Cyber Risks

The New Air War

Web-based air traffic control introduces new cyber risks to aviation.
By: | September 15, 2013 • 10 min read

Anyone who has stewed on an airplane, watching as other planes took off, will appreciate the technology that promises to relieve congestion in crowded skies.

Over the next decade, air traffic control is shifting from ground-based radar to a system that relies predominantly on GPS satellites and aircraft-based technology. The new system — known as NextGen in the United States and the Single European Sky in Europe — is designed to boost efficiency, save fuel and accommodate growth in air travel.

A crucial ingredient is the “e-Enabled” plane, one that can report operational and maintenance data over wireless networks, both on the ground and in flight. In cockpits and hangars, meanwhile, iPads and other mobile devices are replacing paper documents, such as maps, flight manuals and maintenance logs.

While the emerging technology brings benefits, the increasing reliance on networking and wireless computing creates new risks for aviation.

“As soon as you access a web-based system, either by connection to Wi-Fi or satellite, you are opening yourself up to the potential for a cyberattack,” said Brad Meinhardt, area president and managing director of aviation for AIS Gallagher, a business unit of Arthur J. Gallagher & Co.

The most dramatic risks are epitomized by hackers who claim they can take over or fool an airplane’s GPS navigation — with dire consequences should the wrong people do so.

Aviation experts insist it would be very difficult to wrest control of a jet from its pilots or to mislead air traffic controllers. But even the most prosaic risks — computer malware that erases maintenance records and their digital backups, for example — could be costly.

“Historically, if you lost paper records, it almost made the aircraft worthless,” Meinhardt said.

It’s not just accidental bugs that fuel concern. Terrorists and disgruntled insiders with access to critical systems also pose a threat, security experts said. So do politically driven hackers, known as hacktivists, who try to shut down computer networks of targeted companies or industries.

Aviation has not been a significant target, said Emilio Iasiello, chief threat analyst for iSIGHT Partners, a cybersecurity firm in Chantilly, Va. “But if a group says, ‘Air travel is polluting the air; we can’t take it anymore,’ this could be a cause that they rally behind.”

A Focus on Prevention

Just like at airports — where passengers take off their shoes and belts and pass through full-body scanners before boarding planes — the emphasis in cyberspace is on prevention rather than figuring out how to cover losses after the fact, brokers and insurance executives said.

The effort is complicated, however, by the international scope of air travel and the variety of players, both public and private. The list includes airlines, airports and air traffic controllers, as well as vendors who do everything from deliver meals to distribute tickets.

The air also is playing host to a growing number of remotely piloted vehicles which pose their own risks, highlighted by Iran’s claim in February that it hacked into a U.S. military drone and captured it.


“They say they got it by fooling its sensors,” said Iasiello. “Whether that’s true or not, I do not know, but they do have it. It was not a crashed drone.”

The threat of GPS spoofing came to the fore again in July after a report from the University of Texas at Austin. The report outlined how researchers used a homemade device to redirect a yacht in the Mediterranean. The team brought the device on board the ship and, after aiming a fake signal at the boat’s two GPS antennas, nudged it a few degrees off course. According to a university press release, researchers said they could see and feel the boat turning, but that the GPS showed it moving in a straight line.

Mike Garrett, director of aviation security for Boeing Commercial Airplanes, a business unit of The Boeing Co., said planes are secure.

Most cyberattacks target data that can be used for economic crimes, such as identity theft, according to Garrett and other experts in cybersecurity. A much smaller portion, less than 1 percent, seeks to wreak havoc on industrial control systems, such as those used in aviation.

While fewer in number, those attacks often make headlines. One of the most well-known is the Stuxnet virus, a computer worm that struck industrial infrastructure in Iran and is believed to have originated in Israel or the United States.

“It caused us to take a more in-depth look at control systems,” said Garrett.

The Federal Aviation Administration already has established procedures that govern activities such as downloading software and handling memory sticks, Garrett said. For example, an airplane’s operational software can’t be downloaded unless its wheels are down, brakes are locked and doors are open. The procedures also allow for tracing the source of any problems, should they arise.

“The flight controls and how we control the airplane in flight are probably some of the most protected things we have from a safety standpoint,” Garrett said.

One area that could stand improvement, he said, is the sharing of threats to the industry. Aviation is global, but technical information about aircraft control systems is often classified, making it difficult to disclose potential dangers.

Nonetheless, Boeing is working closely with other major aircraft manufacturers, airlines and airports to establish a center for collecting and sharing threats, as banks have done.

