Cyber Insurance Bricking: New Approaches and Solutions for Better Protection

Cyber insurance bricking is becoming a growing concern for businesses, with 71% of companies experiencing a cyber attack in the past year.

The cost of a single cyber attack can be staggering, with an average cost of $3.6 million per incident.

Traditional cyber insurance policies often fall short in providing adequate protection, leaving businesses vulnerable to financial losses.

New approaches and solutions are emerging to better protect businesses from cyber threats, such as incident response planning and threat intelligence.

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Cyber insurance risks are a major concern for businesses and individuals alike. The cost of a single cyber attack can be staggering, with some companies facing losses of up to $1 million.

Data breaches are a leading cause of cyber insurance claims, accounting for over 50% of all claims. In fact, a major retailer faced a $4 million data breach claim after hackers stole sensitive customer information.

Cyber attacks can also disrupt business operations, leading to significant financial losses. A major hospital chain, for example, faced a $2 million loss after a ransomware attack crippled its IT systems.

For more insights, see: Cyber Insurance Losses

Ransomware attacks are a growing concern, with over 70% of organizations reporting a ransomware attack in the past year. These attacks can be particularly devastating, with hackers demanding millions of dollars in ransom payments.

Businesses are increasingly turning to cyber insurance to mitigate these risks. In fact, the global cyber insurance market is expected to reach $20 billion by 2025.

A different take: Ransomware Cyber Insurance

Two of the latest emerging digital risks include service fraud, also known as crypto jacking, and bricking. These tactics can be devastating for businesses and are usually not covered by a general cyber policy.

Businesses may face direct financial losses from fraudulent use of cloud-and internet-based services, including Software as a Service (SaaS), Infrastructure as a Service (IaaS), and Network as a Service (NaaS), IP Telephony, and more.

Service fraud can be covered by Coalition's Service Fraud endorsement, which addresses this growing gap between a business's general cyber coverage and property policy.

Ransomware, a type of malware, encrypts electronic systems and requests a ransom payment to release the data or prevent information from being published, often occurring outside normal business hours.

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Cloud Vendor Risk is a significant concern for businesses that rely on cloud vendors to store sensitive customer and employee data. As many as 30% of businesses consider their platform and system vendors a risk in the event of a data breach, according to Riskrecon.

These vendors often have access to personal information, and companies may rely on them for critical functions like processing accounts receivable and storing medical or financial records. This can lead to costly consequences if the vendor experiences a cyber incident.

Companies could be exposed to privacy claims, regulatory fines, and business interruption costs, including lost income and extra expenses to get their operation back up and running. Even if the vendor has cyber insurance, the contract may limit their liability to the company.

Coalition's Network and Information Security Liability (NISL) coverage can help transfer third-party liability risk, and their Business Interruption and Extra Expense coverage can address first-party losses from reliance on cloud vendors.

Expand your knowledge: Cyber Insurance Data Breach

Ransomware is a type of malware that encrypts electronic systems and requests a ransom payment to release the data or prevent information from being published.

Incidents of ransomware typically occur outside normal business hours, making it essential to have a plan in place to handle such situations.

Once a system is compromised and encrypted, the cybercriminal will request payment for decryption codes to access your system or information.

Paying a cybercriminal will typically lead to the release of systems, but this is not always the case.

Reputation Harm can be a devastating consequence of a cyber attack. If an attack becomes known publicly to current or potential clients, your brand image can be severely damaged.

This damage can lead to lost profits, loss of employees, or even an inability to recruit new talent. Most cyber policies will cover these losses if the organization can show figures for documented losses.

A single data breach can quickly spread through social media and online forums, making it difficult to contain the damage. In some cases, the reputational harm can be irreparable.

Here are some key statistics to consider:

Cyber insurance policies often lack clarity on what constitutes a "bricking" event, leaving policyholders uncertain about their coverage.

The lack of standardization in cyber insurance policies can lead to inconsistent payouts and frustration for policyholders.

Many cyber insurance policies have exclusions for events caused by intentional acts, which can leave policyholders without coverage if their system is intentionally bricked by an insider.

Insurers often have varying definitions of "bricking", which can impact the validity of a claim.

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Ransomware attacks are a major concern, with phishing emails containing malicious attachments being the most common way for ransomware to spread.

Ransomware can leave a business crippled even after payment, and recovering data can be equally expensive in terms of time and cost.

Bricking is another significant issue, where cyber-attacks cause so much damage that a device can no longer be used, essentially becoming a "brick".

