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Cyber Threats

Cyber Challenges Still Evolving

A lack of available data hamstrings cyber-risk underwriting, no matter what the exposure.
By: | May 26, 2015 • 4 min read

Some chief information security officers fail to see the value of standalone cyber-risk coverage, while some brokers give the impression that traditional policies cover many of the same risks.

These factors have contributed to surprisingly low recent take-up on standalone cyber coverage, according to Charles Cowan, counsel to law firm Drinker Biddle & Reath’s insurance transactional and regulatory team.

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Cowan and Andrea Best, a partner with Drinker Biddle, addressed four emerging areas of cyber-related risk on May 19 in the Old Lloyd’s Library, built in 1928 and now in the basement at Lime Street. That very day, Lloyd’s announced its move into cyber coverage in Poland.

In the heavily wood-paneled atmosphere of the past, the speakers addressed four potential horsemen of the digital apocalypse.

Cyber-risk itself, drones, autonomous vehicles, and ride/car share all fall under the cyber umbrella and share a primary reliance on data that is largely not yet available, given the newness of the risks. The lack of data means that none of these risks is yet properly understood.

Cyber

“First and foremost in cyber risk,” said Cowan, “is the need for data. Not a lot of reliable data exists about incidents and where future potential attacks might be, or of what size.”

Cowan added that little litigation has yet taken place to clarify the validity of exclusions. The wording of the standard war exclusion “requires a hostile act by a foreign Government,” he said, “without naming names.” The Sony hack, reportedly by the Government of North Korea, came to mind.

Following another hack that exposed some 80 million customer and employee records at Anthem Health Insurance, the company notified and conducted its correspondence with its customers on paper, Cowan said. (Target experienced further opportunist email hacking after advising its customers by email that the personal data of up to 70 million customers, including credit card numbers, had been stolen in late 2013.)

“For larger breaches, costs can be astronomical,” Cowan said, citing a three-year-old U.S. report that valued the average stolen record at about $180. Cowan, who had left Lloyd’s three weeks earlier, is now working with the Department of Homeland Security on garnering more timely information.

Drones

About 80 percent of commercial unmanned aerial systems, or drones, are used in agriculture. The U.S. economy might expect to earn $82 billion from the use and knock-on effects of drones by 2025, and the FAA is due to issue a set of standards in this as-yet largely unregulated area.

Liability issues abound: criminal activity, matters of privacy and trespass, nuisance and general danger, air traffic problems, misdirected payloads, and of course hacking. “Any system is hackable,” Cowan said.

Autonomous Vehicles

The Institute of Electrical and Electronics Engineers forecasts that as many as 75 percent of all vehicles, some with removable steering wheels, are expected to be autonomous by 2030, Best said. Legislation in the U.S. is being enacted at the state level (five states plus Washington, D.C.), or has failed (12 states), or is not being considered at all.

Autonomous vehicles will require sensors for vehicle-to-vehicle communication, “but we’ll also have to have sensors on buildings, bridges, traffic lights and other objects we’ll have to navigate around,” Best said.

“The ultimate question, if this technology really takes off, and is so safe, is how much of an automobile insurance coverage market will there be left?” — Andrea Best, partner, Drinker Biddle & Reath

It is not yet clear who will need coverage. Manufacturers of the vehicles? Of component parts? Of the sensors? One known unknown is whether driver premiums for autonomous vehicles will fall, due to the lowered risk, or increase for traditional hands-on drivers.

“The ultimate question, if this technology really takes off, and is so safe, is how much of an automobile insurance coverage market will there be left?” Best asked.

Coverage challenges include the reliability and vulnerability of the technology, the adaptability of the driving public, and the hackability of the autonomous systems.

“These are probably just interim challenges,” Best said. “Given the level of investment, and how much of a push there is for (autonomous vehicles), these issues will fall away.”

Ride/Car Sharing

The former will be familiar from transportation network companies such as Uber, which arrange one-time shared rides on short notice, and others that arrange transportation for a fee using online technology platforms.

