Navigating Cyber Insurance: Requirements, Recommendations, and Challenges

Cybercrime is expected to cost the world 9.5 trillion USD1 this year, given the historical year-over-year growth, a rise of state-sponsored cybercrime, and an expanding attack surface. The staggering cost and implications of cybercrime can spell the end of the road for many organizations. Amid blurring corporate perimeters, expanding attack surfaces, and increasing sophistication of determined cybercriminals and cybercrime syndicates, organizations are desperately turning to cybersecurity insurance to mitigate the potentially devastating costs of cyber incidents.

Why is Cyber Insurance Important?

Cyber insurance can be a critical lifeline for organizations facing cybersecurity crises like a data breach, allowing them to offload some of the financial risks to their insurance providers. Cyber insurance can cover various expenses in the aftermath of a breach, including:

1. Investigation costs: Costs associated with investigating the breach and determining the extent of the damage.
2. Legal fees and penalties: Costs related to defense against lawsuits filed after a cyberattack. It may also include fines and penalties imposed by regulatory bodies.
3. Notification costs: Expenses related to notifying individuals and authorities about a data breach.
4. Public relations costs: Costs of managing the reputational damage caused by a cyberattack.
5. Repair and replacement costs: Costs associated with repairing or replacing damaged equipment and software following a cyberattack.
6. Data recovery costs: Expenses related to recovering lost or corrupted data after a cyberattack.
7. Business interruption: Reimbursement for lost revenue due to operational disruptions during a cyberattack.

The financial buffer from cyber insurance enables organizations to recover more quickly and efficiently from cyberattacks and maintain business continuity while minimizing downtime. These benefits have fueled the growth of the cyber insurance market which is estimated to reach 34 billion USD by 20311.

While cyber insurance provides a financial safety net, most insurers have stringent eligibility criteria. Though inconvenient, these criteria encourage organizations to prioritize cybersecurity, ultimately leading to a stronger security posture.

Cyber Insurance: Requirements and Regulations

Insurers may have different eligibility criteria, but generally, they require that any company interested in cyber insurance has, at the very least, the following safety measures in place:

1. Employee training on cybersecurity best practices
2. Robust access control with multi-factor authentication
3. An incident response plan
4. Breach notification procedures
5. Data backups and a disaster recovery plan
6. Up-to-date antivirus and malware protection
7. Central patch management and firewalls
8. Regular vulnerability scanning and pentesting
9. Compliance with relevant data protection regulations

Insurers typically evaluate their applicants’ security posture before issuing a policy. The process is known as underwriting and involves extensive data gathering and risk assessment. It considers the organization’s risk profile, historical data regarding security incidents and claims, industry regulations, and market conditions. This process eventually determines the terms and conditions of an insurance policy, including coverage limits, premiums, and deductibles. Organizations with robust security measures can qualify for better coverage and lower premiums.

Recommendations for Securing Strong Coverage at Optimal Premiums

Potential policyholders can enhance their prospects of securing comprehensive cyber insurance coverage on favorable terms by maintaining a robust security posture and providing evidence to support it. Here’s what organizations can do to ensure they obtain the desired policy:

1. Implement robust cybersecurity controls: This includes firewalls, intrusion detection systems, data encryption, and endpoint protection software. Make sure these controls are always up to date.
2. Invest in comprehensive exposure management: Exposure management tools and platforms can help Identify, prioritize, and mitigate cyber threats and vulnerabilities.
3. Ensure compliance with relevant industry regulations: Compliance with industry-specific regulations like HIPAA in healthcare and PCI-DSS in finance, is often mandatory for securing cyber insurance.
4. Conduct regular security assessments: Regularly conduct vulnerability assessments, Ptaas, and red teaming activities to identify and address exploitable vulnerabilities in systems.
5. Maintain good cyber hygiene: This includes educating employees on cybersecurity best practices, such as strong passwords and phishing awareness.

Maintaining a strong cybersecurity posture is an ongoing commitment. Doing so solely to qualify for a cyber insurance package is short-sighted, as insurers may deny coverage if their investigations reveal a failure to uphold adequate cybersecurity standards. Insurers conduct risk assessments or audits, either independently or with a third party, which varies by provider. These reviews also often examine claims history, examining how effectively a company has managed previous incidents. Furthermore, even comprehensive coverage cannot fully restore customer or partner trust following a security breach. Adhering to cybersecurity best practices, an integrated proactive offensive security program should be a long-term priority for mitigating the impact of a breach.

How Ransomware is Impacting Cyber Insurance

Despite the exponential growth, cyber insurance companies face mounting stability and sustainability challenges. Insurance operates on the principle of spreading risk across a large pool of policyholders, thereby mitigating the financial impact on individuals. However, when widespread cyber threats target multiple organizations simultaneously, several insured organizations can file claims at the same time, straining the provider’s resources.

The threat of ransomware was one of the initial driving forces behind the surge in companies seeking cyber insurance. Companies sought ransomware coverage to lessen the financial impact of extortion demands and operational disruption. However, ransomware-as-a-service (RaaS) has triggered a new wave of ransomware attacks in which the perpetrators don’t need extensive technical expertise – they can simply hire ransomware gangs to carry out advanced attacks on their behalf. Sophisticated cybercriminals not only infiltrate networks but also exfiltrate financial data to determine their target’s potential payout capacity. In fact, today’s ransomware demands increasingly hinge on the target’s insurance coverage.

By 2031, ransomware will cost its victims approximately 265 billion USD annually . Without adequate measures, the cyber insurance industry will have to bear the unsustainable burden of large ransom payouts. The increase in frequency and cost of ransomware has led to insurance premiums increasing steadily by 51% YoY3 and stricter underwriting practices. To avoid jeopardizing their own financial viability, cyber insurance companies carefully assess their customers’ risk exposure and security posture before offering coverage. In fact, Gartner’s recent research report predicts a growing demand for cybersecurity validation tools with integrated Attack Surface Management (ASM) capabilities as they help insurers identify entry points and assess the likelihood and impact of a potential breach to help determine insurance premiums.

Learn more about BreachLock’s comprehensive suite of Cyber Security Validation and Exposure Management tools and solutions. Schedule a discovery call with BreachLock today!

About BreachLock

BreachLock is a global leader in Continuous Attack Surface Discovery and Penetration Testing. Continuously discover, prioritize, and mitigate exposures with evidence-backed Attack Surface Management, Penetration Testing, and Red Teaming. We go beyond providing an attacker’s view of common vulnerabilities and exposures to provide enterprises with evidence of risk across their entire attack surface to determine how they will respond to an attack.