There have been three major global cyberattacks in the last six months. These attacks have caused extensive system damage and monetary loss. Some companies affected remain crippled weeks or months after the attack. Will this rate of “one every other month” continue? Nobody knows, of course. But, as a recent Wall Street Journal op-ed suggests, ransomware will remain the dominant attack method of choice, and the problem “isn’t going anywhere.” The article claims that “cybercriminals launch hundreds of millions of attacks daily across the globe, and recent studies have found that as many as 60% involve ransomware.” Why? Because they are easy, and they work.
Without a robustly secured network, it is impossible for most entities to withstand a targeted or random cyberattack. So most companies, big or small, generally enlist the help of third-party vendors, which traffic a multitude of software products, modules or platforms to keep cybercriminals from exploiting vulnerabilities. But, because nothing is fail-safe, companies must still consider buying insurance to protect against the staggering potential of loss that a global cyberattack can cause.
Cyber is no different from other risks that an organization could be exposed to (e.g., fire, burglary, flooding, power failure, strikes and liability issues). Businesses have to consider insurance against cyber-attacks and the relating financial consequences. This kind of insurance policy is known as Cyber Liability Insurance Coverage, or CLIC. With the estimated annual costs to the global economy from cybercrime estimated between $375 billion and $575 billion in 2014 alone and the average cost of a corporate data breach at more than $3 million per incident, it is understandable why cyber insurance is catching on.
Still, there seems to leave a lot of room for error, rounding or otherwise, in a market where U.S. insurers wrote approximately $1.3 billion in cyber coverage last year. This is expected to reach $14 billion by 2022. There is industry data that shows insurance premiums could range from $800 to $1,200 for SMEs/SMBs with revenues of $100,000 to $500,000 (on the low end) to more than $100,000 for SMEs/SMBs with revenues in the millions. Allianz SE, the largest insurer in the world, expects these premiums to skyrocket by 2025. Furthermore, the Insurance Information Institute estimates that the third-largest risk for companies worldwide is cybercrime, not in the least due to cyber attacks such as WannaCry and Petya/NotPetya.
As it stands right now, insurance companies have limited resources to address the growing number of CLIC applicants. There are the obvious factors that come into play when calculating an insurance premium: the nature of the business, the vulnerability (attractiveness for cyber crooks) of the data, the size of the company and the amount of revenues, etc. But pinpointing the exact risk is still evolving. Currently, insurers mostly rely on questionnaires or third-party onsite assessments to estimate the cybersecurity posture of applicants, which is time-consuming and expensive. Because this branch of insurance is not mature enough, there is a lack of specialized and qualified personnel that have the experience and expertise to perform cyber risk assessments. In many cases, the onsite assessments are conducted by junior staff members of the insurer and junior security consultants using non-standardized methods.
My guess is that insurance companies still don’t know exactly what they are insuring and what to charge, because there are still inefficiencies in the market. There are conflicting definitions of what exactly makes a system “secure” and what constitutes a threatening vulnerability that must be decided upon. Knowledge still has to be gained to determine how to manage risk. Most insurance companies are large enough to have a staff of security officers and to use third-party vendors to protect themselves from cyber vulnerabilities. But what to do about assessing insurance candidates?
The good news is that there is progress being made where advanced simulation can help assess the various attack vectors that are being used today. The value of such a CLIC assessment would derive from being able to put an aggregate “risk score” on an insurance candidate. The score would be based on known and acceptable risk calculating methods such as NIST, CVSS3 and DREAD. It would be provided to each applicant based on the results from a simulated assessment done on its network, testing all its security controls.
The value from such technology comes from insurers being able to know within a few hours if they should provide coverage to an applicant based on demonstrated risk, how much coverage to provide the applicant without putting the insurers at risk and how much in premiums to charge based on an accepted risk score provided after the assessment. Providing a uniform score for cyber insurance applicants reduces the exposure level for insurers, possibly saving millions of dollars and could even lead to revenue growth by raising premium prices to match the risk level.