Insurers shy away from ransomware coverage as losses rise

The interior of the Lloyd’s of London building can be seen in the Financial District of the City of London, London, Great Britain, April 16, 2019. REUTERS / Hannah McKay // File Photo

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  • Lloyd’s of London discourages cyber sources of expansion
  • Ransomware as profitable as the Colombian cocaine-Coveware cartels
  • Some insurers ask policyholders to pay half of the ransoms
  • Attackers change strategy from a scatter gun to a focused strategy

LONDON, Nov. 19 (Reuters) – Insurers cut the amount of cyber coverage they provide to customers in half after the pandemic and working from home led to an increase in ransomware attacks that left them pissed off by large payments.

Faced with increased demand, major European and American insurers and unions operating in the London Lloyd’s market were able to charge higher premium rates to cover ransoms, repair of hacked networks, business interruption losses and even public relations costs to repair reputational damage.

But the increase in ransomware attacks and the increasing sophistication of attackers have made insurers suspicious. Insurers say some attackers can even check whether potential victims have policies that would make them more likely to pay.

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“Insurers are changing their appetites, their limits, their coverage and their rates,” said Caspar Stops, cyber manager at insurance company Optio. “The limits were halved – where people were offering 10 million pounds ($ 13.50 million), almost everyone was reduced to five.”

Lloyd’s of London, which has about a fifth of the global cyberspace market, has discouraged its union’s roughly 100 members from entering e-commerce next year, industry sources say on condition of anonymity. Lloyd’s declined to comment.

US insurer AIG (AIG.N) also announced in August that it was reducing cyber limits. Read more

Ransomware works by encrypting victims’ data, and hackers typically offer victims a password to retrieve it in exchange for cryptocurrency payments.

It has become the attack of choice for cybercriminals, who previously focused on data theft and sale to third parties.

Suspected ransomware payments totaling $ 590 million were made in the first six months of this year, up from $ 416 million reported for all of 2020, U.S. officials said in October. Read more

In one of the biggest heists, a ransomware attack on Colonial Pipeline in May shut down the largest network of fuel pipelines in the United States for days. Read more

Profits for U.S. cyber insurers fell in 2020, according to insurance broker Aon. The combined ratio – a measure of profitability in which a level above 100% indicates a loss – increased by more than 20 percentage points from 2019 to 95.4%.

While insurers struggle to cope, businesses are underinsured.

“People are very unlikely to get the same limits – if they are, they are paying an extraordinary amount,” said David Dickson, CEO of broker Superscript.

Dickson said a tech client had already purchased £ 130 million professional liability insurance and IT coverage for £ 250,000. Now the client could only get 55 million pounds of cover and the price was 500,000 pounds.

Insurers that issued $ 5 million cyber liability policies last year have been reduced to limits of between $ 1 million and $ 3 million in 2021, according to a report released last month by US brokerage Risk Placement. Services (RPS).

AS PROFITABLE AS COCAINENE

A European Union report released in October said the COVID-19 pandemic and the increase in homeworking had allowed cybercriminals to thrive.

Meanwhile, cybersecurity firm Coveware compared the profit margin of over 90% of ransomware attacks in 2021 to the gains made by Colombian cocaine cartels in 1992.

Where hackers previously took a dispersed approach with methods like sending thousands of phishing emails, they have become more focused, reading balance sheets and focusing on specific industries.

Tom Quy, head of cyber practice at reinsurance broker Acrisure Re, said the attacks were moving from healthcare facilities and municipalities – which have weak IT controls but also little money – to manufacturing companies or logistics.

These companies have deep pockets and cannot afford extended outages to fix their systems, so they prefer to pay ransoms, especially if they have insurance to cover them.

“We ask anyone who does not disclose your insurance because it is crucial to your business,” said Scott Sayce, global head of cybersecurity at Allianz Global Corporate & Specialty.

Premium rates nearly doubled in the United States and jumped 73% in Britain due to the frequency and severity of ransomware attacks, insurance broker Marsh said. RPS said the rates on some policies have increased by 300%.

Where ransom payments were typically $ 600 a few years ago, they now stand at $ 50 million, said Michael Shen, head of cybersecurity and technology at insurer Canopius, and insurers. sometimes ask policyholders to pay half the ransom.

The United States and France are among the countries particularly concerned about the payment of ransoms, according to industry sources.

The FBI says it does not support the payment of ransoms, while a few US states are considering banning ransomware payments by municipalities.

But insurers, while less willing to provide large amounts of coverage, say failure to pay the ransoms could backfire.

“Of course, no one wants to pay criminals,” Adrian Cox, CEO of insurer Beazley (BEZG.L) told Reuters. “At the same time, if you ban it… you could cripple many businesses whose systems have been shut down.”

($ 1 = 0.7406 pounds)

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Editing by Barbara Lewis

Our Standards: Thomson Reuters Trust Principles.

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