Cyber insurance market to expand in face of formidable threat environment, says Gallagher

The cyber insurance marketplace will continue to evolve in 2024 and reflect dynamic change as both technology and the threat landscape advances, says Gallagher. It says emerging technology, most notably artificial intelligence (AI), may exacerbate an already formidable cyber threat environment, but despite this, the broker expects the cyber insurance market to follow the trends of the past several years and continue its expansion in 2024 and in the years to follow. Gallagher’s 2024 Cyber Insurance Market Conditions Outlook: Cyber Market Stabilization and Lingering Turbulence warns that the ransomware ecosystem continues to evolve and many organised hacking groups are rebranding to avoid law enforcement scrutiny. “We expect a continual introduction of new ransomware variants, increasing ransom demands, and all industry sectors to be impacted at some level. We also expect ransomware attacks to follow the ongoing trend of double extortion, where threat actors both encrypt and exfiltrate their victim’s data, threatening to expose it if extortion is not paid,” says Gallagher. The broker also points to heightened regulatory risk that could exacerbate cyber claims frequency and severity. “While our focus is on the regulators at the state and federal levels in the US, regulatory risk may extend to other territories and be influenced by other global privacy regimes in 2024,” the report states. Gallagher says there are several developments in policy wording that it is watching closely. Firstly, war and systemic risk exclusions, with the broker noting that many cyber carriers are revising the wording around war exclusions, expanding the scope of the exclusion around war and imposing sub-limits around other systemic events. “We are advising our clients to pay particular attention to wording specific to attribution, the level of harm in a claim scenario, whether war is formally declared or not, and wording that may impact coverage for parties not directly involved in a particular conflict or those impacted by the cascading effects of an attack on another party,” says Gallagher. Secondly, the broker notes that the extent to which cyber insurance policies cover regulatory risk has generally become more restrictive, and it sees that trend continuing. “Underwriting concerns around increasing claims costs generated by a wide number of regulatory bodies has led to coverage constriction around costs for regulatory investigations, settlements, fines, and penalties,” it says. And finally, Gallagher notes that as state, federal, and international privacy law has expanded in scope and complexity, so has the exclusionary wording in cyber policies. “We are paying particular attention to exclusions to website tracking claims and those that exclude claims stemming from specific privacy laws, such as the Biometric Information Privacy Act,” it says. On the issue of AI, its adoption by business leaders could have unintended consequences, including, but not limited to, data bias, privacy liability, risks associated with intellectual property, and professional liability, says Gallagher, adding that there exists the potential for several lines of coverage to be impacted beyond cyber insurance and technology errors and omissions policies. Losses may expand to directors and officers policies, employment practices policies, media liability policies, product liability policies, and professional errors and omissions policies in the near future, the broker warns.

Cyber insurance market to expand in face of formidable threat environment, says Gallagher

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