When Hackers Target Your Building: Why Traditional Property Insurance Falls Short Against New York’s Growing Cyber Threats

In the heart of New York’s bustling commercial landscape, a new breed of threat is emerging that traditional property insurance simply wasn’t designed to handle. Cybersecurity attacks aimed at real estate companies are predicted to continue to grow in 2024 and beyond, with the commercial real estate industry becoming an attractive target for cybercriminals due to the high-value transactions and vast amounts of sensitive data that the industry handles.

The Evolving Cyber Threat Landscape for NY Commercial Properties

New York’s commercial real estate sector faces unprecedented digital vulnerabilities in 2024. Network breaches affected more than 11,000 smart commercial buildings in the past 12 months, leading to system disruptions in 3,200 office complexes, while industrial facilities reported over 9,800 ransomware attacks targeting building automation systems. These statistics paint a stark picture of an industry under siege.

In today’s digital landscape, safeguarding commercial property security systems against cyber threats has become crucial, as businesses increasingly rely on technology for their operations, the risk of cyber-attacks has grown exponentially. Modern commercial buildings integrate numerous connected systems—from HVAC controls to security cameras—creating multiple entry points for malicious actors.

As buildings incorporate more technology and get smarter, they are becoming more vulnerable to a wide range of cybersecurity threats related to data breaches and ransomware. Due to the interconnectivity and interdependence of technology systems within the most modern commercial buildings, cybersecurity breaches can impact multiple if not all occupiers within a single property.

The Critical Coverage Gap in Traditional Property Insurance

Here’s where many New York property owners face a rude awakening: traditional property insurance policies are increasingly excluding cyber-related incidents. Traditional cyber insurance policies only cover electronic data and violations of privacy laws, leaving you vulnerable when a cyberattack damages physical property or equipment. A traditional cyber policy will not cover physical damage to property or equipment caused by a cyberattack—meaning if an attack halts your manufacturing facility and it results in damaged equipment and spoiled products, your cyber policy likely won’t cover it.

As cyber threats become more frequent and financially damaging, insurers are increasingly removing ambiguous or unintended cyber coverage, often referred to as “silent cyber”, from general liability, property, and business interruption policies. This has left organizations with a critical coverage gap, prompting them to seek dedicated cyber insurance solutions to mitigate the financial impact of incidents such as data breaches, ransomware attacks, and IT system disruptions.

The financial implications are staggering. In 2024, the average ransom demand reached $600,000, and ransomware continues to be the leading cause of cyber insurance losses. For commercial property owners, this represents a massive uninsured exposure that could threaten business continuity.

Real-World Consequences for NY Property Owners

The consequences extend far beyond the initial cyber incident. An infection in one system could easily spread to the rest of the network, as with Target’s 2013 attack, in which the network credentials of the retail giant’s HVAC contractor were used to gain access to credit card processing systems. Ultimately, the credit card data of 70 million shoppers was exposed.

Some 60% that suffer a cyberattack are out of business within six months. This sobering statistic underscores why adequate cyber protection has become essential for commercial property survival in New York’s competitive market.

The Smart Building Vulnerability Factor

Approximately 1.2 billion connected IoT devices were installed in commercial properties globally, with 44% exposed to potential cyber risks without protection. New York’s push toward smart building technology has created an expanded attack surface that traditional property insurance simply doesn’t address.

IoT devices and smart buildings are adding to the problem, as they often lack strong security measures to block backdoor access to larger networks. This interconnectedness means a single compromised device can potentially give attackers access to entire building systems.

Why Property Owners Need Specialized Cyber Coverage

The insurance market is responding to these evolving threats, but gaps remain significant. Less than 20% are carrying cyber coverage, compared to 60% with property insurance. “That’s despite cyber being assessed as having a higher probability and severity of loss than property,” says Rory Egan, head of cyber & analytics within the Global ReSpecialty business of Aon’s Reinsurance Solutions unit in London.

For New York commercial property owners seeking comprehensive protection, working with experienced insurance professionals becomes crucial. Commercial property insurance in NY must now be evaluated alongside dedicated cyber coverage to ensure complete protection.

The Max Pollack Insurance Advantage

Understanding these complex coverage needs requires expertise that comes from decades of experience. Max J. Pollack & Sons Insurance has been serving the New York metropolitan community for over 85 years, since 1936. We are a family business that has been serving the New York Metropolitan community for over 75 years. We believe that the ongoing success of our company is due to a combination of extensive insurance industry knowledge, coupled with something you don’t see too often in today’s world — old-fashioned, personalized attention to our customers’ needs.

Based in Brooklyn’s Park Slope neighborhood, Max Pollack Insurance understands the unique challenges facing New York commercial properties. Commercial property and commercial general liability insurance are two of the most important types of commercial insurances necessary to protect the financial security and physical assets of any business.

Moving Forward: A Comprehensive Protection Strategy

Nevertheless, the vast majority of cyber risks are still uninsured. The cyber protection gap has a direct impact on the well-being and economic prosperity not only of individuals and companies, but of society as a whole.

For New York commercial property owners, the solution lies in a multi-layered approach that combines traditional property coverage with specialized cyber insurance. This requires working with insurance professionals who understand both the traditional property risks and the emerging cyber landscape.

The digital transformation of commercial real estate is irreversible, and with it comes new responsibilities for property owners. Doing so is critical for commercial real estate organizations looking to build long-term, sustainable growth that is equal parts innovative and secure.

As cyber threats continue to evolve and traditional property insurance coverage becomes more restrictive, New York commercial property owners must proactively address these coverage gaps. The cost of inadequate protection far exceeds the investment in comprehensive cyber coverage—especially when business survival hangs in the balance.