CNBC reports a rise in cyber insurance premiums in the US by an average of 28% in the first quarter of 2022, compared with the fourth quarter of 2021. If rates continue to climb and insurers offer more limited coverage, cyber insurance might become more and more difficult for many companies to afford or obtain.
Among the many consequences of the rising number of costly data breaches, ransomware, and other security attacks are pricier premiums for cyber security insurance.
The rise in costs could put many organizations out of the running for this essential coverage, a risky proposition given the current threat landscape.
Cyber insurance is a type of specialty insurance that protects organizations against a variety of risks related to information security attacks such as ransomware and data breaches. Ordinarily, these types of risks aren’t included with traditional commercial general liability policies or are not specifically defined in these insurance plans.
Given the rise in attacks, the growing sophistication of these incidents and the potential financial impact, having cyber insurance coverage has become critical for many organizations. Premiums for these plans have been on the rise because of the increase in security-related losses and rising demand for coverage.
Among the primary drivers for the continued price increases were a reduced carrier appetite for the risk and high demand for coverage, CIAB said. The high demand for cyber coverage is in part fueled by greater awareness among companies of the threat cyber risk poses for businesses of all sizes, it said.
In addition to premium price increases, underwriters are attempting to mitigate the losses from cyber claims with much stricter underwriting requirements, including making cyber security protocols such as multi-factor authentication mandatory.
The availability and affordability of cyber insurance can vary by industry and business size, said Dan Garcia-Diaz, managing director of the U.S. Government Accounting Office (GAO). “For example, [a] small business may have more difficulty purchasing cyber insurance,” he said.
Stricter standards for cyber insurance
If rates continue to climb and insurers offer more limited coverage, however, cyber insurance might become more and more difficult for many companies to afford or obtain. Insurers are also getting more demanding in terms of how they want their clients to defend themselves.
“Organizations are facing increased scrutiny by cyber insurers during the underwriting process,” said Rob Norris, principal analyst, property and casualty insurance, at Celent, a global research and advisory firm focused on technology for financial institutions.
“Companies that do not have basic cyber hygiene controls — things like multi-factor authentication, automatic software updates, and regular employee training — will face declinations by cyber insurers.”
Rising premiums, driven by expected increased losses, and greater overall demand for cyber insurance is putting a strain on insurance capacity, Norris said, making it harder to find coverage. That’s true even for organizations with strong cyber security risk management plans.
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