Can Cyber Regulations Work?

Can government regulations keep up with changing technologies to control cyber risk?
By: | September 15, 2013 • 4 min read

Point: The Right Cyber Regulation Can Work

Governmental attempts to create cyber security regulations have been a failure thus far, but that doesn’t mean that doing nothing is the proper approach.

Anne Freedman, Senior Editor, Risk & Insurance

Anne Freedman, Senior Editor, Risk & Insurance®

Businesses are more vulnerable than ever to cyber attacks. And it’s clear that effective protection from cyberrisk takes more than individual effort. Attacks by hackers, nation-states and criminal organizations are growing in frequency and sophistication.

But as we can see from the ongoing controversy over the National Security Agency’s data mining efforts, this is an issue that will provoke opposition, even as technology firms and businesses support the effort.

Nevertheless, federal cyber security legislation is necessary to provide a framework that deals with the realities of cyber crime and data breaches.

Enlightened regulation can help mitigate the risk and protect businesses, customers, owners and investors against the impact of catastrophic loss.

There must be public/private sector information sharing and collaboration that protects against cyberrisk without raising privacy fears and civil liberties issues.

Gathering and communicating data at the federal level on viruses, malware and botnets (programs that communicate with other programs to execute malicious software) would be welcomed by all Internet users, commercial and individual.

In addition, it is only the federal government that has the ability to coordinate with other countries to create harmonious cyber crime laws and to cooperate with other countries in cyber investigations.

Instead of trying to pass a massive bill that invades personal and business privacy and mandates specific cyber security practices, regulatory efforts should focus on creating incentives — and offering assistance and guidance — for companies to take the internal steps necessary to protect their organizations.

Such protective steps must work in conjunction with new and developing insurance policies that substantially reduce the financial risk of cyber attacks. Those policies also play a key role in compelling companies to increase their cyber security efforts.

There is no doubt that no matter what steps are taken, cyber criminals will continue to develop new methods of attack. Organizations will continue to be vulnerable to cyberrisk. Only government can create the overarching framework and global collaboration that can lead to better cyber security.

Counterpoint: Cyber Regulation is Next to Impossible

Government regulations on the reporting of cyberrisk in the private sector cannot succeed. It’s not that the government shouldn’t be attempting to protect taxpayers and investors from this risk, because it should. It is right-minded to do so.


Dan Reynolds, Editor-in-Chief, Risk & Insurance®

Cyber regulation at the national level and the international level is well-intended. But the execution of it is a near-impossible task.

Look at the history of warfare. We have moved from troops standing in line shooting at each other, to cells of hackers operating in cities and towns across the globe.

So how can governments create an international agreement, even if they wanted to? We live in a world where cyber crime is no longer just the province of teenage underground anarchists, or even domestic or foreign organized crime groups. Some governments house hacker cells — affiliated with their own military in some cases — that are carrying out attacks on U.S.-based businesses.

To implement international laws, governments would have to be able to assure the countries that they are negotiating with that they can regulate Internet usage in their own countries. But we know they can’t do that. Some countries don’t even have cyber crime laws on the books yet.

Cyberrisk is a serious issue, but cyber regulation is not the answer. Regulation is deadly slow and not prone to evolve in real-time. It would be handily outpaced by the changing landscape of cyber space and cyber crime, leaving companies strangled by the outdated and ineffective burden of irrelevant mandates.

The worst part of all is that cyber regulation puts the emphasis on compliance rather than the real goal: countering the threat.

The good news is that industry does not have its head in the sand. There are a plethora of organizations working to develop standards and best practices related to cyber security. The International Organization for Standardization (ISO) alone has published more than 200 standards for information security. ISO and more than a dozen other international organizations are actively involved in developing and refining a framework of cyber security agreements and standards. These standards-setting bodies are equipped to respond more swiftly than regulators to keep pace with changes.

Government can help protect citizens and businesses from cyberrisk. But that can best be accomplished by partnering with industry and cooperating with the many organizations that are already working to make cyber space a safer place for citizens and for commerce.


Editor’s note: The opinions stated in the Zurich Point of Action are provided for informational purposes only and are solely those of Zurich in North America.
The Zurich Point of Action opinions are not legal advice and Zurich assumes no liability concerning the information above. The Point and Counterpoint opinions are those of Risk & Insurance® and are completely independent of Zurich.

Anne Freedman is managing editor of Risk & Insurance. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Risk Report: Marine

Crewless Ships Raise Questions

Is a remote operator legally a master? New technology confounds old terms.
By: | March 5, 2018 • 6 min read

For many developers, the accelerating development of remote-controlled and autonomous ships represents what could be the dawn of a new era. For underwriters and brokers, however, such vessels could represent the end of thousands of years of maritime law and risk management.

Rod Johnson, director of marine risk management, RSA Global Risk

While crewless vessels have yet to breach commercial service, there are active testing programs. Most brokers and underwriters expect small-scale commercial operations to be feasible in a few years, but that outlook only considers technical feasibility. How such operations will be insured remains unclear.

“I have been giving this a great deal of thought, this sits on my desk every day,” said Rod Johnson, director of marine risk management, RSA Global Risk, a major UK underwriter. Johnson sits on the loss-prevention committee of the International Union of Maritime Insurers.

“The agreed uncertainty that underpins marine insurance is falling away, but we are pretending that it isn’t. The contractual framework is being made less relevant all the time.”

