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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.
Cyber insurance premiums increased by an average of 28% in the first quarter of 2022 compared with the fourth quarter of 2021, according to the Council of Insurance Agents & Brokers (CIAB), an association for commercial insurance and employee benefits intermediaries.
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 trying 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 US Government Accounting Office