Casino ransomware attacks could lead to higher insurance bills
Caesars Entertainment Inc. (NASDAQ: CZR) announced in a regulatory filing that an unidentified insurance company will cover payments to cybercriminals in the wake of recent ransomware attacks. Analysts widely expect rival MGM Resorts International (NYSE: MGM ) to make a similar announcement soon. The bad news is that this can lead to high cyber insurance costs.
Ransomware attacks (network penetrations in which criminals demand money) have increased significantly in recent years. Guy Carpenter LLC notes that this growth comes as insurance companies raise customer rates.
Following a wave of ransomware activity that began in 2019, cyber insurers responded quickly with significant price increases, as evidenced by the 183% average cumulative rate increase across Guy Carpenter's cyber client base since 2020," the research firm said.
A Caesars-owned insurance company is said to have paid between $15 million and $30 million to the Sccatred Spider hacking group. Separately, a sell-side analyst recently noted that MGM may have $200 million in cyber insurance. This can cover all or most of the losses an operator suffers related to a ransomware attack. Analysts expect that in both cases, casino giants will incur higher cyber insurance costs.
Industries respond to casino ransomware attacks
Although companies spend tens of billions of dollars on cybersecurity every year, the history of cyberattacks on companies is often more reactive than proactive.
For example, there is evidence that after Caesars and MGM suffered cyber breaches, more gaming companies are turning to cybersecurity firms for preventive measures. Likewise, as ransomware attacks and payments increase, insurance companies are reacting in their own way, raising rates.
Guy Carpenter added: “Ransomware activity has increased since the beginning of 2023, with ransom amounts increasing to levels close to the fourth quarter of 2021.” “Recent high-profile attacks at Las Vegas casino resorts will be repeated Focusing the industry's attention on the ongoing threat posed by ransomware groups and the resulting losses suffered by many insurance companies involved in the MGM and Caesars cyber towers may also lead them to take a more cautious approach to pricing and terms. ”
The research firm also noted that while Scatter Spider used the same social engineering methods to attack Caesars and MGM, the insurance industry would likely classify the breaches as two separate incidents rather than a single catastrophe.
Predictable reaction from the insurance industry
It wouldn't be surprising if insurance companies increase cyber insurance rates for Caesars, MGM and other casino operators. Anyone who has been at fault in a car accident knows that insurance companies often increase rates after a negative event.
There are also cases where insurance companies stop new policies after a catastrophic event. For example, State Farm recently announced it would stop selling new home insurance in California due to the threat of wildfires. In hurricane-prone Florida, similar policies rolled out by different companies are becoming increasingly expensive.
At this time, casino operators’ access to cyber insurance is unlikely to be limited. But the breaches at Caesars and MGM remind us that it’s better to be proactive than reactive.
Guy Morris concluded: “As the cyber insurance industry grapples with systemic risk through quantification and policy development, insurers and insureds should view the Las Vegas attack as a purely financially motivated cybercrime. "
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Source: www.casino.org
