Over the past several years, if your organization experienced a cyberattack, such as ransomware or a diversion of funds due to a business email compromise (BEC), and you had cyber insurance, you likely were very thankful. However, if you are renewing that policy (or in the cyber insurance market for the first time), you are probably looking at much steeper rates, higher deductibles, and even co-insurance, compared to just a year or two ago. This is dependent on finding a carrier to provide competitive terms, although there are some steps organizations can take to improve insurability.

What’s going on?

The short answer is what one might expect, claims paid under cyber insurance policies are significantly up, according to Marc Schein*, CIC, CLCS, National Co-Chair Cyber Center of Excellence for Marsh McLennan Agency who closely tracks cyber insurance trends. Mr. Schein identified the key drivers hardening the cyber insurance market: ransomware and business interruption.

  • Ransomware: According to FBI data, adjusted losses from ransomware matters tripled from 2019 to 2020. Further, according to an Allianz Global Corporate & Specialty (AGCS) cyber insights report, cited in Insurance Journal, the U.S. experienced a 62% increase in ransomware incidents during the first six months of 2021 and a 225% increase in ransom demands.
  • Business interruption: Business interruption costs following a ransomware attack more than doubled over the past year, increasing from $761,106 to $1.85 million in 2021, with down time averaging 23 days, according to the same AGCS report.

According to Fitch Ratings’ Cyber Report 2020, insurance direct written premiums for the property and casualty industry Increased 22% last year to over $2.7 billion, representing the demand for cyber coverage. The industry statutory direct loss plus defense and cost containment (DCC) ratio for standalone cyber insurance rose sharply in 2020 to 73% compared with an average of 42% for the previous five years (2015-2019). The average paid loss for a closed standalone cyber claim moved to $358,000 in 2020 from $145,000 in 2019.

The effects of these, other increases in claims, and losses from cyberattacks had a dramatic impact on cyber insurance.

  • Rate increases of 100% to 300% are not uncommon. According to Marsh’s November Cyber Market Report, the average U.S. cyber price per million in coverage increased 174% for the total price per million for the 12 month period ending September 2021.
  • Capacity has decreased dramatically, with $10 million limits becoming challenging to secure.
  • Policy changes, such as increases in deductibles, retention, sublimits, and co-insurance on ransomware payments, are making cyber coverage look more like health insurance.

What can we do?

Perhaps the most concerning development for organizations in the cyber insurance market is the significantly increased scrutiny carriers are applying to an applicant’s insurability. The days of the three-question application process may be over. According to Mr. Schein, before applicants look to procure cyber coverage, an astute buyer should contemplate the following underwriting cyber security controls. Examples of these include:

  • Multi-factor authentication across the applicant’s systems including for email, remote access, vendor access, etc.
  • Adoption of a tested incident response plan.
  • Presence of an endpoint detection solution.
  • Security awareness training, including phishing training.
  • Removing end-of-life software.
  • Closed remote access ports, including remote desktop protocol (RDP).

This is consistent with Mr. Schein’s experience with organizations anxious to bolster information security controls in connection with the underwriting process for cyber insurance. The controls mentioned above are typically best practices underwriters are strongly encouraging which may also improve an organization’s compliance posture. Notably, they are not limited to technical IT fixes, but include broader administrative policies and practices, such as training and breach preparedness.

Indeed, an increasing number of states require businesses to implement “reasonable safeguards“ to protect personal information. In New York, for example, the New York SHIELD Act requires businesses of all sizes to adopt administrative, physical, and technical safeguards to protect the personal information they maintain about New York residents. The statute does not require specific technical safeguards be maintained. The California Privacy Rights Act (CPRA) adds to the California Consumer Privacy Act (CCPA) an affirmative obligation to “implement reasonable security procedures and practices…to protect the personal information from unauthorized or illegal access, destruction, use, modification, or disclosure.” Considering what IT experts have been saying about the effectiveness of multifactor authentication, it has been identified as a meaningful control albeit not full-proof tool to help prevent unauthorized access to information systems within the scope of privacy and security regulation.

Of course, there are no silver bullets, but such safeguards may dramatically reduce the chances of a cyberattack, and that is music to an underwriter’s ears. There will be claims, just fewer of them, and perhaps less damaging.


I wish to thank Marc Schein for his tireless commitment to educating on these issues and for his valuable contributions to this article.  