This can lead to financial loss, business interruption, and exposure of sensitive data, making it essential to address bricking in a cyber policy.

Here are some key policy gaps to consider:

Traditional market offerings for cyber insurance have some major limitations. The current market is a land grab, where prices are not supported by actuarially sound loss data, making premiums often not reflective of the actual risk.

Insurers use a very simple, flat-rate pricing system with adjustments based on industry class, revenue, limits, and retention levels, which is not sophisticated. Most insurers don't assign consistent weights to different cyber security technologies.

Applications provide insight into a company's existing cyber security hygiene, but the weights assigned to different technologies are inconsistent among insurers. In some cases, insurers even "guess" at rates, rather than using their own experience to develop pricing models.

The traditional cyber underwriting process doesn't truly quantify exposures or offer risk-specific recommendations to improve the insured's cyber risk profile. Insurers often don't offer practical tools to mitigate risk during the policy period.

Risk prevention tools are available through risk portals, but they're often only accessible at an additional price or have limited risk management value. Insurers report single-digit take-up rates for these services.

Broaden your view: Cyber Insurance Not Paying Out

In recent years, cyber insurance bricking has become a pressing concern for businesses and individuals alike. Cyber insurance claims have skyrocketed due to the increasing number of cyberattacks.

Many companies are now turning to alternative approaches to mitigate the risks associated with cyber insurance bricking. One such approach is to implement robust cybersecurity measures, such as multi-factor authentication and regular software updates.

The cost of cyber insurance claims can be staggering, with some companies facing losses of up to $1 million per incident. This highlights the need for proactive measures to prevent cyberattacks in the first place.

A different take: Cyber Liability Insurance Companies

In 2017, the term "engineered" cyber insurance emerged, referring to new underwriting models that use the same techniques hackers employ to assess risk.

These models collect thousands of data points relevant to the risk and make underwriting decisions in seconds, allowing insurers to get to the bottom of the risk.

The objective of this new approach is to provide assessment findings to insureds to assist in the prevention of cyber events.

By using these tools, insurers can make more informed decisions and offer more effective risk management strategies to their clients.

For another approach, see: Cyber Insurance Underwriting

Engineered Solutions are gaining traction in the market for small- to medium-size businesses. These products go beyond traditional insurance and claims services to include the use of security technology.

Showing prospects the cyber threats present in their own systems can help close the sale, rather than just peddling fear and uncertainty. This approach is more relatable to small businesses that can't relate to large-scale breaches.

In one case, a security assessment identified outstanding software updates and compromised email credentials for a technology company. A Chinese hyperlink was even found parked on the firm's Web portal.

Engineered Solutions include the use of security technology to assess risk and provide ongoing security services. Historically, these services were only affordable for large enterprises.

Seeing the cyber threats firsthand can make the purchase of cyber insurance more financially appealing.

A unique perspective: Cyber Insurance for Small Business

Risk assessments are valuable tools to help close the information gap for agents selling cyber insurance. These assessments, included at no extra cost by tech-based insurers, provide actionable information and recommendations to remediate heightened risks prior to binding coverage.

Typical findings from these assessments include unprotected ports of entry, outdated software, and compromised employee credentials. In fact, these assessments often uncovered actual hacks in real time.

Ongoing cyber security tools are bundled into some cyber insurance offerings at no additional cost to the insured. These tools include 24/7 network threat monitoring that alerts the insured in real time of breach activity, and direct access to security engineers is also included in some offerings.

Broaden your view: Risk Tolerance Cyber Security

Betterment coverage is a vital component of risk assessment and protection. It's designed to replace and improve software and security systems that were compromised and failed as a result of a cyber incident.

This type of coverage is aimed at preventing future incidents by making security better than what was in place before the incident. Betterment coverage is not just about replacing what was lost, but about upgrading and enhancing security systems to prevent similar breaches from happening again.

By investing in betterment coverage, businesses can ensure that their security systems are robust and up-to-date, reducing the risk of future cyberattacks. This is especially important for companies that handle sensitive customer data or operate in highly regulated industries.

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Risk Assessment Deliverables are a valuable tool for agents to close the information gap and sell cyber insurance. They provide actionable information and recommendations to remediate heightened risks prior to binding coverage.

Typical findings from these assessments include unprotected ports of entry, which can leave a business vulnerable to cyber attacks.

Outdated software is another common issue that can be identified through risk assessments. This can be a major risk factor, as outdated software often lacks essential security patches and updates.

