AGCS report: traditional property and liability claims have been subdued during lockdowns but this
SINGAPORE - Media OutReach - 19 November 2020 - External attacks on companies result in the most expensive cyber insurance losses but it is employee mistakes and technical problems that are the most frequent generator of claims by number, according to a new report from Allianz Global Corporate & Specialty (AGCS), Managing The Impact Of Increasing Interconnectivity -- Trends In Cyber Risk. The study analyzes 1,736 cyber-related insurance claims worth EUR 660mn (US$ 770mn) involving AGCS and other insurers from 2015 to 2020.
"Losses from incidents such as distributed denial of service (DDoS) attacks or phishing and ransomware campaigns account for a significant majority of the value of cyber claims today," says Catharina Richter, Global Head of the Allianz Cyber Center of Competence, which is embedded into AGCS. "But although cyber crime generates the headlines, everyday systems failures, IT outages and human error incidents can also cause problems for companies, even if their financial impact is not, on average as severe. Employers and employees must work together to raise awareness and increase cyber resilience."
The number of cyber insurance claims AGCS has been notified of has steadily risen over the last few years, up from 77 in 2016, when cyber was a relatively new line of insurance, to 809 in 2019. In 2020, AGCS has already seen 770 claims in the first three quarters. This steady increase in claims has been driven, in part, by the growth of the global cyber insurance market which is currently estimated to be worth $7bn according to Munich Re. AGCS started offering cyber insurance in 2013 and, in 2019, generated more than EUR 100mn in gross written premium in this segment. At the same time the report also highlights that there has been a 70%+ increase in the average cost of cyber crime to an organization over five years to $13mn and a 60%+ increase in the average number of security breaches.
Losses resulting from external incidents, such as DDoS attacks or phishing and malware/ransomware campaigns, account for the majority of the value of claims analyzed (85%) according to the report, followed by malicious internal actions (9%) -- which are infrequent but can be costly. Accidental internal incidents, such as employee errors while undertaking daily responsibilities, IT or platform outages, systems and software migration problems or loss of data account for over half of cyber claims analyzed by number (54%) but, often, the financial impact of these is limited compared with cyber crime. However, losses can quickly escalate in the case of more serious incidents.
Business interruption is the main cost driver behind cyber losses, accounting for around 60% of the value of all claims analyzed in the report, followed by costs involved with dealing with data breaches.
The cyber risk environment is not expected to become any easier in future, the report notes. Businesses and insurers are facing a number of challenges such as the prospect of more expensive business interruptions, the rising frequency of ransomware incidents, more costly consequences of larger data breaches given more robust regulation and litigation, as well as the impact from the playing out of political differences in cyber space through state-sponsored attacks. The impact of these trends is also the subject of a new AGCS podcast.
The huge rise in remote working due to the coronavirus pandemic is also an issue. Displaced workforces create new opportunities for cyber criminals to gain access to networks and sensitive information. Malware and ransomware incidents are already reported to have increased by more than a third since the start of 2020, while coronavirus-themed online scams and phishing campaigns about the pandemic continue. At the same time the potential impact from human error or technical failure incidents may also be heightened.
While exposures are rising, the Covid-19 outbreak cannot yet be said to be a direct cause of cyber-related claims. AGCS has seen the first few cyber claims that can be indirectly attributed to the Covid-19 landscape, including ransomware attacks which can be linked to the shift to more remote working. However, it's too early to confirm a broader trend.
Ransomware threats surge
Already high in frequency, ransomware incidents are becoming more damaging, increasingly targeting large companies with sophisticated attacks and hefty extortion demands. There were nearly half a million ransomware incidents reported globally last year, costing organizations at least $6.3bn in ransom demands alone. Total costs associated with dealing with these incidents are estimated to be well in excess of $100bn.
"High-end hacking tools are more widely available driven by the growing 'commercialization of cyber-hacks'. Increasingly, criminals are selling malware to other attackers who then target businesses demanding ransom payments," says Marek Stanislawski, Global Cyber Underwriting Lead at AGCS. "However, extortion demands are just one part of the picture. Business interruption can bring the most severe losses -- with downtimes becoming longer -- while systems and data restoration costs can quickly escalate."
Business interruption and digital supply chain vulnerability growing
"Whether due to ransomware, human error or a technical fault, the loss of critical systems or data can bring an organization to its knees in today's digitalized economy," says Joerg Ahrens, Global Head of Long-Tail Claims at AGCS. "The inability to access data for an extended period of time can have a significant impact on revenues -- for example, if a company is unable to take orders. Similarly, if an online platform is unavailable due to a technical glitch or cyber event, it could bring large losses for companies that rely on it, particularly given today's increasing reliance on online sales or digital supply chains."
