Gaining Insights: A Cyber Insurer’s Perspective on Ransomware

Cyber Insurance 101

Cyber insurance, also known as cyber risk insurance or cyber liability insurance, is a type of insurance coverage designed to protect businesses and individuals from potential losses and liabilities arising from cyber-related incidents. These incidents may include data breaches, cyberattacks, ransomware, and other forms of cyber threats.

Cyber insurance policies typically cover expenses related to:

Data Breach Response: Costs associated with notifying affected individuals, credit monitoring services, and public relations efforts.

Legal and Regulatory Compliance: Expenses related to legal representation and fines resulting from regulatory actions due to a data breach.

Cyber Extortion: Payments related to cyber extortion events, such as ransomware attacks.

Business Interruption: Loss of income and additional expenses incurred as a result of a cyber incident leading to business disruption.

Digital Asset Restoration: Costs associated with restoring or recovering compromised data and systems.

Third-Party Liability: Protection against lawsuits and legal claims from third parties affected by a cyber incident.

Cyber insurance has become increasingly important as businesses and individuals face growing cyber threats. The concept of cyber insurance emerged in the late 1990s and early 2000s in response to the rising prominence of digital technologies and the internet, which introduced new vulnerabilities and risks. The demand for cyber insurance has since grown significantly as the frequency and severity of cyberattacks have escalated.

The insurance industry continually evolves its offerings to address emerging cyber threats, and the landscape of cyber insurance is likely to adapt further in response to changing technologies and risk profiles. The creation of cyber insurance reflects the need to provide financial protection and risk management strategies in an era of increasing reliance on digital systems and data.

Cyber Insurance Concerns and Predictions in 2024

In 2023, the surge in claims frequency was predominantly fueled by ransomware incidents. Ransomware emerged as the primary driver behind the overall rise in claims frequency, accounting for an estimated 20% of all reported claims. The main contributors to the resurgence were Royal Ransomware and Cl0p Ransomware. Royal was responsible for 12% of reported ransomware claims in the first half of 2023. Noteworthy were cases involving the Cl0p ransomware gang, which exploited a zero-day vulnerability in MOVEit, focusing on data exfiltration rather than encryption. The Cl0p gang compromised various global organizations, underscoring the impact on third-party users of the MOVEit vulnerability.

1. Ransomware: By the end of 2024, ransomware claims within the cyber insurance sector are projected to reach levels comparable to those witnessed in 2021, which marked the year with the highest recorded number of ransom claims.
2. SEC Cyber Compliance: The recent mandate to report significant incidents within four days of discovery represents a significant change for those obligated to adhere to it. 
3. Artificial Intelligence: While AI itself won’t alter cyber risk fundamentally, it has the potential to heighten the severity of issues when they occur. This underscores the growing significance of leveraging data science and analytics to make well-informed decisions when acquiring cyber insurance.
4. Privacy Concerns: As of now, thirteen states have enacted state privacy laws. While the spotlight was on healthcare companies in 2023, cyber insurers anticipate an increase in privacy lawsuits across various industries, including retail and financial services, in 2024.
5. Supply Chain Technology: The incentive for attackers is evident: by breaching a single, widely used technology vendor, they can gain access to a large pool of potential targets. When you factor in the delayed system patching practices of many companies, the repercussions of these breaches can linger for years.

Mitigate Risks

1. Consistently update all software and firmware: It is crucial to adhere to a regular patching schedule and promptly address critical vulnerabilities, as ransomware frequently targets outdated software.
2. Reduce the risk of cyber problems by cutting down on potential weaknesses: Get rid of outdated and risky technologies, avoid using software that’s no longer supported, and remove technologies that have known issues.
3. Always make backups of important data and store them offline: Having offline backups is essential for restoring data without giving in to ransom demands, especially when attackers threaten to release sensitive information.

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