Lindsey Nelson, Cyber Development Leader, CFC Underwriting, talks to Emerging Risks about the severity of cyber claims and the emergence of the £1 million extortion demand.
As no-one even remotely connected with the cyber insurance market will be unaware, ransomware attacks have really hit the headlines in recent weeks, with companies such as Colonial Pipeline, Axa, CNA, Toshiba and JBS all the victims of cyber criminals. In the case of Colonial Pipeline significant disruption was suffered by the US East coast energy infrastructure network, and Colonial ended up paying a $4.4 million ransom. However, reports have suggested that with the help of US federal agencies $2.3 million of the cryptocurrency demand was subsequently recouped.
Speaking to Emerging Risks, however, Lindsey Nelson, Cyber Development Leader at market leader CFC Underwriting, says she is not surprised that such blue chip companies can be targeted in this way.
“Criminals are going to go after companies who are vulnerable, providing them with the path of least resistance, rather than companies who are valuable,” she says. “But the large Fortune 500 or FTSE companies typically have the perfect combination of being both extremely lucrative, while unfortunately having limited barriers of entry for criminals to penetrate their networks.”
“There can be several motivations behind criminal activity ranging from political state actors to hacktivists to rogue employee scenarios, but largely what’s fuelling crime is financial gain, and blue chip companies are often targeted either directly or through smaller subcontractors and suppliers to gain access to their systems.”
Equally, she says, as ransomware now largely involves an element of data exfiltration, allowing criminals access to financial information including the net profits of a company, it easily enables them to ask for a larger monetary demand by way of extortion:
“Larger companies also tend to be incentivised to pay the ransom demands quickly due to the fear instilled by either strict fines or penalties under privacy legislation and to avoid subsequent negative publicity from the media resulting in customer attrition.”
Frequency and severity on the increase?
We often hear repeated in the wider media that both the frequency and severity of cyber-attacks (not limited to ransomware demands) are on the increase, but as far as Nelson is concerned, this picture is not necessarily an accurate one.
“Every cyber market in the insurance industry will have a vested interested in keeping both frequency and severity of cyber claims down; however, unlike some of the headlines, the frequency of cyber claims hasn’t increased in a significant way relative to the increase in policyholders,” she says.
“What we are concerned about is the severity of cyber claims due to proliferation of ransomware attacks against businesses, and the extraordinary extortion demands making the headlines which, in a relatively young line of insurance, can easily overtake the profitability of cyber as a line of business. Long gone are the days of Wannacry where the average demand was £300 per victim; it’s not unusual these days to see extortion demands under £1M per victim, and that’s true across any industry, territory or size of business.”
Managing cyber risk
However, she adds, while it’s not possible to stop cyber-crime in the foreseeable future, there are ways to appropriately manage it across client, broker and insurer channels: “Cyber insurers are increasingly seeing the benefit of providing continuous scanning services on behalf of their policyholders to find vulnerabilities specific to their business, driving the frequency of claims down and helping shut a company’s digital windows and doors closed. Providing an experienced, multi-disciplinary – and crucially – in-house incident response team will also help.”
Lindsey Nelson in brief
As Cyber Development Leader, Nelson oversees the global cyber distribution strategy across CFC’s portfolio, responsible for underwriting strategy, key account management and providing in-depth training within the business line. With over 20 years’ experience, CFC was one of the first companies to offer cyber insurance and has one of the largest cyber underwriting and in-house incident response teams in the world.
This is first part of a two-part interview; the second part will appear next week.
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