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Photo of Joseph J. Lazzarotti Joseph J. Lazzarotti

Joseph J. Lazzarotti is a principal in the Berkeley Heights, New Jersey, office of Jackson Lewis P.C. He founded and currently co-leads the firm’s Privacy, Data and Cybersecurity practice group, edits the firm’s Privacy Blog, and is a Certified Information Privacy Professional (CIPP)…

Joseph J. Lazzarotti is a principal in the Berkeley Heights, New Jersey, office of Jackson Lewis P.C. He founded and currently co-leads the firm’s Privacy, Data and Cybersecurity practice group, edits the firm’s Privacy Blog, and is a Certified Information Privacy Professional (CIPP) with the International Association of Privacy Professionals. Trained as an employee benefits lawyer, focused on compliance, Joe also is a member of the firm’s Employee Benefits practice group.

In short, his practice focuses on the matrix of laws governing the privacy, security, and management of data, as well as the impact and regulation of social media. He also counsels companies on compliance, fiduciary, taxation, and administrative matters with respect to employee benefit plans.

Privacy and cybersecurity experience – Joe counsels multinational, national and regional companies in all industries on the broad array of laws, regulations, best practices, and preventive safeguards. The following are examples of areas of focus in his practice:

  • Advising health care providers, business associates, and group health plan sponsors concerning HIPAA/HITECH compliance, including risk assessments, policies and procedures, incident response plan development, vendor assessment and management programs, and training.
  • Coached hundreds of companies through the investigation, remediation, notification, and overall response to data breaches of all kinds – PHI, PII, payment card, etc.
  • Helping organizations address questions about the application, implementation, and overall compliance with European Union’s General Data Protection Regulation (GDPR) and, in particular, its implications in the U.S., together with preparing for the California Consumer Privacy Act.
  • Working with organizations to develop and implement video, audio, and data-driven monitoring and surveillance programs. For instance, in the transportation and related industries, Joe has worked with numerous clients on fleet management programs involving the use of telematics, dash-cams, event data recorders (EDR), and related technologies. He also has advised many clients in the use of biometrics including with regard to consent, data security, and retention issues under BIPA and other laws.
  • Assisting clients with growing state data security mandates to safeguard personal information, including steering clients through detailed risk assessments and converting those assessments into practical “best practice” risk management solutions, including written information security programs (WISPs). Related work includes compliance advice concerning FTC Act, Regulation S-P, GLBA, and New York Reg. 500.
  • Advising clients about best practices for electronic communications, including in social media, as well as when communicating under a “bring your own device” (BYOD) or “company owned personally enabled device” (COPE) environment.
  • Conducting various levels of privacy and data security training for executives and employees
  • Supports organizations through mergers, acquisitions, and reorganizations with regard to the handling of employee and customer data, and the safeguarding of that data during the transaction.
  • Representing organizations in matters involving inquiries into privacy and data security compliance before federal and state agencies including the HHS Office of Civil Rights, Federal Trade Commission, and various state Attorneys General.

Benefits counseling experience – Joe’s work in the benefits counseling area covers many areas of employee benefits law. Below are some examples of that work:

  • As part of the Firm’s Health Care Reform Team, he advises employers and plan sponsors regarding the establishment, administration and operation of fully insured and self-funded health and welfare plans to comply with ERISA, IRC, ACA/PPACA, HIPAA, COBRA, ADA, GINA, and other related laws.
  • Guiding clients through the selection of plan service providers, along with negotiating service agreements with vendors to address plan compliance and operations, while leveraging data security experience to ensure plan data is safeguarded.
  • Counsels plan sponsors on day-to-day compliance and administrative issues affecting plans.
  • Assists in the design and drafting of benefit plan documents, including severance and fringe benefit plans.
  • Advises plan sponsors concerning employee benefit plan operation, administration and correcting errors in operation.

Joe speaks and writes regularly on current employee benefits and data privacy and cybersecurity topics and his work has been published in leading business and legal journals and media outlets, such as The Washington Post, Inside Counsel, Bloomberg, The National Law Journal, Financial Times, Business Insurance, HR Magazine and NPR, as well as the ABA Journal, The American Lawyer, Law360, Bender’s Labor and Employment Bulletin, the Australian Privacy Law Bulletin and the Privacy, and Data Security Law Journal.

Joe served as a judicial law clerk for the Honorable Laura Denvir Stith on the Missouri Court of Appeals.