As Cybercriminals Act More Like Businesses, Insurers Must ThinkMore Like Criminals
Cybersecurity is no longer an emerging risk but a clear and present one for organizations of all sizes, panelists on a panel at Triple-I’s Joint Industry Forum (JIF) said. This is due in large part to the fact that cybercriminals are increasingly thinking and behaving like businesspeople.
“We’ve seen a large increase in ransomware attacks for the sensible economic reason that they are lucrative,” said Milliman managing director Chris Beck. Cybercriminals also are becoming more sophisticated, adapting their techniques to every move insurers, insureds, and regulators make in response to the latest attack trends. “Because this is a lucrative area for cyber bad actors to be in, specialization is happening. The people behind these attacks are becoming better at their jobs.”
As a result, the challenges facing insurers and the customers are increasing and becoming more complex and costly. Cyber insurance purchase rates reflect the growing awareness of this risk, with one global insurance broker finding that the percentage of its clients who purchased this coverage rose from 26 percent in 2016 to 47 percent in 2020, the U.S. Government Accountability Office (GAO) stated in a May 2021 report.
Panel moderator Dale Porfilio, Triple-I’s chief insurance officer, asked whether cyber is even an insurable risk for the private market. Panelist Paul Miskovich, global business leader for the Pango Group, said cyber insurance has been profitable almost every year for most insurers. Most cyber risk has been managed through more controls in underwriting, changes in cybersecurity tools, and modifications in IT maintenance for employees, he said.
By 2026, projections indicate insurers will be writing $28 billion annually in gross written premium for cyber insurance, according to Miskovich. He said he believes all the pieces are in place for insurers to adapt to the challenges presented by cyber and that part of the industry’s evolution will rely on recruiting new talent.
“I think the first step is bringing more young people into the industry who are more facile with technology,” he said. “Where insurance companies can’t move fast enough, we need partnerships with managing general agents, with technology and data analytics, who are going to bring in data and new information.”
“Reinsurers are in the game,” said Catherine Mulligan, Aon’s global head of cyber, stressing that reinsurers have been doing a lot of work to advance their understanding of cyber issues. “The attack vectors have largely remained unchanged over the last few years, and that’s good news because underwriters can pay more attention to those particular exposures and can close that gap in cybersecurity.”
Mulligan said reinsurers are committed to the cyber insurance space and believe it is insurable. “Let’s just keep refining our understanding of the risk,” she said.
When thinking about the future, Milliman’s Beck stressed the importance of understanding the business-driven logic of the cybercriminals.
If, for example, “insurance contracts will not pay if the insured pays the ransom, the logic for the bad actor is, ‘I need to come up with a ransom schema that I’m still making money’,” but the insured can still pay without using the insurance contract.
This could lead to a scenario in which the ransom demands become smaller, but the frequency of attacks increases. Under such circumstances, insurers might have to respond to demand for a new kind of product.
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