Following two years of high but stable loss activity, 2023 has seen a worrying resurgence in ransomware and extortion claims as the cyber threat landscape continues to evolve, Allianz Commercial warns in a new report.
Hackers are increasingly targeting IT and physical supply chains, launching mass cyber attacks, and finding new ways to extort money from companies, large and small.
Most ransomware attacks now involve the theft of personal or sensitive commercial data for the purpose of extortion, increasing the cost and complexity of incidents, as well as bringing greater potential for reputational damage. Allianz Commercial analysis of large cyber losses shows the number of cases in which data is exfiltrated is increasing every year – doubling from 40% in 2019 to almost 80% in 2022, with 2023 significantly higher.
How is ransomware risk evolving?
According to the Allianz Commercial report the frequency of cyber claims stabilized in 2022, reflecting improved cyber security and risk management actions among insured companies. Law enforcement agencies targeting gangs, together with the Ukraine Russia conflict, also helped curtail ransomware activity. However, ransomware activity alone was up 50% year-on-year during the first half of 2023. So-called Ransomware-as-a-Service (RaaS) kits, where prices start from as little as US$40, remain a key driver in the frequency of attacks. Ransomware gangs are also carrying out more attacks faster, with the average number of days taken to execute one falling from around 60 days in 2019 to four.
Data exfiltration can significantly add to the cost of a loss or cyber claim. Such incidents can take longer to resolve, while legal and IT forensics can be extremely expensive. If data has been stolen, companies must know exactly what data has been exfiltrated and will likely have to notify customers, who could seek to claim compensation or threaten litigation.
This year has also seen several large mass ransomware attacks as threat actors used exploits in software and weaknesses in IT supply chains to target multiple companies. For example, the MOVEit mass cyber attack, which exploited a data transfer software product, impacting millions of individuals and thousands of companies, contributed to the increase in the frequency of claims in 2023 to date, affecting multiple policyholders simultaneously.
In the past the number of cyber incidents that became public knowledge was low. Today, it is a different story, as with data exfiltration, hackers threaten to publish stolen data online. Allianz Commercial analysis of large cyber losses (€1mn+) shows that the proportion of cases becoming public increased from around 60% in 2019 to 85% in 2022 with 2023 set to be even higher.
“Today, if you have data exfiltration it will likely go public, and every company needs to be prepared for this,” says Rishi Baviskar, Global Head of Cyber Risk Consulting, Allianz Commercial.
With potentially costly financial and reputational consequences, companies may feel under more pressure to pay ransoms where data has been stolen. The number of companies paying a ransom has increased year-on-year – from just 10% in 2019 to 54% in 2022, again based on analysis of large losses only (€1mn+). Companies are two-and-a half times more likely to pay a ransom if data is exfiltrated, on top of the encryption.
However, paying a ransom for exfiltrated data does not necessarily resolve the issue. The company may still face third party litigation for the breach of data, especially in the US. Indeed, there are few cases where a company should believe that there is no other solution other than paying the ransom to be able to re-access its systems or data. Any impacted party should always inform and cooperate with the authorities.
The importance of early detection and fast response
Protecting an organization against intrusion remains a cat and mouse game, in which cyber criminals have the advantage. Allianz analysis of more than 3,000 cyber claims over the past five years shows that external manipulation of systems is the cause of more than 80% of all incidents. Threat actors are now exploring ways to use artificial intelligence (AI) to automate and accelerate attacks, creating more effective AI-powered malware, phishing, and voice simulation. Combined with the explosion in connected mobile devices – Allianz Commercial has seen a growing number of incidents caused by poor cyber security in this area – attack avenues only look likely to increase.
Preventing a cyber attack is therefore becoming harder and the stakes higher. As a result, early detection and response capabilities and tools are becoming ever more important. Around 90% of incidents are contained early. However, if an attack is not stopped in the early stages the chances of preventing it becoming something much more serious and costly greatly reduce.
Companies should direct additional cyber security spend on detection and response, rather than just adding more layers to protection and prevention. Only one third of companies discover a data breach through their own security teams. However, early detection technology is readily available and effective.
Cyber breaches that are not detected and contained early can be as much as 1,000 times more expensive than those that are, the report highlights, with Allianz Commercial analysis showing that early detection and response can stop a €20,000 loss turning into a €20mn one.