Ukraine war and cyber resilience temper ransomware activity

Investment in risk management appears to be paying off, as ransomware frequency data shows notable moderation, albeit from elevated levels.

This is among the findings of Howden’s second annual report on cyber insurance, which looks at developments that have shaped the market in the past year – including ransomware trends (and vulnerabilities), risk aggregation, the Ukraine war, economic sanctions and the spectre of cyber warfare – and assesses how the insurance market has performed through this period.

The broker’s report reveals that higher loss frequency and severity from ransomware have caused such an extreme supply-demand imbalance in the cyber insurance market that today’s average cost of cover is more than double what it was last year.

The annualised number of global ransomware incidents was up 235% in 2021 compared with 2019.

Shay Simkin, global head of cyber, Howden, commented: “Market conditions remain difficult, but two potential tailwinds may help companies and insurance carriers as this year progresses. The first is off the back of more favourable ransomware trends following underwriting and risk management actions taken in response to increased ransomware frequency and severity. Companies are more resilient to ransomware attacks today than they were this time last year.

“The second, the war in Ukraine, is a lot more unpredictable, but it appears the conflict has so far dampened cyber frequency further as both warring sides focus their efforts on conventional warfare. This could of course change in an instant – for example, a ceasefire, a large-scale cyber attack, pressure on Russia’s government to find new revenue streams as economic sanctions bite – but for now insurance claims are down compared to last year. All of which raise important questions around the prioritisation and efficacy of cyber operations during wartime.”

How these dynamics play out for the rest of 2022 will be instrumental in shaping the pricing environment. For the best part of a year, cyber has experienced the most extreme rate increases across the entire insurance market.

David Rees, executive director, Howden, added: “The last year has been characterised by price corrections, contracting capacity and restrictive terms – classic hard market territory. Whilst the value of cyber insurance continues to prevail for the vast majority of buyers, pricing is now approaching the limits of economic viability for some. Compounded increases from here are not sustainable, which, assisted by the more favourable claims environment that appears to be manifesting this year, is likely to moderate or even stabilise pricing. Improved insurer performance should also help attract new capacity into the market.”


See the next issue of CIR Magazine for more on Howden's report

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