By Carolyn Cohn

LONDON, (Reuters) – Insurers reduced the cyber coverage they offer to their customers by half after ransomware attacks and pandemics drove a rise in home-working.

Due to increased demand, many major European and U.S. insurance companies and syndicates on the Lloyd’s of London markets have been able charge higher premiums to cover ransoms.

Insurance companies are becoming more cautious due to the increasing sophistication and ransomware attacks. Insurance companies say that attackers could even look into whether victims may have insurance policies that make them more likely pay.

Caspar Stops (head of cybersecurity at Optio) stated that “insurers are changing how they feel about their pricing, limit coverage, and price.” “Limits have halved – where people were offering 10 million pounds ($13.50 million), nearly everyone has reduced to five.”

Lloyd’s of London is home to around five percent of the cyber market worldwide. However, it has deterred its 100-strong syndicate members not to take on any cyber business in 2013, industry sources said. Lloyd’s of London declined to comment.

AIG (NYSE 🙂 US insurer also announced in August that they were reducing cyber security limits.

Ransomware encrypts victims’ data, and hackers typically offer victims a code to access it in exchange for cryptocurrency payments.

Cybercriminals have made it their preferred attack, having previously preferred to steal data and sell it to others.

According to U.S. authorities, ransomware payments of $590 million in suspected ransomware were received in the first six month of the year, as compared to the $416 million for 2020.

Colonial Pipeline was shut down for many days in May by a ransomware attack. This is one of the most egregious heists.

Aon, an insurance broker (NYSE:), found that U.S. cybersecurity insurers saw their profits shrink in 2020. From 2019 to 95.4%, the combined ratio (a measure of profitability where a value of over 100% is indicative of a loss) climbed more than 20%.

While insurance companies struggle, businesses are over-insured.

David Dickson of Superscript’s enterprise department stated, “It is very unlikely that people get the same limits. If they do, it is an extraordinarily high price.”

Dickson claimed that one client of technology had purchased cyber and professional indemnity cover worth 130 million pounds for 250,000 pounds. The client was now able to get only 55 million pounds of coverage and it cost 500,000.

According to a U.S. brokerage Risk Placement Services’ (RPS), cyber insurance companies that issued policies covering $5 million last year for cyber liability have reduced their limits to $1 million and $2 million by 2021.

AS PROFITABLE AS COCAINE

The European Union released a report in October stating that the COVID-19 pandemic had enabled cyber criminals flourish.

Coveware, a cyber security company, compared the ransomware profits of over 90% in 2021 with the 1992 gains made by the Colombian cocaine cartels.

Hackers used to be a scattered-gun method, sending thousands of spam emails and then focusing their efforts on specific industries.

Tom Quy from Acrisure Re is the leader of cyber practices. Quy said attackers were shifting away form hospitals and towns – where there are weak IT controls and little money – to manufacturing or logistic companies.

This is because these firms can not afford long outages for their systems to be fixed.

“We advocate to everyone you don’t disclose your insurance because that’s crucial to your business,” Scott Sayce, global head of cyber at Allianz (DE:) Global Corporate & Specialty, said.

Marsh, an insurance broker, stated that the ransomware attack has caused premium rates to almost double in the United States. In Britain, they have jumped by 73%. RPS claimed that some policies’ rates had increased by up to 300%.

Ransom payments used to be $600, but they are now as high as $50,000,000, according to Michael Shen of Canopius’ cyber and technology department. In addition, insurers sometimes ask policyholders for half the ransom.

According to industry sources, ransom payments have been a major concern in France and the United States.

While the FBI states that it doesn’t support ransom payments, a handful of U.S. States are looking at banning municipalities from paying ransomware.

Although insurers are not as willing to cover large sums of money, they do warn against paying ransoms.

Adrian Cox of Beazley, the CEO of insurance company Beazley stated to Reuters that no one would want to pay criminals. However, it could also be a problem for many companies whose systems are disabled if they ban it.”

($1 = 0.7406 pounds)