Three Important Paradigms Which Influence Cyber Insurance Today

Limit has recently partnered with Trava Security to describe three of the most important paradigms that are shaping the cyber insurance industry today.

1. Cyber Insurance Is Becoming More Conservative

Insurance companies are scrambling to keep up with cyber risks, which are evolving rapidly. In the past, most cyber attacks were relatively unsophisticated, relying on simple techniques like phishing and malware to gain access to the victim's system. However, as organizations have become more aware of these threats and have implemented better defenses, attackers have had to develop more sophisticated techniques to be effective. Two major threat types are outlined below:

• Ransomware - encrypts a victim's data and demands payment in exchange for the decryption key. These attacks have become increasingly common in recent years, with high-profile incidents affecting organizations in a wide range of industries. They exploit vulnerabilities in an organization's systems that are not well-known or understood.
• Artificial intelligence - enables attackers to automate many aspects of the attack process, making it easier for them to carry out large-scale attacks and to evade detection. For example, attackers can use machine learning algorithms to automatically scan the internet for vulnerable systems and to generate highly targeted phishing emails that are designed to evade spam filters.

As a result, cyber insurance underwriters have become more conservative in their approach to assessing and pricing risk. This means that they are more cautious and selective when it comes to issuing policies, and are more likely to decline coverage for businesses or individuals who are considered to be at a high risk of a cyber attack.

• Policyholders must now have stronger cyber security defenses in place before they will be issued a policy.
• Insurance underwriters are increasing the premiums charged for cyber policies in an effort to offset the increased threat risk and protect their own financial interests.

2. Cyber Insurance Is Still a Niche Category

Cyber insurance is still considered a niche category within the broader insurance market. While traditional insurance products, such as auto and property insurance, have been around for many years and are widely understood and accepted by consumers, Cyber insurance is a more recent development as a result of increasingly complex IT infrastructure in small and medium-sized organizations as well as an overall increase in the threat and efficacy of cyber attacks.

• Cyber policies can cover a wider range of risks which sometimes overlap with other lines of insurance, making policies much more difficult to understand. For example, a cyber attack may result in physical damage to an organization's premises or equipment, which could be covered by property insurance.
• In addition, a cyber attack could result in financial losses, such as the cost of hiring a public relations firm to manage the organization's reputation, which could be covered by liability insurance.

As a result, organizations must more carefully evaluate their insurance coverage to ensure that they are adequately protected against all potential risks and that their coverage is well balanced across multiple lines. This may require a more tailored Cyber policy from a specialized Cyber carrier that understands the organization's needs. There are only a handful of these carriers today and so the Cyber industry is still very small and niche.

3. The Cyber Insurance Application Process Is Changing

Cyber insurance providers have had to increase their underwriting standards in recent years due to the growing threat of cyber attacks and the increasing complexity of the cyber insurance market.

• Underwriting is the process of evaluating an organization's risk profile and deciding whether to provide insurance coverage and at what cost. In order to effectively underwrite cyber insurance policies, insurers must be able to accurately assess the risks that an organization faces and the likelihood of a cyber attack occurring.
• Cyber insurance policies can cover a wide range of risks, from data breaches and ransomware attacks to business interruption and reputation damage. In order to accurately underwrite these policies, insurers must have a thorough understanding of the different types of risks that organizations face and the potential consequences of a cyber attack.

As a result, the Cyber application process is routinely being revised by both large and small Cyber carriers with the goal of being as comprehensive and conservative as possible. Organizations may find that different carriers have different application requirements and submission standards. This can make the Cyber insurance landscape more confusing and difficult to navigate.

Limit + Trava is Your Solution for Cyber

Trava Security has teamed up with Limit to focus on understanding these paradigms, ultimately helping the Insured navigate this increasingly complex world of Cyber insurance. Together, Trava and Limit make it easy to assess digital risks and help insureds apply for cyber coverage. For business owners and IT professionals looking to manage their cyber risk visit Trava’s cyber risk management platform at www.travasecurity.com. Brokers who wish to provide quick, powerful cyber coverage can visit Limit at www.limit.com.