The recent cyber-attack on HBO should be a wakeup call to both businesses and insurers. While the amount sought by the hackers called “Mr. Smith”—roughly $6 million in bitcoin—is not a huge amount for HBO, it is significantly more than the amounts that have typically been demanded in recent cyber extortion demands. Over the last two years, the average ransom amount demanded in ransomware attacks was only between $100 and $2,000. Accordingly, approximately 70 percent of all ransomware demands have been paid. Datto, “Datto's State of the Channel Ransomware Report” (2016).

While underwriting for many aspects of cyber insurance faces significant challenges—particularly since many data breach cases and claims thus far have foundered on the lack of standing or actual damages where personally identifiable information (PII) has been accessed but not used—ransomware attacks have been substantially under-reported. Id. Ransomware attacks involve introducing a software into a company's computer system that allows data to be temporarily encrypted (and made unusable) until a ransom demand is paid. Absent faulty technology (or fake ransomware), the data is typically only exfiltrated, deleted or destroyed if the ransom demand is not met.

In the past two years, the volume of ransomware-infected email has increased by 6,000 percent resulting in more than 1.5 million systems being infected with ransomware. Limor Kessem, “Ransomware: How Consumers and businesses value their data,” IBM Security (Dec. 14, 2016). But the relatively modest ransom prices have been quickly paid, thereby making this payment appear more like a cost of doing business rather than an event requiring an insurance claim to be filed.