Declining Cyber Insurance Premiums: A Paradox of Increasing Ransomware Attacks
According to a report by broker Howden, cyber insurance premiums are declining worldwide, despite an increase in ransomware attacks. This is due to businesses improving their ability to mitigate losses from cybercrime. Premiums for cyber attack protection surged in 2021 and 2022 due to the impact of the COVID-19 pandemic on cyber incidents. However, there has been a drop in premiums over the past year, with double-digit price reductions observed in 2023/24.
Security measures such as multifactor authentication (MFA) have played a crucial role in safeguarding companies’ data, leading to a decrease in insurance claims. Sarah Neild, head of UK cyber retail at Howden, emphasized the importance of basic security measures like MFA in protecting against cyber threats. She also highlighted the significance of investing in IT security and staff training to strengthen overall cyber resilience.
Ransomware attacks are on the rise, but insurers are offering more coverage due to increased awareness about the need for protection. Although global ransomware attacks declined after Russia’s invasion of Ukraine in February 2022, there was an 18% increase in ransomware incidents in the first five months of 2024 compared to the previous year. Ransomware attacks typically involve encrypting data and demanding cryptocurrency payments in exchange for a decryption key.
Business interruption is often the most significant cost following a cyber attack, but businesses can minimize these costs by implementing robust backup systems such as using cloud providers. The majority of cyber insurance business is concentrated in the United States, but Europe is expected to experience the fastest growth in the $15 billion global cyber insurance market due to lower penetration levels currently.
Despite the benefits of cyber insurance, smaller firms are less likely to purchase coverage primarily due to a lack of awareness regarding cyber risks. As businesses become more resilient and insurers expand their offerings, the cyber insurance market is expected to continue evolving to meet changing needs.
In conclusion, while there has been an increase in ransomware attacks globally, businesses’ ability to mitigate losses from these incidents has led to declining premiums for cyber attack protection worldwide. Security measures such as MFA have played a crucial role in reducing claims and minimizing costs following a business interruption incident.
As insurers continue to expand their offerings and awareness about the need for protection grows among businesses worldwide, we can expect further evolution within this rapidly growing industry.
Overall, it’s essential for businesses not only take basic security measures like MFA but also invest heavily into IT security and staff training as well as implement backup systems that can minimize costs during business interruptions caused by cyberattacks.