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The latter includes peer-to-peer car rentals organized by program administrators (such as RelayRides and Getaround) for short periods of time.

“Both services present new insurance coverage challenges,” Best said.

Ride-sharing is typically excluded from personal auto policies, creating coverage gaps. NAIC has issued a white paper to help state insurance regulators, and legislation is pending in more than 35 states. Similar coverage gaps exist in the car-sharing realm.

As if these four risks were not enough to digest, on the subject of emerging risks, in Best’s words, “we could have covered any number of topics and be here for hours.”

Roger Crombie is a United Kingdom-based columnist for Risk & Insurance®. He can be reached at [email protected]

Cyber Resilience

No, Seriously. You Need a Comprehensive Cyber Incident Response Plan Before It’s Too Late.

Awareness of cyber risk is increasing, but some companies may be neglecting to prepare adequate response plans that could save them millions. 
By: | June 1, 2018 • 7 min read

To minimize the financial and reputational damage from a cyber attack, it is absolutely critical that businesses have a cyber incident response plan.

“Sadly, not all yet do,” said David Legassick, head of life sciences, tech and cyber, CNA Hardy.

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In the event of a breach, a company must be able to quickly identify and contain the problem, assess the level of impact, communicate internally and externally, recover where possible any lost data or functionality needed to resume business operations and act quickly to manage potential reputational risk.

This can only be achieved with help from the right external experts and the design and practice of a well-honed internal response.

The first step a company must take, said Legassick, is to understand its cyber exposures through asset identification, classification, risk assessment and protection measures, both technological and human.

According to Raf Sanchez, international breach response manager, Beazley, cyber-response plans should be flexible and applicable to a wide range of incidents, “not just a list of consecutive steps.”

They also should bring together key stakeholders and specify end goals.

Jason J. Hogg, CEO, Aon Cyber Solutions

With bad actors becoming increasingly sophisticated and often acting in groups, attack vectors can hit companies from multiple angles simultaneously, meaning a holistic approach is essential, agreed Jason J. Hogg, CEO, Aon Cyber Solutions.

“Collaboration is key — you have to take silos down and work in a cross-functional manner.”

This means assembling a response team including individuals from IT, legal, operations, risk management, HR, finance and the board — each of whom must be well drilled in their responsibilities in the event of a breach.

“You can’t pick your players on the day of the game,” said Hogg. “Response times are critical, so speed and timing are of the essence. You should also have a very clear communication plan to keep the CEO and board of directors informed of recommended courses of action and timing expectations.”

People on the incident response team must have sufficient technical skills and access to critical third parties to be able to make decisions and move to contain incidents fast. Knowledge of the company’s data and network topology is also key, said Legassick.

“Perhaps most important of all,” he added, “is to capture in detail how, when, where and why an incident occurred so there is a feedback loop that ensures each threat makes the cyber defense stronger.”

Cyber insurance can play a key role by providing a range of experts such as forensic analysts to help manage a cyber breach quickly and effectively (as well as PR and legal help). However, the learning process should begin before a breach occurs.

Practice Makes Perfect

“Any incident response plan is only as strong as the practice that goes into it,” explained Mike Peters, vice president, IT, RIMS — who also conducts stress testing through his firm Sentinel Cyber Defense Advisors.

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Unless companies have an ethical hacker or certified information security officer on board who can conduct sophisticated simulated attacks, Peters recommended they hire third-party experts to test their networks for weaknesses, remediate these issues and retest again for vulnerabilities that haven’t been patched or have newly appeared.

“You need to plan for every type of threat that’s out there,” he added.

Hogg agreed that bringing third parties in to conduct tests brings “fresh thinking, best practice and cross-pollination of learnings from testing plans across a multitude of industries and enterprises.”

“Collaboration is key — you have to take silos down and work in a cross-functional manner.” — Jason J. Hogg, CEO, Aon Cyber Solutions

Legassick added that companies should test their plans at least annually, updating procedures whenever there is a significant change in business activity, technology or location.

“As companies expand, cyber security is not always front of mind, but new operations and territories all expose a company to new risks.”

