The other reaction from insurers has been more scrutiny. "So it's actually pretty hard for many organizations to get good coverage on cyber now." "The policies are highly priced and the payout limits are very low," continues Thomson. Its most recent Q1 2022 data showed a 27.5 percent quarter-on-quarter bump in premium prices for cyber insurance, following a 34.3 percent rise in Q4. The Council of Insurance Brokers and Agents has measured these increases. One characteristic is the rising price of premiums. "A hard market is one that is difficult to comply with," he explains. This, along with other evolving security risks, transformed the still-nascent cyber insurance industry into a 'hard market'. Insurers naturally became obsessed with ransomware as payouts increased, recalls Thomson. Lower is better and in 2015-2019, the average figure was 42 percent. The direct loss plus defense and cost containment (DCC) ratio is the proportion of the earned premium paid out in claims expenses. Claims closed with payment grew by 200 percent annually over the same period, with 8,100 claims paid in 2021.
In May, Fitch Ratings found that reported cyber insurance claims had risen 100 percent annually in the past three years. Supply chain attacks make third-party liability costs especially worrying for insurers, who face reimbursement costs for their clients' downstream users. These include post-breach investigation and data recovery loss of income from business disruption breach notification costs legal claims and regulatory penalties. Ransomware payments are perhaps the simplest to understand, but they're just one factor among many possible expenses. Insurers that charged too little for covering cybersecurity risk have found themselves shouldering an array of costs. Assessing the risk of cyber attack is more art than science, and the industry demand for the skills to support that process is high. Actuaries have decades of data on car accidents and health conditions, but not much about cyber risk for example. The change in infrastructure and access methods created yet more layers of security risk, making cyber risk transfer even more problematic for underwriters.įairly assessing and pricing this risk has been tough for insurers, especially given the lack of available data. Managing these devices' access to corporate information became more difficult. Companies supporting a hybrid workforce found themselves grappling with endpoints sitting on residential local area networks (LANS) used for both work and personal activities.
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