Cyber criminals have become more sophisticated and are taking advantage of the shift to remote working conditions and online workforces accelerated by the Covid-19 outbreak.
These issues have contributed to a significant increase in the financial losses sustained by insurers emanating from cyber loss events, particularly concerning ransomware attacks. According to Coveware – a leading ransomware response firm – the average demand for a digital extortion payment was more than $220,000 in the first quarter of 2021, up 43% from the previous quarter.
A leading global broking firm also reported a 100% rise in claim notifications from clients reporting ransomware incidents in 2020 compared to 2019.
The extent of cyber losses experienced in the marketplace has triggered a series of remedial actions from insurers as they look to improve the performance of their portfolio. And while capacity in the market remains, insurers are reducing their coverage, imposing higher deductibles, and applying notable premium increases across their entire portfolio.
For instance, a recent report issued by global broker Marsh stated that premiums increased by 20-30% in Australia in the first quarter of 2021, followed by a whopping 60-80% in Q2, compared to the same periods from 2020, respectively.
S&P Global Ratings - an American credit rating agency - has also released a report that says insurers' are intending to reduce their pay out limits moving forward, especially where contracts include ransomware or business interruption components, while at the same time increasing retention levels through 2021-2023.
Many insurers are also changing the way they assess risks and are adopting stricter underwriting guidelines when considering both new and existing clients, focusing on the organisation's Business Continuity and Incident Response Plans.
Organisations seeking to navigate this hardening environment will need to demonstrate a high-level of cyber risk maturity to insurers. This will require clients to collaborate with their insurance broker to devise effective strategies that ensure any investments they have made to bolster their cyber risk management and resilience strategies are communicated to insurers clearly and effectively.
Clients should also carefully examine the make-up of their existing insurance program as insurers apply cyber and technology related exclusions across various financial and general lines of insurance, particularly concerning acts of ransomware. This will require the majority of all cyber exposures to be managed using a dedicated cyber insurance policy that should ideally be tailored to address the client's specific needs.
In such an environment, the performance of your insurance broker is critical. Their capabilities and expertise in the field of cyber security could be the difference between having the right cover at the right price or having cover that is both insufficient and overpriced.
Please don't risk it. Contact us today to discover how you can leverage the expertise of multiple insurance industry experts to achieve the best cyber-security measures for your business.
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