Anecdotal evidence suggests that the global insurance industry is unwilling to play ball on writing cyber insurance policies. Companies are facing unprecedented cyber threats and thus seeking ever larger cyber insurance covers. Insurers, however, are either unwilling to write policies, or are writing limited policies at a fat cost or with significant conditionalities. Firms are looking for US $ 1 billion covers, but the insurers are not biting.
It is not hard to understand the predicament of insurers. As it stand today, cyber insurers face a situation of information asymmetry, there is none or very limited actuarial insights available. No insurer has a clue as to what hidden vulnerabilities exist in a company’s IT set up – software, websites, network, data centres and processes. How can the insurers know when companies themselves do not fully understand their vulnerabilities?
The task for insurers is made even more difficult by the fact that attacks may not aimed at a big firm directly. The recent attack on iOS (Apple) app store suggests that hackers may have discovered another route to compromise the internet – by infecting machines of software developers writing legitimate programs and apps. Developers are a huge, globally dispersed (geopolitical risks) and logical target for hackers, and this approach may be harder to defend against.
Further, insurers also need to take into account that one lives in the days of internet linked business ecosystems which include multiple partners and suppliers of various sorts, apart from outsourced software development. Smaller, less prepared, less equipped members of ecosystems offer hackers a easier route to sneak into the systems of the big firms
The situation gets extremely complicated when one considers the size of cyber threats. One estimate of annual cost of cybercrime to global economy ranges from US $ 375 bn – US $ 575 bn. That’s a lot of money, and the reluctance of insurers to write out policies to protect against hugely expensive and unknown threats is unsurprising to say the least. Attackers are remotely located, face no direct/immediate physical threat and are unafraid to take risks.
Testing for vulnerabilities is a deeply technical issue. When one is faced with situations such as Advanced Persistent Threats (APT) and 0 Day Vulnerabilities, it needs to be borne in mind that businesses are up against attackers typically belong to organised criminal groups, mafia groups, Black Hat hacker groups or state backed groups.
APT attack happens when committed adversaries persistently utilise advanced technologies to compromise targets. Extremely hazardous 0 Day exploits (vulnerabilities found by hackers and never reported to security vendors) are found in Operating Systems, Application Software, Browsers, Antivirus Software, Firewall, and Internal Application Software. On an average, twenty 0 Day vulnerabilities exist in any given server. O Days have the greatest amount of success and damage rates and least probability of detection by firewalls/IDS/AV’s etc.
The problem is also compounded by lack of senior management involvement in a vulnerability assessment and penetration testing similar exercise. This is a matter that cannot be left to systems administrators or developers who are better equipped to remediate security issues than discovering vulnerabilities.
Given the reluctance of insurers to play ball, companies may have little choice but to look after themselves. The buck needs to stop at the desk of senior management and Boards need to ask difficult questions. Cyber threats are strategic in nature and as such a strategic response is called for to defend against financial and non-financial damage.
Constant vigilance, vulnerability assessments and penetration testing are essential for defence. Companies also need to utilise country-cyber espionage and counter-intelligence techniques to protect themselves against cyber-attacks, as well as inject themselves with a healthy dose of paranoia.
Author: Prasanna J, Founder of Cyber Security and Privacy Foundation(CSPF)