As Attacks and Costs Mount, Rates Climb Higher

The report by global insurance firm Aon plc predicted that rates would jump by 20% to 50% this year due to two main factors:

1. Cyber attacks are becoming more frequent

While publicly disclosed data breach/privacy incidents are actually occurring less often, ransomware attacks are exploding in frequency.

When measured over periods of four quarters, ransomware incident rates rose 486% from the first quarter of 2018 to the fourth quarter of 2020. The comparable rate for data breach incidents fell 57% during the same period. The incident rates for the two types of events combined rose 300% over the trailing two years.

2. The costs of these attacks are growing

The average dollar loss increased in every quarter of 2020.

Ransomware attacks were particularly severe – many of them resulted in eight-figure losses. Others may grow to that level as business interruption losses are adjusted and lawsuits against insured organizations proceed.

The combination of more frequent and more costly losses is a recipe for higher rates.

Cyber insurance rates continued increasing in 2020, rising between 6% and 16% in the last four months of this year.

In January 2021, most of the top 12 cyber insurance companies told Aon they were planning more drastic rate hikes. Nearly 60% reported that they would be seeking rate increases of 30% or more during the second quarter. None of them expected increases less than 10%.