“This is one area where we are not being that competitive,” Garrett said. Early detection is critical, he said, because it takes time to certify upgrades to hardware and software.

If an attack succeeds, pilots and air traffic controllers will be the first to sense something is wrong. Thus, people may serve as something of a security backstop, experts said. But as cyber threats evolve, training needs to keep pace so people can recognize what’s happening and react in situations where seconds count.

“It is going to be the first responders who have to deal with this,” said Steve Carver, a consultant with Aviation Management Associates in Alexandria, Va.

You don’t have to interfere with a plane in flight to inflict pain. Cyberattacks or computer problems that ground planes could cause substantial economic losses.

American Airlines suffered a network system outage in mid-April that forced it to cancel or delay hundreds of flights nationwide. The outage lasted about two to three hours, according to news reports.

Related Risks

It’s not the vulnerability of individual systems alone that worries security experts and risk managers. It’s also the weaknesses that surface when systems share data, whether it’s the credit card information entered by passengers calling up an in-flight movie, or the readiness of a plane to pull out of the gate.

“It’s a challenge, definitely a challenge,” said Carver, a former information systems security manager for the FAA’s National Airspace System. As an example, he cited emerging technology designed to better manage ground traffic at airports.

The technology will inform controllers exactly when planes are ready to leave the gate, improving efficiency. But it will rely on the exchange of data between the private sector — airlines — and the public — air traffic control. A disruption of the exchange, whether accidental or deliberate, could be devastating, Carver said.

“If you have a system impact at many, many airports, you’ve got a financial impact to both the airport authority and the airlines,” he said. “And, of course you’ve got a problem for the public, because they’re probably going to have their flights delayed or canceled.”

The system’s complexity could be one of its strengths, said Brian Legan, vice president in the aerospace and transportation business for consulting firm Booz Allen Hamilton in Herndon, Va.

The air traffic control system traditionally has been able to weather the temporary malfunction here or there, such as the loss of voice communication, Legan said. And computer networking might make it easier to transfer critical information to equipment that is still working.


“The positive side of this complexity and enormity is you’ve got more than one pair of eyes on an asset,” Legan said, noting that portions of the old radar system are likely to remain in place even as new technology comes online.

Still, as systems become more interconnected, the potential for a bigger failure grows, Legan said. More attention should be paid to the vulnerabilities that arise from systems operating together.

“I’m not sure it’s greater or worse,” he said. “But the threat is different, and the way you would manage it is different.”

Remember Iceland

The volcanic eruption in Iceland in 2010, which blocked flights between Europe and North America, shows the scale of losses possible from a single event. Over the course of a few weeks, airlines lost an estimated $1.7 billion, according to the International Air Transport Association. The Britain-based Airport Operators Associated pegged airport losses at around £80 million.

“That’s one of the problems with aviation. It’s not isolated to just one store,” said Kevin Kalinich, global practice leader for cyber insurance at Aon Risk Solutions in Chicago.

Airlines generally do not cover business interruption losses stemming from flight cancellations or delays, whether the cause is volcanic ash or a computer bug, insurance executives said. Still, cyber insurance can protect them from other risks of doing business online.

Data breaches and network outages can generally be covered, Kalinich said, with money available for costs related to regulatory actions, crisis management and customer notification.

For example, an airline may need to hire a public relations firm after a data breach, as well as specialists to conduct forensics investigations and notify consumers. Most states require companies to notify customers whose personal data has been stolen, and laws vary by state.

Once airlines and airports have secured their own systems, they need to ensure their vendors are doing the same, Kalinich said.

Airlines, for example, most likely have outsourced email, data storage, cloud computing and social media. “The focus can’t just be on your internal IT systems anymore,” Kalinich said.

If a vendor experiences a data breach, the consumer is going to go after the airline or the airport, he said. The claims can be covered, but it has to be spelled out in the insurance policy.

“That’s a huge part of the aviation industry’s exposure,” Kalinich said.

Deliberate cyber attacks on aviation likely would be covered by war risk insurance, which is available through the FAA, as well as the private market, according to Joseph Strickland, head of Americas for aviation at Allianz Global Corporate & Specialty, an arm of Allianz.

But coverage would depend upon the facts of the claim, especially if no airplanes were damaged, Strickland said. An attack may disrupt an airline’s operations. But if there’s no proof of malevolent intent, and there’s a lack of physical harm, the business interruption alone likely would not be covered under the wording currently offered in the private market, Strickland said.

“The airlines would struggle as much as the insurance companies would to quantify the risk and pricing profile for an exposure like that,” Strickland said.

