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The WannaCry ransomware attack should be a wake-up call for companies. Should their cybersecurity insurance coverage include ransomware?
The spectre of ransomware, in which cybercriminals infect computers and block access to data unless a fee is paid, is a strong motivator for businesses to reevaluate ways to mitigate their cybersecurity risk.
Certain cybersecurity insurance policies may exclude ransomware attacks or include coverage only when companies exercise due diligence by adopting reasonable data security safeguards and ensuring that software security upgrades are maintained. In addition, companies may have to provide notice of an attack to law enforcement and inform their insurer that they intend to pay a ransom.
WannaCry hit more than 300,000 computers in more than 150 countries at a time when the cybersecurity stakes for companies already are high. The global cost of cyberattacks may reach $1 trillion annually, according to Bloomberg Intelligence analysts.
Insurance shouldn’t be the only method to limit cybersecurity risk, cybersecurity and insurance professionals told Bloomberg BNA. Companies still must keep up robust cybersecurity protections and have well-though out incident response plans, they said.
Businesses shouldn’t treat “cyber insurance as a substitute for developing and sustaining appropriate information security capabilities,” Peter Tran, general manager and senior director at cybersecurity solutions company RSA Security LLC, told Bloomberg BNA. Insurance shouldn’t be viewed as a “quick fix” but rather part of an “overall program to augment business continuity and disaster recovery,” he said.
Not all companies will need ransomware-specific cybersecurity insurance, attorneys said. In some scenarios, companies may be able to get their systems back online without much cost. Each company must evaluate its own risk profiles, the attorneys said.
But ransomware attacks are a “serious threat,” James S. Carter, policyholder-only insurance counsel at Blank Rome LLP in Washington, said. Because the risk is so high, companies should be aware of their “cyber insurance policies to make sure they’ll be covered in the event of a ransomware attack,” he said.
John C. Pitblado, insurance shareholder and member of Carlton Field’s privacy and cybersecurity group in Hartford, Conn., told Bloomberg BNA that a “ransomware attack can be covered” under a cybersecurity insurance policy. But “it is critical” for companies “to discuss it specifically with the broker, as many insurance companies now offer products tailored” to ransomware attacks, he said.
Businesses hit with a ransomware attack must check their policies to make sure they are covered in the event of a cybersecurity incident, the attorneys said. There is no one-size fits-all-approach to cybersecurity insurance, and many policies are specifically tailored to each business, they said.
Jason Hogg, leader of Aon Plc’s Cyber Solutions Group and CEO of Stroz Friedberg, told Bloomberg BNA that typical policies do protect against ransomware but there are limits to recovery for such attacks, “depending on the wording of the policy.” A well-written policy will cover not just the ransomware payments but any cost related to the investigation and clean up of the attack, he said.
Businesses should be cognizant of “cooperation clauses” that may require companies to reach out to law enforcement agencies before losses can be recovered, Hogg said.
Companies must be aware that “standard commercial general liability” insurance might have “exclusions for cyber-related events,” Pitblado said. , Courts “may simply find that these policies, by their terms, were not intended to cover this type of risk.”
Carter said sometimes insurance companies may change their coverage following large cybersecurity incidents like WannaCry. Businesses must be prepared for some insurance companies that try “to crimp coverage when they purchase or renew cyberinsurance policies” after a larger scale attack, he said.
A National Association of Insurance Commissioners staffer told Bloomberg BNA on background that ransomware coverage must be obtained prior to an attack. Much “like buying fire insurance after the building has burned down,” there’s no chance at coverage after the fact, the staffer said.
Pitblado said that “notice to the insurer is always of paramount importance after any loss, but prompt notice is even more important with” ransomware because “trails of investigation can run cold much more quickly.”
Additionally, companies might have to take specific steps post-cyberattack to recover losses. The NAIC staffer said that “remediation steps will vary by type of business and effectiveness of the business’ cyber-hygiene,” because many “cybersecurity policies are customized” to the company acquiring coverage.
Carter said that in many scenarios companies will need to get an insurer’s permission before paying a hacker’s ransom. Without the permission, the insurer has the ability to not cover the specific incident, and this “gets tricky” when time is of the essence in ransomware attacks, he said.
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