2021 Predictions: Cyber insurers will be on the front line in defending against digital threats

The cyber insurance market is currently at the most challenging point in its history due to a marked increase in the severity of losses being experienced, and driven almost entirely by bigger ransomware events.

Prior to 2018, ransomware threat actors rarely exercised victim profiling and tended to issue nominal demands that remained constant regardless of the size of the victim organisation. But over the past two years this has changed dramatically with the increasing popularity of ransomware variants which have been developed for more targeted attacks and where demands are set according to the victim’s perceived ability to pay.

The net result has been an increase in the value of ransom demands as threat actors are recognising that they are able to extort more money from victims than previously, which in turn has led to more victims seeking reimbursement for a variety of costs under their cyber insurance policies. Six and seven figure claims payments are now a frequent occurrence.

These events are starting to drive change in the market. Cyber insurance rates are increasing significantly for the first time in years in direct response to the shifting claims environment, whilst some insurers are starting to apply sub-limits and co-insurance with respect to ransomware related coverage items.

Despite these changes, cyber insurers with size, scale and experience in the sector seem to be well placed to help their customers navigate the challenges that the heightened threat environment presents.

There has been an increasing trend amongst the longest established cyber insurers to build large in-house cyber security teams, which have become first responders for thousands of organisations being hit with potentially catastrophic cyber attacks.

At CFC we are also seeing a move amongst cyber insurers to provide proactive threat alerts to their customers in real time, warning them of vulnerabilities on their network that have a high probability of leaving them open to attack. Cyber insurers are going to play an increasingly crucial role in this kind of risk mitigation activity.

While ransomware will continue to be the greatest digital threat that most organisations face in 2021, this won’t always be the case. As the cyber market continues to mature, cyber insurers no longer view their role as simply being there just to create policy wordings and reimburse financial loss. More will seek to carve out a central role in not only being the first line of defence for customers, but also in identifying what the next big threats are and ensuring that their customers are protected before the worst happens, not just afterwards.

Throughout this year, I see cyber insurers investing more in their in-house claims and security teams and investing more in their technology and infrastructure that will allow them to communicate threat alerts rapidly to their customers -- and then, of course, helping them to address these threats.

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