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Author: Carolyn Cohn
LONDON (Reuters) – Insurance has halved the amount of cyber coverage provided to customers after pandemics and housework led to a rise in ransomware attacks, prompting large payments.
In the face of increasing demand, major European and US insurance and unions operating in the Lloyd’s of London market have been able to charge higher premium rates to cover bailouts, repairing hacked networks, loss of business interruptions and even PR fees to repair damage to reputation.
But with the rise of ransomware attacks and the growing sophistication of attackers, insurers have been wary. Insurers say some attackers can also verify that victims have policies that will allow them to pay more.
“Insurers are changing their appetite, limits, coverage and prices,” said Caspar Stops, the head of cyber insurance at Optio. “The limits have been halved; where people were offering £ 10 million ($ 13.50 million), almost everyone has reduced it to five.”
Lloyd’s of London, which owns about a fifth of the world’s cyber market, has recommended its odd 100 union members to take over the cyber business next year, industry sources say on condition of anonymity. Lloyd’s declined to comment.
AIG (NYSE 🙂 U.S. insurance also said they were cutting cyber borders in August.
Ransom software works by encrypting victim data and typically provides hackers with a passcode to recover victims in exchange for cryptocurrency payments.
It has become a targeted attack on cybercriminals, who previously advocated stealing data and selling it to third parties.
The total ransomware payments totaled $ 590 million in the first six months of this year, compared to the $ 416 million reported for the whole of 2020, U.S. authorities said in October.
In one of the biggest robberies, a ransomware attack on the Colonial Pipeline in May shut down the largest U.S. pipeline network for several days.
U.S. cyber insurance profits were slashed in 2020, according to insurance broker Aon (NYSE :). The combined ratio – a measure of profitability that indicates a loss of more than 100% – rose by more than 20 percentage points from 2019 to 95.4%.
While insurance companies are struggling to cope, companies have little insurance.
“It’s very difficult for people to get the same limits; if so, they’re paying an extra amount,” said David Dickson, head of business at Superscript broker.
Dickson said a tech customer had previously bought £ 130 million in professional compensation and cyber coverage for £ 250,000. Now the customer could only get 55 million pounds of coverage and the price was 500,000 pounds.
Insurance that issued $ 5 million in cybersecurity policies last year has lowered its limits by $ 20 million to $ 3 million in 2021, a U.S. Risk Placement Services (RPS) agent found in a report last month.
As profitable as cocaine
A European Union report released in October said the COVID-19 pandemic and the rise in domestic work have allowed cybercriminals to flourish.
Meanwhile, cybersecurity company Coveware compared the 90% profit margin on ransomware attacks in 2021 to the profits made in 1992 by Colombian cocaine cartels.
Hackers who had previously taken a dispersal approach with methods like sending thousands of phishing emails have become more focused, reading balance sheets and focusing on specific sectors.
Tom Quy, a leader in cyber practices at the Acrisure Re reinsurance broker, said the attacks were moving away from health facilities and municipalities – which have weak computer control but little money – to manufacturing or logistics companies.
Companies have deep pockets and can’t afford to take long breaks to fix their systems, so they’d rather pay rescues, especially if they have insurance to cover them.
“We advocate for everyone who doesn’t disclose your insurance, because that’s critical to your business,” said Scott Sayce, global cyber head of Allianz (DE 🙂 Global Corporate & Specialty.
Premium rates have nearly doubled in the United States and rose 73% in the UK as a result of the frequency and severity of ransomware attacks, insurance broker Marsh said. The RPS said the rates for some policies had risen by 300%.
A few years ago ransom payments were typically $ 600, now they are $ 50 million, according to Michael Shen, Canopius insurer’s cyber and technology manager, and insurers sometimes require them to pay half of the ransom.
The United States and France are among the countries particularly concerned about bailout payments, industry sources say.
The FBI says it does not support the payment of ransoms, and some U.S. states are considering banning ransomware payments from municipalities.
But insurers, while unwilling to offer large amounts of coverage, say non-payment of ransoms can backfire.
“Of course, no one wants to pay criminals,” Adrian Cox, Beazley’s chief executive officer, told Reuters. “At the same time, banning it … can disable many businesses that have systems disabled.”
($ 1 = £ 0.7406)
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