NEWS & MEDIA
Cyber Security and Cyber Insurance2 August 2017
Cyber security is not a new industry, and cyber threats are hardly a new phenomenon. Despite this the world has become so digitized that malware attacks can now cause unprecedented problems. Recognising this, the World Economic Forum has rated cyber attacks as one of the five key global risks we face.
What is cyber security?
Cyber security is an umbrella term encompassing methods designed to shield computers, networks, programmes and data from unauthorised access or attacks aimed at exploitation or profiteering. The period from 2013 to the end of 2015 witnessed a number of high-profile incidents in the cyber security space. US retailer Target was hit during the 2013 holiday season with a data breach, while in the subsequent months both Home Depot and JPMorgan also experienced system intrusions. Corporates have slowly begun to realise that cyber security is not to be taken lightly, prompting a greater system fortification. There are four key areas covered in cyber security:
- Application Security: Application security includes measures or counter-measures taken during development to defend applications from threats that can seep through flaws in design, development, deployment, upgrades or maintenance.
- Information Security: Information security protects information from unauthorised access to avoid identity theft and to ensure privacy.
- Disaster recovery planning: Disaster recovery planning is a process that includes assessing risk, establishing priorities and developing recovery strategies in case of disaster. Firms need a concrete plan for disaster recovery whose main objective is restoring normal business operations as quickly as possible.
- Network Security: Network security consists of activities to protect the usability, reliability, integrity and safety of the network. Effective network security recognises threats and prevents them from entering the network.
Recent cyber security breaches
There has been heightened attention around cyber security after global businesses have been attacked with ransomware requests in recent months. Ransomware is the latest tool of choice for cyber extortion.
It proliferates and infects computers, often when users click on a link or open an email attachment. It then displays a ransom message that typically demands a virtual currency payment in exchange for a cryptographic key to decrypt or unlock system access.
According to McAfee, the cyber security software provider, the number of unique types of ransomware detected ballooned to 3.87 million in 2016, from 2.55 million in the previous year, and from 643,000 the year before that. These include major incidents affecting global corporations, as well as small scale breaches attacking smaller companies and individuals.
Average Organisational Cost due to Data Breach in 2016
DDoS Attack in 2016
2016, which was riddled with many cyber-attacks, ended with news of a massive distributed denial of service (DDoS) attack. The malware attacked New Hampshire-based Dyn Inc., a company that controls much of the internet’s domain name system (DNS) infrastructure.
The attack wreaked havoc with a number of big name websites including The Guardian, Twitter, Netflix, Reddit and CNN.
The US CCTV Camera Attack
On 12th January 2017, a few days prior to the US Presidential inauguration, hackers accessed 123 of the total 187 network video recorders installed inside CCTV devices for public spaces in Washington DC. The attack posed a massive security threat as the cameras were unable to record for over 48 hours.
On 12th May 2017, a cyber-attack with the WannaCry virus locked up hundreds of thousands of Windows PCs globally. The attack used a malicious software that exploited a vulnerability in Windows. The threat receded after a UK-based researcher inadvertently found a way to halt the spread of the virus.
However, the damage was already done. In Britain, the NHS was the worst hit. Hospitals were forced to turn away patients and cancel appointments after systems were infected.
Biggest Gainers in Cyber Security Following the WannaCry Attack (As of 15 May 2017)
The Petya/NotPetya cyber-attack
In June 2017, another widespread ransomware attack commenced, stopping unprepared companies in their tracks using the same method of propagation as the WannaCry ransomware. Most notable were:
- FedEx Corp.: The leading international shipper’s TNT unit, which primarily caters to the industrial, automotive, high-tech and health-care industries, was the worst hit. Customers continue to experience widespread service and invoicing delays, and FedEx has announced that these issues might cause delays in its disclosure and financial reporting procedures going forward.
- Mondelez International Inc.: The Petya cyber-attack crippled the US food giant Mondelez’s ability to ship and invoice during the last four days of its second quarter. The firm announced that a preliminary estimate of the impact indicated a 3% shave from its second quarter revenue growth.
- AP Moller – Maersk A/S: The Danish shipping conglomerate’s worldwide IT systems were affected by the Petya attack. The company has now introduced new advanced cyber security protective measures.
Petya Cyber Attack – 27 June 2017
Security company SonicWall, which studies cyberthreats, states that ransomware attacks rose by 167 times in 2016, compared to 2015. You only need to look up cyber security online to witness the mounting concern among individuals, businesses and governments about the compounding effects of ransomware. These include both monetary damage and business downtime. Investors have been quick to recognise these developments and have piled into cybersecurity stocks. Following the WannaCry attack in May for instance, cyber security stocks surged, underlining an expectation of increasing numbers of cyber-attacks going forward, and driving business to those who know how to defend against it.
In particular, Mimecast Ltd (MIME), FireEye Inc. (FEYE) and Proofpoint Inc. (PFPT) led gains among cyber security stocks. Shares of Palo Alto Networks Inc. (PANW), Qualys Inc. (QLYS) and Fortinet Inc. (FTNT) also perked up. In London, shares of cloud network security specialist Sophos, which counts the NHS among its clients, jumped by a record high of 7.3%. Further, Cisco Systems Inc. (CSCO) received a slight boost after Morgan Stanley analysts upgraded the firm with a “Buy” rating.
The PureFunds ISE Cyber Security ETF (HACK) which owns shares of most of the big security firms, witnessed the highest number of shares traded since August 2015, as the global scope of the WannaCry attack emerged. Another cyber security fund, the First Trust NASDAQ Cybersecurity ETF (CIBR) also advanced. There’s clearly plenty of movement in the cyber security space at the moment.
Cyber Security ETFs
With this steady increase in cyber-crime, has come the recognition that anyone is vulnerable to attack. A cyber-attack can damage not just a firm’s computer system, but also lead to tangible costs, brand degradation and changes in consumer behaviour. This is where cyber insurance is key.
Big Players in the Cyber Insurance Market
Cyber insurance typically covers the following expenses:
- Cost of investigation
- Business losses
- Data breach notifications to customers and other affected parties
- Lawsuits and extortion
Almost 55% of small businesses worldwide have experienced a data breach and in fact 53% have seen multiple breaches. Yet when looking at security confidence, studies have shown that over half of the organisations hit by a cyber-attack are hesitant to make a change, mainly due to lack of additional budget. Cyber insurance is filling this gap. It may not be able to protect against cyber-crime, but it can help maintain a stable financial footing, should a significant security event occur. With its roots in errors and omissions insurance, cyber insurance started gaining traction in 2005, and PwC has projected that it may command premiums worth about $7.5 billion by 2020.
Cyber Attack Victims Adjusting Security Plans in 2017
So, what can we expect?
- The number and rate of ransomware attacks and cyber security breaches will continue to increase.
- The industries of cyber security and cyber insurance are likely to grow in tandem with this increased threat level and media attention.
- Cyber security and its importance is only going to become better understood; especially the financial implications. Even now, a report published by Morgan Stanley estimates that by reducing the cost of breaches by just 10% global enterprises can unlock $17 billion in annual savings.