Insurance coverage options before ransomware attacks

More and more cities are becoming targets for ransomware attacks, and determining insurance coverage can be tricky. (Photo: iStock)

Computer systems everywhere have become the targets of ransomware attacks in recent years. Ransomware is a form of “malware” (malicious software that gets installed on a computer without the user’s consent and is harmful to the computer) in which the access to important data and computer systems are locked or encrypted unless the victim agrees to pay a ransom to regain access to the affected computer system or data. AIG announced in May 2018 that of all the cyber claims it received in 2017, ransomware was the largest cause of loss, making up 26% of the cyber claims that it received that year. By comparison, the next largest cause of loss was data breaches caused by hackers, at 12% of all claims received.

The decision regarding payment of a ransomware demand is a complex one, which becomes even more layered when there is coverage for the loss. This article examines some of the issues faced by insurers and insureds in dealing with a ransomware attack and provides guidance for evaluating insurance coverage options.