Data breaches and state-sponsored attacks
The cost of dealing with a large data breach is rising as IT systems and cyber events become more complex, and with the growth in cloud and third-party services. Data privacy regulation, which has recently been tightened in many countries, is also a key factor driving cost, as is growing third-party liability and the prospect of class action litigation. So-called mega data breaches (involving more than one million records) are more frequent and expensive, now costing $50mn on average, up 20% over 2019.
In addition, the impact of the increasing involvement of nation states in cyber-attacks is a growing concern. Major events like elections and Covid-19 present significant opportunities. During 2020 Google said it has had to block over 11,000 government-sponsored potential cyber-attacks per quarter. Recent years have seen critical infrastructure, such as ports and terminals and oil and gas installations hit by cyber-attacks and ransomware campaigns.
Prepare, practice and prevent
Preparation and training of employees can significantly reduce the consequences of a cyber event, especially in phishing and business email compromise schemes, which can often involve human error. It can also help mitigate ransomware attacks, although maintaining secure backups can limit damage. Cross-sector exchange and cooperation among companies -- such as what has been established by the Charter of Trust -- is also key when it comes to defying highly commercially-organized cyber crime, developing joint security standards and improving cyber resilience.
The Covid-19 landscape brings new challenges. With home-working widespread, security around access and authentication points is critical but organizations should also ensure there is sufficient network capacity as this can have a significant impact on lost income if there is an outage.
About Allianz Global Corporate & Specialty SE
Allianz Global Corporate & Specialty (AGCS) SE is a leading global corporate insurance carrier and a key business unit of Allianz Group. We provide risk consultancy, Property-Casualty insurance solutions and alternative risk transfer for a wide spectrum of commercial, corporate and specialty risks across 10 dedicated lines of business.
Our customers are as diverse as business can be, ranging from Fortune Global 500 companies to small businesses, and private individuals. Among them are not only the world's largest consumer brands, tech companies and the global aviation and shipping industry, but also wineries, satellite operators or Hollywood film productions. They all look to AGCS for smart answers to their largest and most complex risks in a dynamic, multinational business environment and trust us to deliver an outstanding claims experience.
Worldwide, AGCS operates with its own teams in 32 countries and through the Allianz Group network and partners in over 200 countries and territories, employing over 4,450 people. As one of the largest Property-Casualty units of Allianz Group, we are backed by strong and stable financial ratings. In 2019, AGCS generated a total of €9.1 billion gross premium globally.
Cautionary Note Regarding Forward-Looking Statements
The statements contained herein may include statements of future expectations and other forward-looking statements that are based on management's current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. In addition to statements which are forward-looking by reason of context, the words "may", "will", "should", "expects", "plans", "intends", "anticipates", "believes", "estimates", "predicts", "potential", or "continue" and similar expressions identify forward-looking statements.
Actual results, performance or events may differ materially from those in such statements due to, without limitation, (i) general economic conditions, including in particular economic conditions in the Allianz Group's core business and core markets, (ii) performance of financial markets, including emerging markets, and including market volatility, liquidity and credit events (iii) the frequency and severity of insured loss events, including from natural catastrophes and including the development of loss expenses, (iv) mortality and morbidity levels and trends, (v) persistency levels, (vi) the extent of credit defaults, (vii) interest rate levels, (viii) currency exchange rates including the Euro/U.S. Dollar exchange rate, (ix) changing levels of competition, (x) changes in laws and regulations, including monetary convergence and the European Monetary Union, (xi) changes in the policies of central banks and/or foreign governments, (xii) the impact of acquisitions, including related integration issues, (xiii) reorganization measures, and (xiv) general competitive factors, in each case on a local, regional, national and/or global basis. Many of these factors may be more likely to occur, or more pronounced, as a result of terrorist activities and their consequences.
The matters discussed herein may also be affected by risks and uncertainties described from time to time in Allianz SE's filings with the U.S. Securities and Exchange Commission. The company assumes no obligation to update any forward-looking statement.
AGCS report: traditional property and liability claims have been subdued during lockdowns but this
Safety and Shipping Review 2019: Asia Pacific waters remain top shipping loss region, led by South
• Safety & Shipping Review 2018: Globally 94 large ships lost in 2017, down by more than a
Significant increase in the number of riots, demonstrations and vandalism, as terrorism events dec
Pilot problems, "air rage" incidents, reactivation risks and even insect infestations ar
Safety & Shipping Review 2021: 49 large ships lost worldwide last year. Total losses down 50%
HONG KONG SAR - 23 November 2021 - Professional medical services can solve health problems for many.
HONG KONG SAR - 23 November 2021 - Aide et Action, the largest international French-based associatio
Celebrate Christmas with homegrown Singaporean brand Awfully Chocolate. Curate a thoughtful gift wit