Stronger Cyber Controls Are Needed to Counter Ransomware Pandemic, According to New Allianz Risk Report
During the Covid-19 crisis, another outbreak took place in the cyber space: a digital pandemic driven by ransomware. In a new report, cyber insurer Allianz Global Corporate & Specialty (AGCS) analyzes the latest risk developments around ransomware and outlines how companies can strengthen their defenses with good cyber hygiene and IT security practices.
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Allianz: Cyber-related claims per year 2016-2021 (Graphic: Business Wire)
The increasing frequency and severity of ransomware incidents is driven by several factors:
"The number of ransomware attacks may even increase before the situation gets better," says Scott Sayce, Global Head of Cyber at AGCS. "Not all attacks are targeted. Criminals also adopt a scattergun approach to exploit those businesses that aren't addressing or understanding the vulnerabilities they may have. As insurers we must continue to work with our clients to help businesses understand the need to strengthen their controls. At the same time, in today's rapidly evolving cyber insurance market, providing emergency response services, as well as financial compensation, is now the standard."
Cyber intrusion activity globally jumped 125% in the first half of 2021 compared to the previous year, according to Accenture, with ransomware and extortion operations one of the major contributors behind this increase. According to the FBI, there was a 62% increase in ransomware incidents in the US in the same period that followed an increase of 20% for the full year 2020.
These cyber risk trends are mirrored in AGCS' own claims experience. AGCS was involved in more than a thousand cyber claims overall in 2020, up from about 80 in 2016. Specifically, the number of ransomware claims (90) rose by 50% compared to 2019 (60). Losses resulting from external cyber incidents such as ransomware or Distributed Denial of Service (DDoS) attacks account for most of the value of all cyber claims analyzed by AGCS over the past six years.
Increasing reliance on digitalization, the surge in remote working during Covid-19, and IT budget constraints are just some of the reasons why IT vulnerabilities have intensified, offering countless access points for criminals to exploit. The wider adoption of cryptocurrencies, such as Bitcoin, which enable anonymous payments, is another key factor in the rise of ransomware incidents.
"We often hear about high profile sophisticated attacks in the media, but as a whole the majority of ransomware attacks are not targeted, nor are they technically sophisticated," says Thomas Kang, North American Head of Cyber, Tech and Media, AGCS. "For the most part, cyber criminals are looking for the most vulnerable firms, focusing their efforts on where there is the best chance of receiving a payout for the least effort."
Five Ransomware Trends
In the report, AGCS identifies five trends in the ransomware space, although these are constantly evolving and can quickly change in the 'cat and mouse' race between cyber criminals and companies:
Business Interruption and Recovery Cost Main Drivers of Losses
Business interruption and restoration costs are the biggest drivers behind cyber losses such as ransomware attacks, according to AGCS claims analysis. They account for over 50% of the value of close to 3,000 insurance industry cyber claims worth around €750mn ($885mn) it has been involved in over six years.
The average total cost of recovery and downtime - on average 23 days - from a ransomware attack more than doubled over the past year, increasing from $761,106 to $1.85mn in 2021.
The surge in ransomware attacks in recent years has triggered a major shift in the cyber insurance market. Cyber insurance rates have been rising, according to broker Marsh, while capacity has tightened. Underwriters are placing increasing scrutiny on the cyber security controls employed by companies.
"Three out of four companies do not meet AGCS' requirements for cyber security," explains Marek Stanislawski, Global Cyber Underwriting Lead at AGCS. "Companies need to invest in cyber security. Losses can be avoided if organizations follow best practices. A house with an open door is much more likely to be burgled than a locked house."
IT Security Best Practices
AGCS has published a checklist with recommendations for effective cyber risk management. "In around 80% of ransomware incidents losses could have been avoided if the organizations had followed best practices. Regular patching, multi-factor authentication, as well as information security and awareness training and incident response planning are essential to avoiding ransomware attacks and also constitute good cyber hygiene," says Rishi Baviskar, Global Cyber Experts Leader at AGCS Risk Consulting. "If companies adhere to best practice recommendations there is a good chance that they will not become ransomware victims. Numerous security gaps can be closed, often with simple measures."
In the event of an attack, cyber insurance coverage has evolved to provide emergency incident response services that typically include access to a professional crisis manager, IT forensic support and legal advisory. Further offerings include IT security training for employees and assistance with the development of a cyber crisis management plan.
About Allianz Global Corporate & Specialty
Allianz Global Corporate & Specialty (AGCS) is a leading global corporate insurance carrier and a key business unit of Allianz Group. We provide risk consultancy, Property-Casualty insurance solutions and alternative risk transfer for a wide spectrum of commercial, corporate and specialty risks across 10 dedicated lines of business.
Our customers are as diverse as business can be, ranging from Fortune Global 500 companies to small businesses, and private individuals. Among them are not only the world's largest consumer brands, tech companies and the global aviation and shipping industry, but also wineries, satellite operators or Hollywood film productions. They all look to AGCS for smart answers to their largest and most complex risks in a dynamic, multinational business environment and trust us to deliver an outstanding claims experience.
Worldwide, AGCS operates with its own teams in 31 countries and through the Allianz Group network and partners in over 200 countries and territories, employing around 4,400 people. As one of the largest Property-Casualty units of Allianz Group, we are backed by strong and stable financial ratings. In 2020, AGCS generated a total of €9.3 billion gross premium globally.
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