If a cyber vulnerability does ever lead to a fatal crash, courts may hold airlines to a higher standard of liability than they would face in a traditional data breach, said Thomas J. Smedinghoff, a partner in the privacy and data protection group at law firm Edwards Wildman Palmer LLP in Chicago.


Victims who suffer financially generally have to prove negligence by the parties they believe responsible, Smedinghoff said. In cases of injury or death, liability is harder to escape.

“The standard that would be applied is going to be much tougher, and much more likely to result in a finding of liability,” Smedinghoff said.

The risks extend throughout the aviation supply chain, he added.

While airlines may balk at cyber coverage, airports are taking a closer look, according to Dawn Mehler, risk, insurance and contracts manager for Broward County Aviation Department, which owns and operates Fort Lauderdale/Hollywood International Airport in Florida.

Airports are recognizing the many entry points that hackers might exploit, she said. An assessment by Broward County Aviation identified risks to everything from employee information to credit card data collected at an airport parking garage. The agency purchased cyber liability insurance this summer for the first time, Mehler said.

“There’s a lot of thresholds that could possibly be hacked into by third parties, which would obviously be an economic drag,” said Mehler, who chairs the risk management committee of Airports Council International. “We obviously want to be protected.”



Joel Berg is a freelance writer and adjunct writing teacher based in York, Pa. He has covered business and regulatory issues. He can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Risk Focus: Cyber

Expanding Cyber BI

Cyber business interruption insurance is a thriving market, but growth carries the threat of a mega-loss. 
By: | March 5, 2018 • 7 min read

Lingering hopes that large-scale cyber attack might be a once-in-a-lifetime event were dashed last year. The four-day WannaCry ransomware strike in May across 150 countries targeted more than 300,000 computers running Microsoft Windows. A month later, NotPetya hit multinationals ranging from Danish shipping firm Maersk to pharmaceutical giant Merck.


Maersk’s chairman, Jim Hagemann Snabe, revealed at this year’s Davos summit that NotPetya shut down most of the group’s network. While it was replacing 45,000 PCs and 4,000 servers, freight transactions had to be completed manually. The combined cost of business interruption and rebuilding the system was up to $300 million.

Merck’s CFO Robert Davis told investors that its NotPetya bill included $135 million in lost sales plus $175 million in additional costs. Fellow victims FedEx and French construction group Saint Gobain reported similar financial hits from lost business and clean-up costs.

The fast-expanding world of cryptocurrencies is also increasingly targeted. Echoes of the 2014 hack that triggered the collapse of Bitcoin exchange Mt. Gox emerged this January when Japanese cryptocurrency exchange Coincheck pledged to repay customers $500 million stolen by hackers in a cyber heist.

The size and scope of last summer’s attacks accelerated discussions on both sides of the Atlantic, between risk managers and brokers seeking more comprehensive cyber business interruption insurance products.

It also recently persuaded Pool Re, the UK’s terrorism reinsurance pool set up 25 years ago after bomb attacks in London’s financial quarter, to announce that from April its cover will extend to include material damage and direct BI resulting from acts of terrorism using a cyber trigger.

“The threat from a cyber attack is evident, and businesses have become increasingly concerned about the extensive repercussions these types of attacks could have on them,” said Pool Re’s chief, Julian Enoizi. “This was a clear gap in our coverage which left businesses potentially exposed.”

Shifting Focus

Development of cyber BI insurance to date reveals something of a transatlantic divide, said Hans Allnutt, head of cyber and data risk at international law firm DAC Beachcroft. The first U.S. mainstream cyber insurance products were a response to California’s data security and breach notification legislation in 2003.

Jimaan Sané, technology underwriter, Beazley

Of more recent vintage, Europe’s first cyber policies’ wordings initially reflected U.S. wordings, with the focus on data breaches. “So underwriters had to innovate and push hard on other areas of cyber cover, particularly BI and cyber crimes such as ransomware demands and distributed denial of service attacks,” said Allnut.

“Europe now has regulation coming up this May in the form of the General Data Protection Regulation across the EU, so the focus has essentially come full circle.”

Cyber insurance policies also provide a degree of cover for BI resulting from one of three main triggers, said Jimaan Sané, technology underwriter for specialist insurer Beazley. “First is the malicious-type trigger, where the system goes down or an outage results directly from a hack.

“Second is any incident involving negligence — the so-called ‘fat finger’ — where human or operational error causes a loss or there has been failure to upgrade or maintain the system. Third is any broader unplanned outage that hits either the company or anyone on which it relies, such as a service provider.”

The importance of cyber BI covering negligent acts in addition to phishing and social engineering attacks was underlined by last May’s IT meltdown suffered by airline BA.

