It’s been 18 months since June 2017 when the Petya/NotPetya cyber attacks fell on businesses around the globe, resulting in a dramatic loss of income and intense business disruption. Has cyber insurance limited the fallout for the victims of the ransomware attacks, and should proactive businesses follow suit and ensure they are financially covered in case of a breach?
Monetizing the Impact of Cybercrime
The effect on the IT and insurance industries of last years wave of cybercrime continues to grow as businesses disclose silent cyber impacts, as well as affirmative losses from WannaCry/Petya. The latest reports from Property Claim Services put the loss at over $3.3 billion, and growing.
Despite this, for some businesses, reliance on insurance schemes has proven inadequate. US Pharmaceutical company Merck disclosed that the Petya cyberattacks have cost them as much as $580 million since June 2017, and predicted an additional $200 million in costs by the end of 2018. In contrast, experts estimated their insurance pay-out would be around $275 million, a huge number, but under half of the amount they have incurred so far, let alone as their silent costs continue to rise.
Other companies have been left even worse off, such as snack food company Mondolez International Inc, who are in a continuing battle with their property insurer, Zurich American Insurance Company. Mondolez claimed for the Petya attacks under a policy that included “all risks of physical loss or damage” specifying “physical loss or damage to electronic data, programs, or software, including loss or damage caused by the malicious introduction of a machine code or instruction.”
However, Zurich disputed the claim, due to a clause that excludes insurance coverage for any “hostile or war-like act by any government or sovereign power.” As US Intelligence officials have determined that the NotPetya malware originated as an attack by the Russian military against the Ukraine, Zurich are fighting the claim by Mondelez that they are wrongfully denying coverage.
How Does This Lawsuit Affect the Cyber-Insurance Market Overall?
As cyber crime continues to rise, cyber insurance is understandably becoming big business. For companies deciding on whether to take out coverage, CISO’s need to find space in the budget for monthly costs and potentially large premiums. For this risk to be worthwhile, businesses want to be confident that they will recover their costs if a breach happens.
The insurance pay-outs around the Petya cyberattacks, and in particular the Mondolez case, throw this into question. This is especially true considering the rise in cyberattacks that are nation-backed or could plausibly be claimed to be nation-backed by insurance companies in order to dispute a claim. As regulations change and the US military are given more freedom to launch preventative cyberattacks against foreign government hackers, any evidence that suggests governmental or military attribution could be legitimately used against claimants looking to settle their losses.
The Effect on Public Research
The ripple effect of this could go beyond the claims sector, and have a connected impact on security research, as well as free press and journalism in the long run, something we feel strongly about at Guardicore Labs. Traditionally, researchers have had the freedom to comment and even speculate on the attribution of cyber attacks, through information on the attackers’ behavior behind the scenes and the attack signatures they use. If insurance companies and claims handlers begin using public research as a reason to deny coverage to the victims, this could put research teams in an ethical bind, reducing the amount of public research and the transparency of the industry overall.
How Much of a ‘Guarantee’ Can Security Companies Provide?
The issue of what claims to honor extends to financial guarantees from security companies, not only to insurance handlers. It is becoming increasingly popular to offer guarantees to customers who purchase cybersecurity products, in order to ‘put your money where your mouth is’ on the infallibility of a particular solution.
However, many experts believe that these policies have so many loopholes that they negate the benefit of the warranty overall. One example is the often cited ‘nation state or act of god’ exception, which includes cyberterrorism. Others include exclusions of coverage for portable devices, insider threats, or intentional acts. Even if you are widely covered for an event, does that extend to all employees? According to the latest Cyber Insurance Buying Guide, “most policies do not adequately provide for both first-party and third-party loss.”
Your ‘Guarantee’ is not a Guarantee
The bottom line for CISOs looking to protect their business is that cyber insurance is not a catch-all solution by any means. Whether it’s insurance companies paying out a limited figure or skirting a pay-out altogether, or cybersecurity companies making big promises that are ultimately undermined by the small print, cyber insurance has a way to go.
Focus on your cybersecurity solution, including strong technology like micro-segmentation to limit the attack surface in the case of a breach. With this in place, you can ensure that your critical assets and data are ring-fenced and isolated, no matter what your infrastructure looks like and what direction the attack comes from. Integration with powerful breach detection and incident response capabilities strengthens your position even further, reducing dwell time, and giving you a security posture you can rely on.