“Carriers are asking a whole lot more questions,” Peed said. “And it’s taking them a lot longer.”
Cyber insurance typically covers costs associated with a hack, such as money spent to investigate and notify consumers their data has been compromised. It can also cover ransom payments.
For years, insurers have had to imagine worst-case scenarios and their consequences—some of which are turning out to be fairly accurate. When Colonial was attacked, it was forced to shut operations on the biggest U.S. fuel pipeline and paid $4.4 million in ransom to the hackers.
Exploiting Weakness
Cyber risks are global, and often crimes of opportunity. When a hacker finds a weakness, they’re likely to exploit it. That makes assessing risks especially complicated. And insurers aren’t immune, either. CNA Financial Corp., which offers cyber coverage to clients, was said to have paid $40 million in March to regain control of its network after a ransomware attack.
Unlike other types of insurance, cyber is developing in real time. Insurers have had to make changes whenever a breach occurs, according to Sam Levine, a senior vice president at broker CAC Specialty.
And some argue that cyber risks can be so catastrophic that the government should step in to to backstop the market, similar to what the U.S. did with terrorism risk in insurance policies after the Sept. 11 attacks.
“Cyber security in general, by definition, should be collaborative,” said Jennifer Rothstein, who’s head of insurance and legal at security firm BlueVoyant. “Private sector should work with law enforcement, and work with a lot of different sectors, because the risks are so severe.“
Meantime, as the cyber market adjusts, remaining providers stand to gain. Some even see more opportunity to profit.
“Cyber insurance will stay,” CAC Specialty’s Levine said. “We’ll see this pullback and restriction of coverage, and then we’ll see a right-sizing of the premiums, and then the organizations and the insurers will start to be profitable again.”
This article was provided by Bloomberg News.