Global insurers face quiet strain from hacker ransom demands

Global insurers face quiet strain from hacker ransom demands

Reuters  | Oct 25, 2019 15:05

Global insurers face quiet strain from hacker ransom demands

By Suzanne Barlyn

NEW YORK (Reuters) - Global insurers that cover cyberattacks are facing more claims related to ransom-demanding hackers who cripple businesses’ technology systems, and only stop after receiving substantial payments.

These hackers use malicious programs known as ransomware to take down systems controlling everything from supply chains to payments to manufacturing. The hackers have grown more sophisticated during the past year, cybersecurity experts say, shifting from individuals and mom-and-pop operations to larger companies that can afford bigger ransoms.

The effort, known in the cybersecurity industry as “big game hunting,” has been paying off for hackers. It has also been hurting insurers that provide cyber coverage for victims, which are often mid-sized companies desperate to get their systems restored and running quickly.

“They’re large enough to be worth extorting but not large enough to have sufficient network protections to defeat the ransomware,” said Brad Gow, global cyber product leader for insurer Sompo International.

Sompo has been fielding a spate of claims related to a ransomware strain known as “Ryuk,” Gow said. He described the victims as companies with annual revenue between $500 million (£390 million) and $1 billion.

Graphic: Common industries targeted by ransomware - https://fingfx.thomsonreuters.com/gfx/editorcharts/USA-RANSOMWARE-INSURANCE/0H001QXE790N/index.html

The number of attacks and size of ransom demands have been soaring.

Businesses detected 365% more ransomware attacks in the second quarter than they did a year earlier, according to Malwarebytes, which sells cybersecurity software. The average ransom nearly tripled, to $36,295, from $12,762 between the first and second quarters of this year, according to Coveware, a firm that helps negotiate and facilitate cyber-ransom payments.

Criminals who dispatched the Ryuk strain have demanded as much as $5 million in bitcoin, the Federal Bureau of Investigation said in May.

"We’ve seen an unprecedented amount of ransomware attacks in 2019," said Eireann Leverett, a senior risk researcher at the University of Cambridge Centre for Risk Studies. The size of losses for those attacks poses a serious risk to the business, Leverett said.

Companies that have cyber insurance are often covered for a variety of expenses. They include: data recovery, legal liabilities for exposing sensitive customer information, negotiators fluent in hackers’ native languages and the ultimate ransom payments.

Cyber experts say the criminals launching ransomware against companies are organised gangs in Russia and eastern Europe, or hackers sponsored by foreign governments. Insurers sometimes have restrictions in their policies to avoid covering attacks by nations, but it can be difficult to know for sure what type of criminal is launching an attack.

Insurers interviewed by Reuters said ransomware attacks are accelerating but declined to say how much they have paid in total claims.

Lloyd’s of London insurer Beazley expects to handle double-to-triple the number of ransomware incidents in 2019 as it did last year, including at least another 800 claims by year-end, according to Katherine Keefe, Beazley's global head of breach response services.

Ransomware incidents during the third quarter increased 37% over the prior year quarter, Beazley said.

Similarly, Chubb (NYSE:CB) Ltd had already responded to the same number of ransomware events by June of this year as it did for all of 2018, said Michael Tanenbaum, its head of cyber for North America.

The average Ryuk ransomware attack claim from large companies is roughly $2 million, said Wade Chmielinski, a cyber consultant for commercial property insurer FM Global. Claims from smaller companies are typically between $150,000 and $250,000. FM Global does not pay for ransoms, he said.

One prominent attack in March against Norwegian aluminium maker Norsk Hydro turned out to be a lot more expensive.

Norsk Hydro is among the few public examples available of ransomware striking a business, because publicizing such events can invite more attacks, experts said.

After its systems were paralysed by the LockerGoga strain of ransomware, Hydro experienced $60.1 million to $71.1 million (550 million to 650 million Norwegian crowns/£55 million) in related losses during the first half of 2019, the company said in a filing on Wednesday.

In March, Norsk Hydro identified American International Group Inc (NYSE:AIG) as its lead cyber insurer. An AIG spokesman declined comment.

Norsk received a $3.6 million (33 million Norwegian crowns) insurance payout during the quarter and will report additional payouts when "deemed virtually certain," the company said on Wednesday.

Global insurers collected $7 billion to $8 billion in cyber-insurance premiums during 2018, up about 13% from 2017, according to ratings agency AM Best.

But insurers are grappling with pricing as ransomware attacks become more common. Many of those attacks occur in the dark, making their frequency hard to know or how severe losses are. Although a simple ransom payment is often the cheapest, easiest solution, it also emboldens hackers, said Robert Hudock, a lawyer in Washington who advises clients on dealing with cyber attacks.

“It’s going to be a hard problem to solve,” he said, “if people keep paying the ransoms and the systems keep getting compromised.”

Latest comments

Add a Comment
Please wait a minute before you try to comment again.
Discussion
Write a reply...
Please wait a minute before you try to comment again.

Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.

English (USA) English (India) English (Canada) English (Australia) English (South Africa) English (Philippines) English (Nigeria) Deutsch Español (España) Español (México) Français Italiano Nederlands Português (Portugal) Polski Português (Brasil) Русский Türkçe ‏العربية‏ Ελληνικά Svenska Suomi עברית 日本語 한국어 简体中文 繁體中文 Bahasa Indonesia Bahasa Melayu ไทย Tiếng Việt हिंदी
Sign out
Are you sure you want to sign out?
NoYes
CancelYes
Saving Changes

+

Download the Investing.com App

Get free real time quotes, charts and alerts on stocks, indices, currencies, commodities and bonds. Get free top of the line technical analysis/predictors.

Investing.com is better on the App!

More content, faster quotes and charts, and a smoother experience is available only on the App.

';