Compromised employee credentials are also frequently uncovered during risk assessments. This can be a major concern, as it can give hackers access to sensitive business information.

In some cases, risk assessments have even uncovered actual hacks in real time, allowing businesses to take immediate action to prevent further damage.

For another approach, see: Cyber Insurance Business Interruption Coverage

Traditional cyber insurers are hesitant to include ongoing cyber security tools in their policies due to concerns about creating a higher standard of care and increased liability.

These concerns are valid, as cyber security is complex and requires specialized expertise. Information security engineers with experience in government intelligence, white hat hacking, and leading security software providers are now leading new tech-based insurers.

They offer tools like 24/7 network threat monitoring that alerts the insured in real time of breach activity, which is bundled into their policies at no additional cost to the insured. This includes threat monitoring, antiransomware software, denial of service website protection, and credential monitoring.

Direct access to security engineers is also included in some of these offerings, providing the insured with a year-round risk management partnership. Insurance has a key role to play in managing cyber risk, requiring a shift from traditional snapshot underwriting.

Emerging digital risks can be devastating for businesses, and two of the latest examples include service fraud and bricking. Service fraud, also known as crypto jacking, can result in direct financial losses for an insured.

Intriguing read: Cyber Fraud Insurance

Bricking, on the other hand, refers to a loss of use or functionality of hardware due to a hacking event. This can be particularly problematic because even if malicious software is removed, the hardware may still be considered untrustworthy and require replacement.

Coalition's Service Fraud endorsement covers direct financial losses resulting from fraudulent use of cloud-and internet-based services, including Software as a Service (SaaS), Infrastructure as a Service (IaaS), and Network as a Service (NaaS).

Contingent pollution coverage is a type of insurance that can help protect against unexpected events. This coverage is particularly relevant for industrial control systems that can be vulnerable to hacking.

A single hacking incident can have severe consequences, including system failures that release pollutants into the environment. The costs to defend against third-party liability can be astronomical.

One insurer is now offering contingent pollution coverage that can help mitigate these costs. This policy will cover the costs to defend the insured from third-party liability in the event of a system failure caused by a hacker.

Computer Hardware is a critical aspect of any business, and specialized cyber policies can help mitigate the risks associated with it.

Bricking, a term that refers to the loss of use or functionality of hardware due to a hacking event, is a significant concern. This can occur even if malicious software is removed, as the affected hardware may still be considered untrustworthy.

Replacing hardware can be costly, but specialized cyber policies can provide coverage for these expenses. This coverage can help businesses recover from a bricking event without breaking the bank.

Funds transfer fraud saw a 28% increase in claims in 2021 from previous years.

Coalition's FTF coverage can cover incidents where a cyber criminal misdirects funds, and their claims team will work with law enforcement and financial institutions to attempt to retrieve the funds.

Typical sublimits for cyber crime coverage ranged from $100,000 to $250,000, but several insurers now offer increased fraudulent funds transfer limits as high as $2.5 million for select risks.

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Phishing attacks are a type of social engineering attack employed to steal user data, including login credentials and credit card numbers.

Client phishing, or invoice manipulation, is a type of phishing attack where criminals create phony invoices in the name of the insured to trick clients or vendors into making payments to a fraudulent account.

Service fraud coverage reimburses the insured for direct financial loss resulting from being charged for fraudulent use of electricity and other business services, such as cryptocurrency mining malware.

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Funds transfer fraud is a common way for cyber criminals to monetize their crimes, often using social engineering techniques like phishing or business email compromise (BEC).

Coalition saw a 28% increase in funds transfer fraud claims in 2021 compared to previous years.

This type of fraud is often perpetrated through emails or messages that appear to be from a trusted source, tricking victims into modifying payment instructions or transferring funds to unintended parties.

Coalition's funds transfer fraud coverage can help cover incidents where a cyber criminal misdirects funds, and their claims team will work with law enforcement and financial institutions to try to retrieve the funds.

Service Fraud (Cryptojacking) is a type of cybercrime where hackers use malware to hijack the processing power of computers, smartphones, and other devices to mine cryptocurrency.

This process requires an inordinate amount of electricity, which can lead to significant financial losses for businesses.

Cryptocurrency mining is a process in which transactions are verified and added to the blockchain digital ledger, requiring computers to solve complicated math puzzles to win currency.

Businesses can be reimbursed for direct financial loss resulting from being charged for fraudulent use of electricity and other business services through service fraud coverage.

Cyber criminals have increasingly turned to cryptomining malware as a way to generate revenue from cryptocurrency mining.