Allianz recently released their Annual Global Claims Review (ACGS) which revealed some stunning percentage increases in contingent business interruption claims with causes as varied as the companies who filed them. Many of these claims were tied to natural disasters and cyber crimes, which increasingly are becoming an important part of the conversation.
“Companies and their insurers have shown resilience to weather the loss impact of the pandemic, but the ongoing war in Ukraine, a spike in the cost and frequency of business interruption losses and the sustained elevated level of cyber claims are creating new challenges,” stated AGCS Chief Claims Officer Thomas Sepp.
In 2016, AGCS handled fewer than 100 cyber claims. However, this has now grown to an average of 1,000 cyber claims per year for the past two years. Regarding the increased claims, Joerg Ahrens, Head of Global Practice Group for Cyber Claims at AGCS states, “Claims frequency has begun to stabilize however, albeit at elevated levels.” (Source: Allianz Global Claims Review)
There are myriad factors that have driven the escalation over the years, including global circumstances ranging from pandemic impacts to supply chain interruptions. In a world of concentrated corporate exposure, claims can multiply as when dependencies fail. Cyber claims are a part of that cost structure, and are expected to keep up the trend.
Unfortunately, as technology has developed, so have criminal strategies. With more organized and better resourced criminal groups today than in the past, cyber was ranked as the top threat for companies by more than 2,600 risk management experts around the world. Year-on-year ransomware attacks increased by 13 percent according to the Verizon Business 2022 Data Breach Investigations Report. (Source: Allianz Global Claims Review)
This trend is reflected across the cyber security landscape, where, according to the Verizon report, more than 60% of system intrusion incidents come through an organization’s partner. (Source: 2022 Data Breach Investigations Report)
“We have seen a number of concerning supply chain cyber-attacks in recent years,” says Joerg Ahrens. “Compromising the right partner can be a powerful weapon in the cyber criminal’s arsenal and highlights the difficulties that many organizations face in securing their digital supply chains. AGCS has been working with its customers to prepare and invest in the resources necessary to react to these and other huge cyber threats.”
Companies often overlook vendors or digital supply chains as security risks, with only 43% saying they had conducted a risk assessment of their vendor or supply chain, according to Marsh and Microsoft’s latest annual global cyber risk survey of over 1,000 respondents. It leaves business interruption losses with plenty of room to grow, especially when large companies and their digital supply chains are targeted. (Source: 2022 Marsh and Microsoft Global Cyber Risk Survey)
Firms should be optimizing their protection by investing in attack protection plans and technology paired with cyber insurance. According to the report, it is becoming the standard of operations in today’s market in order to provide the coverage required by global challenges. Firms should also encourage their partners to implement best practices, particularly when sensitive customer or organizational data is shared. They can do this by requiring partners to complete security audits and/or implement specific cybersecurity technology. This will help strengthen their key dependencies and the interruption risk of attacks.