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An Introduction to Cyber Liability Insurance
Catherine Berry
Senior Underwriter
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What is cyber risk?
Exposures emanating from computer networks and the internet
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The Cyber Risk Phenomenon
The incredible pace of technology-based innovation has produced huge dependenciesand interconnectivities of companies and organizations around the globe.
This has brought about great efficiencies and enhanced business practices – but hasalso created a wave of new problems : cyber-crime, media liabilities as a result of onlinepublishing, and a heavy reliance on the uptime of the network, for example.
As a result, there are new business exposures faced by commercial organizations,primarily driven by continually evolving e-commerce laws. Cyber liability to Third Parties,Network Security, Commerce Business Interruption and Loss of Data are just some of thenew liabilities clients need to build into their risk management and risk transfer strategies
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Cyber risks
• Natural disasters
• System failures
• Cybercrime
• Corporate and state espionage
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Cyber risks
• Cyber warfare:• 5th domain of warfare
• 2011 US drone fleet hit by Stuxnet – sabotaged Iran’s nuclear development plans
• Cyber terrorism
• Cyber activism
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Business risks
• Operational
• Financial
• Intellectual property:• Erosion of competitiveness in global economy
• Legal and regulatory: sanctions / pecuniary fines
• Reputational:• Public visibility can cause harm to company’s image, brand and reputation
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Non-malicious digital risks
• Natural disasters• Employees:
• Human error• Multitude of networks• BYOD• Mobile storage devices• Social networking:
• Information leaked• Spread of malware• Engineered attacks• Reputational damage
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Hacking motivations
• Demonstration of skill, thrill-seeking• Cyber theft and cyber fraud • Industrial espionage• Insider attacks• Extortion:• Cyber terrorism• Cyber warfare:• Activism
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Impact of a data breach
• Directors & Officers liability • 2014 Verizon Data Breach Investigation• Costs arising:
• Forensics• Crisis communications• Legal• Reputational
• Impact on brand value
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Data breaches
• HFT:• PCI compliant to level 1• 2m credit card details stolen• Forensics, PCI assessments, crisis communications and credit
monitoring, PCI fines and penalties• Total claim: USD10,690,000
• Target:• Suspected to be same hacking group and malware as HFT• Class actions: 80 to date• Estimated total claim: USD244m
HFT:HFT:
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Data breaches
• Home Depot:• 56m credit / debit card details stolen• Malware inserted at POS• News broke when batch of cards put up for sale on Internet• Estimated total claim: in excess of USD500m
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Comprehensive cover,modular solutionThe eRisk product has been specifically designed as a one-stopsolution for a variety of needs.
It meets the requirements of IT professionals looking forcomprehensive Errors & Omissions coverage combined with cyberliability; at the same time, it answers the need or organizations seekinga first-class insurance product, providing cyber liability coverage forthird and first party e-commerce exposures.
The eRisk product has been designed in a modular format, with uniqueseparate insuring clauses for each section. These operateindependently or in combination; modules can be purchased either on acombined or stand-alone basis, depending on an organization’sparticular requirements.
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Overview of Cover
1. Professional Services
2. Multimedia Liability
3. Security and Privacy Liability
4. Data Recovery and Loss of Business Income
5. Privacy Regulatory Defence Costs & Penalties
6. Crisis Management Costs, Customer support
7. Data Extortion
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Risk Management Services
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Risk Management Services
• Vulnerability assessment
• Private arbitration services
• Crisis communications guidelines
• Data breach guidelines
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Camargue Commercial Crime
Presented by Justin Keevy
Senior Underwriter
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Suspects
• Most common suspects
• Where did all the money go?
• Sentencing
• Recovery
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Most Common Losses
• Stock Theft (Manual Invoicing) (Cycle Counting and Collusion)
• EFT Transfers
• Cash Theft
• Debtors (Rolling)
• Payroll (SARS) (Ghost Employees)
• Cheque Fraud
• Cyber Crime (Syndicates)
• Corruption
• Change of Banking Details
• Retail (Credit Cards) (Returns) (Cash)
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Let’s Face the Facts
• Estimated loss to an organisation as a result of fraud = 5% of annual revenue
• Estimated that corporate fraud costs SA economy R150Bn annually
• Employees biggest perpetrators (47%) in Africa, average loss due to fraud is R400,000
• From 107 cases analysed in Africa, more than 20% of cases resulted losses of at least US$1m (ZAR 9,68 million)
• +/- 50% of organisations do not recover any losses suffered due to fraud
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Overview of cover
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What is covered?
• Theft of the company’s property by employees
• Includes Care, Custody and control
• Money and any other property
• Third party collusion
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What is covered?
• Theft by employees (continued)
• Identifying guilty employees not required
• No restrictions on the method of theft
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What is covered?
• Extortion• Committed by employees or third parties
• Threatened violence to commit theft
• Fraudulent Transfer Instructions• Employees or third parties
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What is covered?
• Computer Fraud
• Hacking
• Use of viruses
• Employees or third parties
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What is covered?
• Contractual Penalties
Contractual liabilities arising out of
• Theft by employees
• Computer Fraud committed by non-employees
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Summary of Theft Cover
Type of Theft Employee OthersComputer Hacking/Virus Covered Covered
Fraudulent TransferInstructions Covered Covered
Extortion Covered Covered
Other/Ordinary Theft Covered Not covered
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More about the cover
• Policy covers malicious destruction of data, including• Alteration or destruction of data
• Care, Custody and Control
• Destruction of media
• Computer programs
• Physical records, if damaged as a result of theft
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Extensions
• Costs of recovery of uninsured loss
• Reinstatement of office records
• Claims preparation costs
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Extensions
• Legal fees
• Automatic Reinstatement
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Camargue Commercial Crime Risk Management Services
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Whistle Blowing Hotline
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Risk Management Hotline
• Risk management hotline
• Fraud risk surveys
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“My employees will never steal from me”
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“My employees will never steal from me”
72% are going to change their mind
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Disclaimer
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