This was triggered by a technician who switched off and then reconnected the power supply to BA’s data center, physically damaging servers and distribution panels.

Compensating delayed passengers cost the company around $80 million, although the bill fell short of the $461 million operational error loss suffered by Knight Capital in 2012, which pushed it close to bankruptcy and decimated its share price.

Mistaken Assumption

Awareness of potentially huge BI losses resulting from cyber attack was heightened by well-publicized hacks suffered by retailers such as Target and Home Depot in late 2013 and 2014, said Matt Kletzli, SVP and head of management liability at Victor O. Schinnerer & Company.


However, the incidents didn’t initially alarm smaller, less high-profile businesses, which assumed they wouldn’t be similarly targeted.

“But perpetrators employing bots and ransomware set out to expose any firms with weaknesses in their system,” he added.

“Suddenly, smaller firms found that even when they weren’t themselves targeted, many of those around them had fallen victim to attacks. Awareness started to lift, as the focus moved from large, headline-grabbing attacks to more everyday incidents.”

Publications such as the Director’s Handbook of Cyber-Risk Oversight, issued by the National Association of Corporate Directors and the Internet Security Alliance fixed the issue firmly on boardroom agendas.

“What’s possibly of greater concern is the sheer number of different businesses that can be affected by a single cyber attack and the cost of getting them up and running again quickly.” — Jimaan Sané, technology underwriter, Beazley

Reformed ex-hackers were recruited to offer board members their insights into the most vulnerable points across the company’s systems — in much the same way as forger-turned-security-expert Frank Abagnale Jr., subject of the Spielberg biopic “Catch Me If You Can.”

There also has been an increasing focus on systemic risk related to cyber attacks. Allnutt cites “Business Blackout,” a July 2015 study by Lloyd’s of London and the Cambridge University’s Centre for Risk Studies.

This detailed analysis of what could result from a major cyber attack on America’s power grid predicted a cost to the U.S. economy of hundreds of billions and claims to the insurance industry totalling upwards of $21.4 billion.

Lloyd’s described the scenario as both “technologically possible” and “improbable.” Three years on, however, it appears less fanciful.

In January, the head of the UK’s National Cyber Security Centre, Ciaran Martin, said the UK had been fortunate in so far averting a ‘category one’ attack. A C1 would shut down the financial services sector on which the country relies heavily and other vital infrastructure. It was a case of “when, not if” such an assault would be launched, he warned.

AI: Friend or Foe?

Despite daunting potential financial losses, pioneers of cyber BI insurance such as Beazley, Zurich, AIG and Chubb now see new competitors in the market. Capacity is growing steadily, said Allnutt.

“Not only is cyber insurance a new product, it also offers a new source of premium revenue so there is considerable appetite for taking it on,” he added. “However, whilst most insurers are comfortable with the liability aspects of cyber risk; not all insurers are covering loss of income.”

Matt Kletzli, SVP and head of management liability, Victor O. Schinnerer & Company

Kletzli added that available products include several well-written, broad cyber coverages that take into account all types of potential cyber attack and don’t attempt to limit cover by applying a narrow definition of BI loss.

“It’s a rapidly-evolving coverage — and needs to be — in order to keep up with changing circumstances,” he said.

The good news, according to a Fitch report, is that the cyber loss ratio has been reduced to 45 percent as more companies buy cover and the market continues to expand, bringing down the size of the average loss.

“The bad news is that at cyber events, talk is regularly turning to ‘what will be the Hurricane Katrina-type event’ for the cyber market?” said Kletzli.

“What’s worse is that with hurricane losses, underwriters know which regions are most at risk, whereas cyber is a global risk and insurers potentially face huge aggregation.”


Nor is the advent of robotics and artificial intelligence (AI) necessarily cause for optimism. As Allnutt noted, while AI can potentially be used to decode malware, by the same token sophisticated criminals can employ it to develop new malware and escalate the ‘computer versus computer’ battle.

“The trend towards greater automation of business means that we can expect more incidents involving loss of income,” said Sané. “What’s possibly of greater concern is the sheer number of different businesses that can be affected by a single cyber attack and the cost of getting them up and running again quickly.

“We’re likely to see a growing number of attacks where the aim is to cause disruption, rather than demand a ransom.

“The paradox of cyber BI is that the more sophisticated your organization and the more it embraces automation, the bigger the potential impact when an outage does occur. Those old-fashioned businesses still reliant on traditional processes generally aren’t affected as much and incur smaller losses.” &

Graham Buck is editor of He can be reached at