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Ransomware and Data Exfiltration Continue to Dominate Cyber Losses – Allianz Report

Posted on October 9, 2024October 9, 2024 By Martin Hinton

In the first half of 2024, the global landscape of cyber insurance has seen a marked rise in both the frequency and severity of cyber claims, driven by increasing data breaches and privacy violations. According to Allianz Commercial’s 2024 Cybersecurity Resilience report, large cyber claims — defined as those exceeding €1 million — rose 14% in frequency and 17% in severity, continuing an upward trend from previous years. A key contributor to these cyber losses is the growing prevalence of data and privacy breaches, which now account for two-thirds of these claims. This growth is particularly evident in the US, where class action lawsuits tied to privacy violations have surged.

Our takeaways from the report follow; access the whole report here.

Cover image of Allianz report "2024 Cybersecurity Resilience report"
Data Privacy and Litigation Drive Costs

The sharp rise in cyber claims can be attributed to evolving tactics by cybercriminals, notably the shift towards data exfiltration during ransomware attacks. Cybercriminals now steal sensitive personal and corporate data to pressure victims into paying ransoms, leveraging the potential public exposure of such data. However, the report points to a burgeoning new trend that is compounding the cost of cyber claims: non-attack data privacy breaches.

Non-attack claims arise from improper collection or handling of personal data, without any direct cyber-attack. These claims have skyrocketed in recent years, tripling in value from 7% of total large claim values in 2022 to 21% in the first half of 2024. This shift reflects a broader regulatory environment and a more litigious legal landscape in the US, where data privacy lawsuits are increasingly targeting companies for perceived violations around data usage, consent, and security.

According to Michael Daum, Global Head of Cyber Claims at Allianz Commercial, the rise of privacy litigation is fueled by the growing interconnectivity between organizations and the escalating volume of personal data being shared. Companies are under increasing pressure to ensure compliance with data protection laws, and in the US, plaintiff lawyers are exploiting ambiguities in privacy regulations. This has led to more class action lawsuits, some of which have resulted in settlements worth hundreds of millions of dollars.

US Leads in Privacy-Related Claims

The US has become a hotbed for privacy litigation, with more than 1,300 data breach-related class action lawsuits filed in 2023, more than double the number from the previous year. Companies across various sectors, including healthcare, social media, and entertainment, have faced lawsuits over their use of tracking tools and the alleged misuse of personal data. The MOVEit data breach of 2023, which affected millions of individuals, triggered more than 240 lawsuits that were consolidated into a single multidistrict litigation case.

Beyond ransomware, non-attack privacy claims have added a new dimension to the costs associated with cyber incidents. Some of these claims, such as those arising from privacy violations, have even exceeded the cost of ransomware incidents. In particular, violations involving the wrongful collection or misuse of data, including biometric and health data, have led to settlements in the hundreds of millions.

Global Privacy Regulations: A Growing Risk

While the US leads in terms of class action lawsuits, the risk of privacy litigation and subsequent cyber losses is growing globally, particularly in Europe. The General Data Protection Regulation (GDPR) in the EU has provided a framework for data protection, but as new technologies such as artificial intelligence (AI) are integrated into business practices, the potential for privacy violations has increased. The Allianz report highlights that businesses in Europe are facing heightened regulatory scrutiny, and while class action lawsuits are less common than in the US, the evolving legal landscape could lead to an increase in privacy-related claims in the near future.

AI is a significant factor driving both privacy risks and cyber-attacks. As AI tools become integral to industries ranging from healthcare to finance, the volume of personal data being collected, processed, and stored is expanding rapidly. If not properly managed, this data could become a prime target for cybercriminals. Additionally, AI itself presents challenges, as its usage in chatbots, recommendation systems, and other applications raises questions about consent and data handling practices.

Ransomware Continues to be a Major Threat

While non-attack claims are on the rise, ransomware remains the most significant cause of cyber insurance losses. In 2024, ransomware accounted for 58% of the value of large cyber claims. Cybercriminals have become more sophisticated in their attacks, using encryption and AI to evade detection and increase their chances of success. Data exfiltration now plays a common role in ransomware attacks, with businesses two and a half times more likely to pay a ransom when attackers steal personal or sensitive corporate data.

Despite the growing sophistication of these attacks, Allianz notes that businesses with cyber insurance and strong cyber hygiene practices have fared better than those without. Improved backup strategies and early detection tools have helped to limit the financial and reputational damage caused by ransomware.

Strengthening Cybersecurity Resilience

Allianz’s report emphasizes the importance of early detection and response to cyber breaches, noting that breaches that are not contained early can cost up to 1,000 times more than those that are addressed promptly. AI is playing an increasingly critical role in these efforts, helping companies detect breaches early and isolate compromised systems, potentially saving millions of dollars in cyber losses.

The insurance industry also has a role to play in helping businesses bolster their cyber resilience. By providing loss prevention and mitigation advice, insurers can help companies make the case for investing in cybersecurity and direct their resources toward the most effective measures.

The growing risk of data breaches and privacy violations highlights the need for businesses to invest in robust cyber hygiene, including strong access controls, database segregation, backups, and staff training. Additionally, as data privacy regulations continue to evolve, companies must ensure they are transparent in their data handling practices and compliant with relevant laws. This, combined with early detection and response capabilities, can help businesses mitigate the growing risks associated with cyberattacks and privacy violations.

Other News: Patient Sues Hospital Network to Make it Pay Ransom (Opens in a new browser tab).

Other News: Ransomware gang Trinity joins pile of scumbags targeting healthcare.

Cyber Insurance, Cyber Insurance Reports Tags:2024 Cybersecurity Resilience report, Allianz Commercial, Allianz Commercial’s 2024 Cybersecurity Resilience report, cyber insurance, cyber liability insurance, Cybersecurity, Data Exfiltration, Ransomware

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SMB Cyber Threats - In this episode of the Cyber Insurance News Podcast, host Martin Hinton talks with Dan Candee, CEO of Cork Protection, about the rising tide of cyber threats targeting small and mid-sized businesses (SMBs). Dan shares his journey from Main Street entrepreneur to cybersecurity leader, offering real-world insight into the threat landscape, financial vulnerabilities, and how AI and managed service providers (MSPs) can help fortify business resilience.

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00:00 Introduction - Dan Candee and Cork Protection
02:27 The Importance of Cybersecurity for Small Businesses
05:29 Understanding Cyber Threats and Their Impact
08:26 The Role of Managed Service Providers in Cybersecurity
11:24 24Financial Protection and Cyber Insurance Solutions
14:01 Leveraging AI in Cybersecurity
16:53 Navigating Cyber Insurance Policies
19:56 Empowering Small Businesses with Knowledge
21:52 The Future of Cybersecurity and Community Resilience
26:05 MSP/ MSSP The Lingo decoded
29:05 Finals Thoughts and a bit of Hope!
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