Cyber Risk

High Net Worth’s Unique Cyber Challenges

Emerging cyber risk is a challenge for everyone these days, but for high net worth individuals and families, the challenges can be even greater.
By: | September 12, 2017 • 6 min read

High net worth individuals have a bigger attack surface,” said Martin Hartley, executive vice president and chief operating officer of PURE Group of Insurance Companies. “They have more devices, they travel more, they may have domestic staff. There is just a greater attack surface for someone targeting them to get through.”

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Wealth attracts theft, but the lifestyles of the better off make them targets as well. They tend to embrace technology, from computer-enhanced toys to a vast array of smart home devices, most of which are Wi-Fi enabled, presenting opportunities for would-be cyber thieves.

“With all of the smart home technology, [criminals can] hack into your thermostat, which now gives them access to the rest of your network and … the phones, iPads, and computers that family members do their banking on,” said Lisa Lindsay, executive director at the Private Risk Management Association. The latest gadgets or apps may still have unknown bugs or weaknesses, as well.

Domestic staff and frequent entertaining can both lead to sharing passwords, which makes networks less secure.

“Children of the high net worth will have phones earlier,” said Kim Lucarelli, senior vice president and director of personal client management at Oswald Companies. “They may have them at 10, 11 years old.” Children that age are less likely to understand the importance of good cyber hygiene, and more likely to develop bad habits that will be difficult to unlearn when they get older.

The wealthy tend to travel more. Using unknown networks to control remote devices or conduct financial transactions, especially abroad, puts home networks, sensitive financial information, or even accounts themselves at risk.

Lisa Lindsay, executive director, the Private Risk Management Association

“People think all the time, ‘Everything I do at home I can do remotely,’ and that is true,” said Heather Posner, director of high net worth at Burns & Wilcox. “But … how do you make sure you’re secure? Whether you’re paying bills, filing your taxes, changing your thermostat, setting your alarm, what kind of exposure are you opening yourself up to if you’re not doing that in a secure manner?”

Lindsay agrees. “People have to know public Wi-Fi common sense,” she said. “They’re sitting in a hotel lobby in Rome transacting financial matters. It’s crazy. You shouldn’t even do that [in the U.S].”

Other risks arise from technological advances of another sort. Cyber criminals drive through neighborhoods to access vulnerable home networks, and experts are increasingly concerned about the use of drones, which would allow criminals to detect and hack into networks remotely from a mile or two away, including networks not accessible from the street.

The ultimate goal of those hackers is, of course, simple. “Without a doubt, it is theft of funds from their bank account, through a variety of different means,” said Hartley. “ … That is the highest risk facing high net worth individuals.”

“High net worth individuals have a bigger attack surface. They have more devices, they travel more, they may have domestic staff … more transactions are occurring.” —Martin Hartley, executive vice president and chief operating officer, PURE Group of Insurance Companies

Identity theft or the use of stolen login info to access accounts can be devastating and disruptive, but in those cases the financial institution may accept liability. However, criminals can also use information gleaned from social media accounts, with or without stolen personal information, to craft sophisticated social engineering scams.

Social media posts made while traveling often provide details that make fraudulent correspondence so convincing, and the distance between family members can make fake pleas for money more believable and urgent.

Hartley routinely sees cases where thieves have used information stolen or gleaned from social media to create utterly convincing correspondences instructing personal assistants to transfer often vast sums of money.

“The bank is not liable,” said Hartley. “They say, ‘We followed our protocols. It was your personal assistant, who is an authorized bank user, who wired the money out of the account.’ That money is gone.”

“This is the nature of an evolving risk,” he said. “Today we have $10,000 worth of coverage for this kind of loss,” although PURE will soon roll out new coverage with much higher limits.

Defamation Claims

The fastest growing liability claim, according to a claim supervisor at Chubb, is online defamation, said Oswald’s Lucarelli.

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These claims often have to do with negative reviews on Yelp or other online platforms.

While such a claim may be picked up by a traditional liability policy, Lucarelli sees the potential for coverage gaps.

“If it’s deemed an intentional act there may not be coverage,” she said, adding, “The coverage really is more around bodily injury … Mental anguish isn’t a loss that’s likely covered.”

And coverage under a traditional liability policy maybe not be a sure thing. “AIG calls their coverage ‘silent,’” she said. Meaning maybe they’ll cover it, maybe they won’t.

Ambiguous language typically leans in the client’s favor, but Lucarelli hopes the industry will trend toward more explicit coverage.

Some high net worth carriers have bolstered their cyber offering. Lucarelli said it’s a good start, citing a new coverage from AIG called Family Cyber Edge, which includes coverage for data restoration, cyber extortion and ransomware, crisis management for reputational harm, as well as cyber bullying expenses. “They’ve done a good job rolling a lot of these coverages into one endorsement.”

Still, Lucarelli sees unmet demand for more specific cyber bullying liability coverage. “We interviewed 300 people and most said, ‘If you offer coverage that defines this and you even put a cap a limit on it of, say, $250,000, I’ll buy it.’ ”

Kim Lucarelli, senior vice president and director, personal client management, Oswald Companies

The new, higher-limit coverage PURE will be rolling out in coming months — which will include high-limit coverage for social engineering and cyber fraud losses — utilizes a new approach to cyber security. PURE is partnering with the cyber security firm Rubica for active cyber monitoring.

Coverage will be contingent on having an app installed on each of the insured’s devices. All data will be sent via VPN to Rubica’s cloud, which will use pattern recognition, a constantly updated list of known trouble spots, and AI to flag problems.