Defining Autonomous Vessels

Two types of crewless vessels are being contemplated. First up is a drone with no one on board but actively controlled by a human at a remote command post on land or even on another vessel.

While some debate whether the controllers of drone aircrafts are pilots or operators, the very real question yet to be addressed is if a vessel controller is legally a “master” under maritime law.


The other type of crewless vessel would be completely autonomous, with the onboard systems making decisions about navigation, weather and operations.

Advocates tout the benefits of larger cargo capacity without crew spaces, including radically different hull designs without decks people can walk on. Doubters note a crew can fix things at sea while a ship cannot.

Rolls-Royce is one of the major proponents and designers. The company tested a remote-controlled tug in Copenhagen in June 2017.

“We think the initial early adopters will be vessels operating on fixed routes within coastal waters under the jurisdiction of flag states,” the company said.

“We expect to see the first autonomous vessel in commercial operation by the end of the decade. Further out, around 2025, we expect autonomous vessels to operate further from shore — perhaps coastal cargo ships. For ocean-going vessels to be autonomous, it will require a change in international regulations, so this will take longer.”

Once autonomous ships are a reality, “the entire current legal framework for maritime law and insurance is done,” said Johnson. “The master has not been replaced; he is just gone. Commodity ships (bulk carriers) would be most amenable to that technology. I’m not overly bothered by fully automated ships, but I am extremely bothered by heavily automated ones.”

He cited two risks specifically: hacking and fire.

“We expect to see the first autonomous vessel in commercial operation by the end of the decade. Further out, around 2025, we expect autonomous vessels to operate further from shore — perhaps coastal cargo ships. For ocean-going vessels to be autonomous, it will require a change in international regulations, so this will take longer.” — Rolls-Royce Holdings study

Andrew Kinsey, senior marine risk consultant, Allianz Global Corporate & Specialty, asked an even more existential question: “From an insurance standpoint, are we even still talking about a vessel as it is under law? Starting with the legal framework, the duty of a flag state is ‘manning of ships.’ What about the duty to render assistance? There cannot be insurance coverage of an illegal contract.”

Several sources noted that the technological development of crewless ships, while impressive, seems to be a solution in search of a problem. There is no known need in the market; no shippers, operators, owners or mariners advocate that crewless ships will solve their problems.

Kinsey takes umbrage at the suggestion that promotional material on crewless vessels cherry picks his company’s data, which found 75 percent to 90 percent of marine losses are caused by human error.


“Removing the humans from the vessels does not eliminate the human error. It just moves the human error from the helm to the coder. The reports on development by the companies with a vested interest [in crewless vessels] tend to read a lot like advertisements. The pressure for this is not coming from the end users.”

To be sure, Kinsey is a proponent of automation and technology when applied prudently, believing automation can make strides in areas of the supply chains. Much of the talk about automation is trying to bury the serious shortage of qualified crews. It also overshadows the very real potential for blockchain technology to overhaul the backend of marine insurance.

As a marine surveyor, Kinsey said he can go down to the wharf, inspect cranes, vessels and securements, and supervise loading and unloading — but he can’t inspect computer code or cyber security.

New Times, New Risks

In all fairness, insurance language has changed since the 17th century, especially as technology races ahead in the 21st.

“If you read any hull form, it’s practically Shakespearean,” said Stephen J. Harris, senior vice president of marine protection UK, Marsh. “The language is no longer fit for purpose. Our concern specifically to this topic is that the antiquated language talks about crew being on board. If they are not on board, do they still legally count as crew?”

Harris further questioned, “Under hull insurance, and provided that the ship owner has acted diligently, cover is extended to negligence of the master or crew. Does that still apply if the captain is not on board but sitting at a desk in an office?”

Andrew Kinsey, senior marine risk consultant, Allianz Global Corporate & Specialty

Several sources noted that a few international organizations, notably the Comite Maritime International and the International Maritime Organization, “have been very active in asking the legal profession around the world about their thoughts. The interpretations vary greatly. The legal complications of crewless vessels are actually more complicated than the technology.”

For example, if the operational, insurance and regulatory entities in two countries agree on the voyage of a crewless vessel across the ocean, a mishap or storm could drive the vessel into port or on shore of a third country that does not recognize those agreements.

“What worries insurers is legal uncertainty,” said Harris.

“If an operator did everything fine but a system went down, then most likely the designer would be responsible. But even if a designer explicitly accepted responsibility, what matters would be the flag state’s law in international waters and the local state’s law in territorial waters.


“We see the way ahead for this technology as local and short-sea operations. The law has to catch up with the technology, and it is showing no signs of doing so.”

Thomas M. Boudreau, head of specialty insurance, The Hartford, suggested that remote ferry operations could be the most appropriate use: “They travel fixed routes, all within one country’s waters.”

There could also be environmental and operational benefits from using battery power rather than conventional fuels.

“In terms of underwriting, the burden would shift to the manufacturer and designer of the operating systems,” Boudreau added.

It may just be, he suggested, that crewless ships are merely replacing old risks with new ones. Crews can deal with small repairs, fires or leaks at sea, but small conditions such as those can go unchecked and endanger the whole ship and cargo.

“The cyber risk is also concerning. The vessel may be safe from physical piracy, but what about hacking?” &

Gregory DL Morris is an independent business journalist based in New York with 25 years’ experience in industry, energy, finance and transportation. He can be reached at [email protected]