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Insurers are trying to get a handle on the issue of ransomware as demands increase and are responding with higher rates and tighter coverage.
The highest known ransom demand increased from $15 million to $30 million in 2020, according to a report issued by cybersecurity company Palo Alto Networks, based in Santa Clara, California, and demands are also increasing in frequency.
A report issued by Aon PLC in March said cyber liability claims continue to increase in volume and severity, with much of the increases driven by ransomware events. The higher claims are expected to drive 20% to 50% rate increases for cyber coverage through this year.
Large insurers’ “rate and underwriting guidelines have apparently firmed up” across the board, said Paul E. Paray, based in Glen Rock, New Jersey, who advises businesses on cybersecurity.
“People are trying to fix the problem with higher premiums,” coinsurance and sublimits rather than broad exclusions, said Nick Economidis, vice president of erisk underwriting for Crum & Forster in Houston.
Crum & Forster wants policyholders to maintain their levels of coverage but have some participation in the losses, he said.
“We are being very, very selective about the risks we want to add to the book,” said Kristen Dauphinais, head of cyber and technology for Beazley PLC in Dallas, who predicted the market will continue to harden.
Tracie Grella, head of cyber insurance at American International Group Inc. in New York, said the insurer has introduced a 50% co-insurance for companies that have not implemented what AIG determines to be adequate security measures.
“We’ve seen a very sharp pivot in underwriting strategies” as companies try to better identify risks and help policyholders identify vulnerabilities, said Meredith Schnur, New York-based cyber brokerage leader, U.S. and Canada, for Marsh LLC.
If the situation gets worse, insurers may no longer provide coverage for ransomware “because that could potentially put the viability of the product at risk,” said Sou Ford, Atlanta-based cyber team leader for Willis Towers Watson PLC’s southeast region.
Companies have faced a surge in ransomware attacks during the COVID-19 pandemic, but despite the onslaught they can dramatically reduce if not eliminate the threat of ransomware, experts say.