“They’re actively monitoring where data packages are being sent and identifying if they go off somewhere they shouldn’t. Then they can shut them off,” said Hartley.

Rubica’s model could be game changing. By monitoring the data itself, Rubica can detect problems regardless of how they are introduced, and avert them before they are executed.

PURE has such confidence in its efficacy that it will be offering coverage limits that would previously been considered prohibitive.

Ultimately, however, the most important aspect of cyber coverage for the high net worth lies in assessing and minimizing cyber risk. “So many people are looking for that,” said Lucarelli. “‘Just give me 10 great tips to make myself more secure.’”

“People want to know how to best prevent this sort of thing, not deal with it after it’s occurred,” agreed Hartley. “The gap between smart risk behavior and not smart risk behavior is one of just simply not knowing.” &

Jon McGoran is a novelist and magazine editor based outside of Philadelphia. He can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Risk Management

The Profession

This senior risk manager values his role in helping Varian Medical Systems support research and technologies in the fight against cancer.
By: | September 12, 2017 • 5 min read

R&I: What was your first job?

When I was 15 years old I had a summer job working for the city of Plentywood, mowing grass in the parks and ballfields, emptying garbage cans, hauling waste to the dump, painting crosswalk lines.  A great job for a teenager but I thought getting a college degree and working in an air-conditioned office would be a good plan long term.

R&I: How did you come to work in risk management?

I was enrolled in the University of Montana as a general business student, and I wanted to declare a more specialized major during my sophomore year. I was working for my dad at his insurance agency over the summer, and taking new agent training coursework on property/casualty risks in my spare time, so I had an appreciation for insurance. My dad suggested I research risk management for a career, and I transferred sight unseen to the University of Georgia to enroll in their risk management program. I did an internship as a senior with the risk management department at Sulzer Medica, and they offered me a full time job.

R&I: What could the risk management community be doing a better job of?

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We need to do a better job of saying yes. We tend to want to say no to many risks, but there are upside benefits to some risks. If we initiate a collaborative exercise with the risk owners — people who may have unique knowledge about that particular risk — and include a cross section of people from other corporate functions, you can do an effective job of taking the risk apart to analyze it, figure out a way to manage that exposure, and then reap the upside benefits while reducing the downside exposure. That can be done with new products and new service offerings, when there isn’t coverage available for a risk. It’s asking, is there anything we can do to reduce the risk without transferring it?

R&I: What emerging commercial risk most concerns you?

Cyber liability. There’s so much at stake and the bad guys are getting more resourceful every day. At Varian, our first approach is to try to make our systems and products more resilient, so we’re trying to direct resources to preventing it from happening in the first place. It’s a huge reputation risk if one of our products or systems were compromised, so we want to avoid that at all costs.

We need to do a better job of saying yes. We tend to want to say no to many risks, but there are upside benefits to some risks.

R&I: What insurance carrier do you have the highest opinion of?

I’ve worked with a number of great ones over the years. We’ve enjoyed a great property insurance relationship with Zurich. Their loss control services are very valuable to us. On the umbrella liability side, it’s been great partnering with companies like Swiss Re and Berkley Life Sciences because they’ve put in the time and effort to understand our unique risk exposures.

R&I: How much business do you do direct versus going through a broker?

One hundred percent through a broker. I view our broker as an extension of our risk management team. We benefit from each team member’s respective area of expertise and experience.

R&I: Is the contingent commission controversy overblown?

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I think so. The brokers were kind of villainized by Spitzer. I think it’s fair for brokers and insurers to make a reasonable profit, and if a portion of their profit came from contingent commissions, I’m fine with that. But I do appreciate the transparency and disclosure that came out as a result of the fiasco.

R&I: Are you optimistic about the US economy or pessimistic and why?

David Collins, Senior Manager, Risk Management, Varian Medical Systems Inc.

While we might be doing fine here in the U.S. from an economic perspective, the Middle East is a mess, and we’re living with nuclear threat from North Korea. But hope springs eternal, so I’m cautiously optimistic. I’m hoping saner minds prevail and our leaders throughout the world work together to make things better.

R&I: Who is your mentor and why?

My Dad got me started down the insurance and risk path. I’ve also been fortunate to work for or with a number of University of Georgia alumni who’ve been mentors for me. I’ve worked side by side with Karen Epermanis, Michael Rousseau, and Elisha Finney. And I’ve worked with Daniel Dean in his capacity as a broker.

R&I: What have you accomplished that you are proudest of?

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Raising my kids. I have a 15-year-old and 12-year-old, and they’re making mom and dad proud of the people they’re turning into.

On a professional level, a recent one would be the creation and implementation of our global travel risk program, which was a combined effort between security, travel and risk functions.

We have a huge team of service personnel around the world, traveling to customer sites to do maintenance and repair. We needed a way to track, monitor and communicate with them. We may need to make security arrangements or vet their lodging in some circumstances.

R&I: What do your friends and family think you do?

My 12-year-old son thought my job responsibilities could be summed up as a “professional worrier.” And that’s not too far off.

R&I: What about this work do you find the most fulfilling or rewarding?

Varian’s mission is to focus energy on saving lives. Proper administration of the risk function puts the company in a better position to financially support research that improves products and capabilities, helps to educate health care providers and support cancer care in general. It means more lives saved from a terrible disease. I’m proud to contribute toward that.

When you meet someone whose cancer has been successfully treated with one of our products, it’s a powerful reward.




Katie Siegel is an associate editor at Risk & Insurance®. She can be reached at [email protected]