact Comparison Report’, the study has been conducted yearly since 2015 and surveyed 2,348 respondents from North America, Europe, the Middle East, Africa, Asia Pacific, Japan and Latin America. Respondents are those who were most involved in their organisation's intellectual property, cyber risk management and/or enterprise risk management activities. A major hypothesis of this year's study was the comparison of insurance coverage for traditional tangible assets (PP&E) to the coverage of intangible assets.

"One of our major findings is that threats to a company's intangible assets are not in proper balance with that company's insurance protection. Understanding how to properly value, exploit and insure intangible assets is exponentially heightened in the digital era. Intangible assets are a board of director level issue," said Aon's IP Solutions global head and CEO Lewis Lee.

Even though respondents valued intangible assets only slightly higher than PP&E at $1.15bn and $1.03bn respectively, the 2019 study found that the average potential loss if intangible assets are stolen or destroyed was 36% more than if PP&E is damaged or destroyed. However, the 2019 study also revealed an increase of 33% in the protection of potential loss of information assets versus an increase of only 9% for PP&E between 2015 and 2019.

This demonstrates that organisations have begun to recognise the value of intangible assets as well as the significant risks surrounding the loss of those assets. At the same time, organisations are seen to be working to increase the protection of intangible assets.

Mr Lee also said, "While few companies have trade secret theft insurance policies or patent liability policies, organisations are better equipped to make informed decisions regarding strategy, valuation and risk transfer with respect to IP and other intangible assets by better understanding intangible versus tangible asset coverage.”

The study also revealed noteworthy findings such as:

• 44% of respondents said their company would disclose a material loss to PP&E or information assets that is not covered by insurance as a footnote disclosure in the financial statement.
• As a complement to a cyber risk policy, few companies have a trade secret theft insurance policy and/or a patent infringement liability policy.
• Only 24% of respondents say they have a trade secret theft insurance policy and 30% of respondents have an intellectual property liability policy. However, there is significant interest in purchasing such policies.