For smaller companies that might not have the resources or the expertise to develop an internal cyber response plan from whole cloth, some carriers offer their own cyber risk resources online.

Evan Fenaroli, an underwriting product manager with the Philadelphia Insurance Companies (PHLY), said his company hosts an eRiskHub, which gives PHLY clients a place to start looking for cyber event response answers.

That includes access to a pool of attorneys who can guide company executives in creating a plan.

“It’s something at the highest level that needs to be a priority,” Fenaroli said. For those just getting started, Fenaroli provided a checklist for consideration:

  • Purchase cyber insurance, read the policy and understand its notice requirements.
  • Work with an attorney to develop a cyber event response plan that you can customize to your business.
  • Identify stakeholders within the company who will own the plan and its execution.
  • Find outside forensics experts that the company can call in an emergency.
  • Identify a public relations expert who can be called in the case of an event that could be leaked to the press or otherwise become newsworthy.

“When all of these things fall into place, the outcome is far better in that there isn’t a panic,” said Fenaroli, who, like others, recommends the plan be tested at least annually.

Cyber’s Physical Threat

With the digital and physical worlds converging due to the rise of the Internet of Things, Hogg reminded companies: “You can’t just test in the virtual world — testing physical end-point security is critical too.”

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How that testing is communicated to underwriters should also be a key focus, said Rich DePiero, head of cyber, North America, Swiss Re Corporate Solutions.

Don’t just report on what went well; it’s far more believable for an underwriter to hear what didn’t go well, he said.

“If I hear a client say it is perfect and then I look at some of the results of the responses to breaches last year, there is a disconnect. Help us understand what you learned and what you worked out. You want things to fail during these incident response tests, because that is how we learn,” he explained.

“Bringing in these outside firms, detailing what they learned and defining roles and responsibilities in the event of an incident is really the best practice, and we are seeing more and more companies do that.”

Support from the Board

Good cyber protection is built around a combination of process, technology, learning and people. While not every cyber incident needs to be reported to the boardroom, senior management has a key role in creating a culture of planning and risk awareness.

David Legassick, head of life sciences, tech and cyber, CNA Hardy

“Cyber is a boardroom risk. If it is not taken seriously at boardroom level, you are more than likely to suffer a network breach,” Legassick said.

However, getting board buy-in or buy-in from the C-suite is not always easy.

“C-suite executives often put off testing crisis plans as they get in the way of the day job. The irony here is obvious given how disruptive an incident can be,” said Sanchez.

“The C-suite must demonstrate its support for incident response planning and that it expects staff at all levels of the organization to play their part in recovering from serious incidents.”

“What these people need from the board is support,” said Jill Salmon, New York-based vice president, head of cyber/tech/MPL, Berkshire Hathaway Specialty Insurance.

“I don’t know that the information security folks are looking for direction from the board as much as they are looking for support from a resources standpoint and a visibility standpoint.

“They’ve got to be aware of what they need and they need to have the money to be able to build it up to that level,” she said.

Without that support, according to Legassick, failure to empower and encourage the IT team to manage cyber threats holistically through integration with the rest of the organization, particularly risk managers, becomes a common mistake.

He also warned that “blame culture” can prevent staff from escalating problems to management in a timely manner.

Collaboration and Communication

Given that cyber incident response truly is a team effort, it is therefore essential that a culture of collaboration, preparation and practice is embedded from the top down.

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One of the biggest tripping points for companies — and an area that has done the most damage from a reputational perspective — is in how quickly and effectively the company communicates to the public in the aftermath of a cyber event.

Salmon said of all the cyber incident response plans she has seen, the companies that have impressed her most are those that have written mock press releases and rehearsed how they are going to respond to the media in the aftermath of an event.

“We have seen so many companies trip up in that regard,” she said. “There have been examples of companies taking too long and then not explaining why it took them so long. It’s like any other crisis — the way that you are communicating it to the public is really important.” &

Antony Ireland is a London-based financial journalist. He can be reached at [email protected] Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]