The financial consequences of a cyberattack can be devastating, especially for small and medium enterprises (SMEs) in Australia. Experts are calling for stronger cybersecurity regulations to protect these businesses, many of which are not properly insured.
Cybersecurity Risks Can Lead to Business Collapse
Susie Amos, the principal and head of commercial lines at Finity Consulting, warned that the financial fallout from a single cyber incident could result in insolvency for many SMEs. She told Insurance Asia, “For an SME, even a small portion of the cost of a cyber event could push them to bankruptcy.” Amos emphasized that a consistent and affordable certification system would help SMEs improve their cybersecurity and provide the market with a clearer picture of their preparedness.
In the latest news, research by the Australian Cyber Security Centre revealed that 60% of Australian SMEs have experienced a cybersecurity incident. On average, small businesses face costs of around AU$50,000, while medium-sized enterprises lose approximately AU$63,000 per attack.
The Burden of High Cyber Insurance Costs
Many SMEs face the additional challenge of high cyber insurance premiums, which can range from AU$700 to AU$50,000 annually, depending on the size and coverage. Kristine Salgado, cyber broker leader for Marsh in the Pacific, noted that many SMEs mistakenly believe their cyber risk is low because they don’t handle large volumes of sensitive data. She explained that cyber risk extends beyond data to include system availability, business operations, and reputation management.
Ransomware Attacks Pose Major Threats
According to Lindsey Nelson, head of cyber development at CFC Underwriting, ransomware attacks have been the primary source of financial losses for Australian businesses. In the past year, 89% of business costs in Australia stemmed from ransomware incidents, far higher than the global average of 71% and the US figure of 65%. Nelson highlighted that SMEs are often victims of larger-scale attacks, making them vulnerable targets for cybercriminals.
Systemic Risks and the Challenge for Insurers
SMEs also face systemic risks from their reliance on major service providers, which can lead to widespread disruptions in case of cyber incidents. Salgado stressed that insurers are struggling to model these systemic losses, which complicates risk assessment and pricing. In addition, the Australian government’s Cyber Security Act 2024 mandates businesses with an annual turnover of AU$3 million to report ransomware attacks, excluding the majority of Australian SMEs, which accounts for 97.2% of all businesses in the country.
Impact of Underinsurance and the Need for Stronger Regulations
Amos estimates that the long-term economic impact of underinsurance among Australian SMEs could be in the tens of billions of dollars. She urged the government to invest more heavily in national cybersecurity measures to help safeguard businesses from the growing cyber threat landscape. “The government needs to take action to strengthen Australia’s cybersecurity defences,” she said.
Cyber Insurance Market Faces Uncertainty
The cyber insurance market in Australia faced significant challenges in 2020 when premiums more than doubled. This increase placed considerable strain on businesses with limited cybersecurity budgets. Nelson added that while conditions have improved since then, the future stability of the market relies on consistent underwriting practices and predictability. “Clients need confidence that the insurance market understands cyber risks and can provide clear, consistent terms,” she said.
Conclusion
The need for clearer cybersecurity risk benchmarks is critical for the future of Australian SMEs. Strengthening insurance policies, improving industry standards, and investing in cybersecurity infrastructure are essential steps in protecting these businesses from cyber threats. In the latest related news, experts continue to push for more robust regulations to prevent the potentially devastating financial impact of cyberattacks on SMEs.
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