Cyber Insurance New Rules: IT Defense Mandates

When cyber insurance used to be a mere comfort blanket? Those days are gone. Now is a bitter reckoning here. High ransomware payouts have compelled insurers to be the unloved implementers of cybersecurity regulations. They are not merely risk rating anymore. They are proactively dictating the tools that you use. How much does it take to be covered in this new age? Let’s pull back the curtain.

The Hard Market Squeeze: What happened to your Premiums

Imagine the insurances cyber market as a pendulum. During years, it was biased towards buyers. It was relatively accessible coverage and coverage was wide. Then the epidemic of ransomware occurred. The criminals perfected their methods. They began to extort enterprises twice–secrecy and extortion. Payouts exploded.

The industry lost billions. According to a recent report released by Marsh McLennan, more than 75 percent of cyber insurance claims last year involved ransomware claims. And so the pendulum has gone to the opposite extreme. It is now in a vicious hard market. The insurers are retaliating with harsh demands. They are cutting off, and hiking up prices, to as much as 50 percent. In simple words, they are no longer able to gamble on insecure security.

The Non-Negotiable Cybersecurity Checklist

And what, precisely, do they want? It can now be said that application is more of a barbaric IT audit. The yes/no checkboxes have been dropped. Rather, insurers require technical evidence.

To start with, Multi-Factor Authentication is compulsory. It’s the bare minimum. Insurers would like to enable it everywhere particularly on email and remote access points. You can probably be shot down without it.

Then they need the latest Endpoint Detection and Response. It is no longer cut with basic antivirus software. EDR gives the insurers the visibility and response that they require. They would like to know that you can identify and prevent a threat, rather than hope that you will not.

Last but not the least, you have to demonstrate that you possess strong, offline backups. Can you regain on the terms of not paying the ransom? Your final leverage is your backup strategy. The documentation will be required by insurers. They can even insist on a test restoration evidence.

• One of the underwriters informed me that MFA on all accounts of cloud email is a non-negotiable point. It is the only one that is effective in control.
• One broker told, Clients that do not have EDR get 30-50% greater premiums, should they be able to receive a quote.

Outside of the Application: The Age of Constant Surveillance

This is the frightening part to most IT leaders. The examination does not go away after receiving the policy. Insurers are shifting to uninterrupted validation. How do they do this? Most of them use external security rating. Such sites as BitSight or SecurityScorecard probe your network externally. They offer a real-time security rating.

Imagine this. A compromised server that you have neglected brings down your security rating. Your insurer sees this dip. Suddenly, you get an email. It’s a compliance warning. Or still worse, a letter to increase your premium on your next renewal. Digital hygiene is being scrutinized at all times. This leaves a strong motivational force to keep your defenses.

An Actual Case: The $1 million denied claim

We will put this into perspective with an actual case. One of the mid-sized logistics companies was hit by a ransomware attack of catastrophic proportions. Hackers have encrypted all their operation. They couldn’t ship goods. This firm had made a claim because their policy of $5 million was supposed to cover the ransom and business interruption. The insurer investigated. They actually found that the hackers accessed the system via a remote desktop protocol gateway. More importantly, the company had not turned on MFA on this system, although they attested on their application that they had.

The claim was denied. The company was exposed to losing a multi-million dollar out-of-pocket. This isn’t a rare horror story. The insurance litigation legal firms are reporting significant increase in such disputes. The lesson is brutally clear. Reporting falsely on your security on an application is a financial time bomb.

Insider Knowledge: The AI Underwriting Revolution is Here

I interviewed an experienced cyber risk underwriter with the condition of anonymity. She provided a shocking look at the future. We are taking your security data in our models already, she explained. The next one is AI-driven underwriting. What does that mean?

Algorithms will be able to scan your network traffic patterns soon. Patches may be automatically inspected by them. This artificial intelligence may automatically change your premium to the real-time risk. You may reduce your cost by responding quickly to a new vulnerability. On the other hand, a sudden surcharge can be provoked by slow patching. This turns the cybersecurity into an ongoing and financial performance measure rather than a one-time compliance activity.

How to respond to the New Reality

So, where does this leave us? To be honest it makes no sense to lament about tough market. This is the new normal. On the contrary, astute leaders are exploiting such demands. That fratricidal insurance form? Make it your road map on your IT budget. Frame the important security upgrades with reference to covering insurance and saving money.

The CFO may be unaware of the technical necessity of obtaining a new EDR platform. We will have no problems sending an email that states, “Unless you provide us with this tool, we will raise our insurance premium on cyber crimes by 100,000 dollars, or we will cease your insurance altogether.” This shift changes the discussion. Companies can no longer view cybersecurity as a mere technical cost.

It is a straight financial necessity.

Finally, the insurers have made a stand. They are the unforeseen, uncompromising engines of minimum cyber safety standards. The question is will your organization change and become insurable or will you take a chance of going it alone?