Insurance Week: Ransomware Payouts, Wildfire Season, Windstorms, Safety Inspections

Will Cyber Insurers Stop Reimbursing for Ransomware Payouts?:

For a while now the prevailing wisdom in the cyber insurance industry has been that victims should just pay off the hackers and seek reimbursement from their insurer because it’s just less costly for everyone.

But with ransomware cases having shot up 400 percent last year and cyber insurance payouts now topping 70 percent of premiums, that may not be the prevailing wisdom much longer.

“The ransomware groups got way too greedy too quickly,” said Fabian Wosar, chief technical officer of the cybersecurity firm Emsisoft. “So the cost-benefit equation the insurers initially used to figure out whether or not they should pay a ransom — it’s just not there anymore.”

One way cyber insurers have responded to the ransomware onslaught is by raising premiums. In the U.S. and Canada, premiums increased 29 percent in January, 32 percent in February and 39 percent in March.

“The price has to match the risk,” said Michael Phillips, chief claims officer for the cyber insurance firm Resilience and co-chair of the public-private Ransomware Task Force.

Cyber insurers have also been imposing more restrictions on policies. For example, a policy might stipulate reimbursements for ransomware payments can’t exceed a third of the total amount of coverage.

Most cyber insurers appear disinclined to stop providing reimbursements for ransoms altogether. But Jan Lemnitzer, a Copenhagen Business School lecturer, said compelling them to do so would be a “no-brainer.” (ASSOCIATED PRESS, OMAHA DAILY RECORD)

P/C Insurance Group Defends Ransomware Reimbursements:

The American Property Casualty Insurance Association, the largest property/casualty insurance organization in the nation, defended ransomware reimbursements in a set of Cyber Extortion/Ransomware Guiding Principles released this month.

“This principle is consistent with the long-standing approach to the parallel issue of crime or kidnap & ransom coverages, which are allowed by regulators so long as those payments do not violate sanctions laws,” the group said. (INSURANCE JOURNAL)

Wildfire Season Raising Concern in CA about Homeowner’s Policy Non-Renewals:

California’s wildfire season is shaping up to be another bad one, with the Lava and Tennant fires in Northern California already having scorched over 35,000 acres between them.

Catastrophe modelers like CoreLogic and Risk Management Solutions (RMS) are also seeing an increase in sales of their products, which allow insurers to identify where higher risk properties are - and potentially non-renew those deemed to be too risky.

“That’s the thing that the regulators most worry about,” said Michael Young, vice president of model product management for RMS.

The number of California homeowner policy non-renewals rose 31 percent in 2019 - to 235,250 - after the state’s 2018 wildfire season, during which the town of Paradise, with a population of over 26,000 people, was almost completely destroyed. (INSURANCE JOURNAL)

TX Enacts Multiple Windstorm Insurer Reforms in 2021:

The Texas Legislature passed and Gov. Greg Abbott (R) signed four bills in the 2021 session dealing with the Texas Windstorm Insurance Association, established by the Legislature in 1971 to provide wind and hail insurance for property owners who are unable to obtain such coverage from private insurers.

HB 769 prohibits TWIA’s board of directors from voting on rate increases when there are longstanding vacancies on the board and bars the association from purchasing reinsurance from brokers or insurers involved in the process the association uses to calculate the probable maximum loss for the period the reinsurance will cover.

SB 1448 requires a two-thirds majority vote by the board for TWIA premium rate increases. HB 2920 establishes a 10-day grace period for the payment of premiums on policies renewed by TWIA. And HB 3564 prohibits Texas’ Department of Insurance from rescinding certificates of compliance for improvements to obtain coverage under a TWIA policy once the certificates have been issued.

In related news TWIA posted its 2021 Rate Adequacy Analysis on its website for public review. According to that analysis, the association’s current rates are too low by 39 percent for residential insurance and 46 percent for commercial insurance. (INSURANCE JOURNAL)

FL High-Rise Insurers Demand Safety Inspections:

Insurers of high-rises along the South Florida coast have begun notifying the buildings’ owners that they must provide proof that their buildings are safe within 45 days or risk losing coverage. The notifications were prompted by the collapse of Champlain Tower South in Surfside on June 30. (NEWSWEEK)

LA Orders CA Insurer to Stop Non-Renewing Homeowners Policies:

Louisiana Insurance Commissioner Jim Donelon has ordered GeoVera Specialty Insurance Co., a surplus lines company based in California, to stop non-renewing Louisiana homeowners’ policies. Donelon’s cease and desist order states that Louisiana law prohibits insurers from non-renewing polices that have been in place for over three years except under very limited conditions. (INSURANCE JOURNAL)

Judge Rules Private WV Insurer Subject to ACA’s Anti-Discrimination Provision:

A federal judge ruled last month that The Health Plan of West Virginia, a private company that provides health insurance services for the state, must comply with a provision of the Affordable Care Act prohibiting sex discrimination, including against transgender individuals. The decision came in connection with a lawsuit brought by two transgender men who say the insurer refused to cover their hormone replacement therapy because they are transgender. (CHARLESTON GAZETTE-MAIL)

— Compiled by KOREY CLARK