Advisen

Small businesses hit hard in 2021 with 56% rise in average cyber claims cost: Coalition

By Erin Ayers, Advisen

Ransomware claims severity showed signs of plateauing in the latter half of 2021, but smaller businesses felt disproportionate impacts from a 56% rise in average claim cost and a 40% rise in ransomware events, according to Coalition’s 2022 Cyber Claims report.

The average ransom demand rose 20% to $1.8 million, but ransom payouts made by Coalition policyholders dropped 16%, the cyber MGA said in a review of its cyber claims data. Ransomware claims severity rose 10% and frequency rose 23% in the second half of 2021, with healthcare firms bearing the brunt of attacks.

“We anticipate that the severity of ransomware will continue to flatten over time. As we predicted in our previous Claims Report, there is little leverage threat actors can gain beyond what they already have once they have taken an organization’s operations and data hostage,” said Coalition.

Despite some promising signs on ransomware, costs continue to rise for organizations least able to afford it. The 56% increase for businesses with under $25 million in revenue brought the average claim cost to $149,000. For middle-market businesses, claims severity increased 54% to $358,000 between the first half of the year and the second half, according to the report.

Cybercriminals also showed flexibility over 2021, shifting tactics to take advantage of digital supply chains and widespread software vulnerabilities. Microsoft Exchange vulnerabilities continue to evolve – businesses using Microsoft Exchange experienced a 108% rise in claims compared to organizations not using the tool.

“This heralds an era of omnidirectional threat-equality — cyber threats are ever-present from all angles,” wrote Coalition in its report. “While ransomware may be the most newsworthy, no attack vector can be trivialized or ignored.”

While ransomware claims continued to cost more on average than other types of cyberattacks, losses due to funds transfer fraud (FTF) rose by 69% in 2021. Frequency increased by 54% for smaller organizations and losses (before funds recovery) increased by 102% between the first half and second half of 2021. In the middle market, frequency rose by 68%, but initial losses dropped.

“While many things have changed since our last report, there was one constant: organizations continue to be targeted by criminals because they have made poor technological choices, often exposed to the public internet, that make them vulnerable,” said Coalition in the report.

According to Joshua Motta, CEO and co-founder of Coalition, the firm was able to contain 46% of reported incidents in 2021 at no cost to the policyholders. In tandem with the cyber claims report release, Coalition announced the launch of “Active Insurance,” a new model for risk transfer provide ongoing risk assessments, protection, and response.

Managing Editor Erin Ayers can be reached at erin.ayers@zywave.com