Risk and Reward? Considering Cyber Insurance and the Challenge of Cybersecurity

According to the recent report from the UK’s Royal United Services Institute for Defence and Security Studies (RUSI), post-incident services have become one of the success stories of cyber insurance for both insurers and insureds. For insurers, they may reduce incident costs. For purchasers of cyber insurance – particularly SMEs – they provide access to services and expertise during crises.

en flag
nl flag
et flag
fi flag
fr flag
de flag
he flag
ja flag
lv flag
pl flag
pt flag
ru flag
es flag

Content Assessment: Cyber Insurance and the Challenge of Cybersecurity

Information - 95%
Insight - 100%
Relevance - 90%
Objectivity - 95%
Authority - 95%

95%

Excellent

A short percentage-based assessment of the qualitative benefit of the post highlighting the research by RUSI on cyber insurance and cybersecurity challenges.

Editor’s Note: From time to time, ComplexDiscovery highlights publicly available or privately purchasable announcements, content updates, and research from cyber, data, and legal discovery providers, research organizations, and ComplexDiscovery community members. While ComplexDiscovery regularly highlights this information, it does not assume any responsibility for content assertions.

To submit recommendations for consideration and inclusion in ComplexDiscovery’s cyber, data, and legal discovery-centric service, product, or research announcements, contact us today.

Industry Research from RUSI* (Jamie MacColl, Jason R C Nurse, and James Sullivan)

Cyber Insurance and the Cyber Security Challenge

Cyber risk poses a complicated and growing challenge for governments, businesses, and consumers. Shared under Creative Commons License via the Royal United Services Institute for Defence and Security Studies (RUSI), the following paper explores cyber insurance’s potential contribution to solving this problem.

Executive Summary

Governments and Businesses are struggling to cope with the scale and complexity of managing cyber risk. Over the last year, remote working, rapid digitalization and the need for increased connectivity have emphasized the cyber security challenge. As the pursuit of approaches to prevent, mitigate and recover from malicious cyber activity has progressed, one tool that has gained traction is cyber insurance. If it can follow the path of other insurance classes, it could play a significant role in managing digital risk.

This paper explores whether cyber insurance can incentivize better cyber security practices among policyholders. It finds that the shortcomings of cyber insurance mean that its contribution to improving cyber security practices is more limited than policymakers and businesses might hope. Although several means by which cyber insurance can incentivise better cyber security practices are identified, they have significant limitations. Interviewees from across government, industry and business consistently stated that the positive effects of cyber insurance on cyber security have yet to fully materialize. While some mature insurers are moving in the right direction, cyber insurance as a whole is still struggling to move from theory into practice when it comes to incentivizing cyber security.

If this is to change, the insurance industry must overcome significant challenges. One is the competitiveness of the nascent cyber insurance market over the last two decades. Most of the market has used neither carrots (financial incentives) nor sticks (security obligations) to improve the cyber security practices of policyholders. The industry is also struggling to collect and share reliable cyber risk data that can inform underwriting and risk modeling. The difficulties inherent in understanding cyber risk, which is anthropogenic and systemic, mean insurers and reinsurers are unable to accurately quantify its causes and effects. This limits insurers’ ability to accurately assess an organization’s risk profile or security practices and price policy premiums accordingly. The specter of systemic incidents such as NotPetya and SolarWinds has also limited the availability of capital for cyber insurance markets.

However, the most pressing challenge currently facing the industry is ransomware. Although it is a societal problem, cyber insurers have received considerable criticism for facilitating ransom payments to cybercriminals. These add fuel to the fire by incentivizing cybercriminals’ engagement in ransomware operations and enabling existing operators to invest in and expand their capabilities. Growing losses from ransomware attacks have also emphasized that the current reality is not sustainable for insurers either.

To overcome these challenges and champion the positive effects of cyber insurance, this paper calls for a series of interventions from government and industry. Some in the industry favor allowing the market to mature on its own, but it will not be possible to rely on changing market forces alone. To date, the UK government has taken a light-touch approach to the cyber insurance industry. With the market undergoing changes amid growing losses, more coordinated action by government and regulators is necessary to help the industry reach its full potential.

The interventions recommended here are still relatively light, and reflect the fact that cyber insurance is only a potential incentive for managing societal cyber risk. They include: developing guidance for minimum security standards for underwriting; expanding data collection and data sharing; mandating cyber insurance for government suppliers; and creating a new collaborative approach between insurers and intelligence and law enforcement agencies around ransomware.

Finally, although a well-functioning cyber insurance industry could improve cyber security practices on a societal scale, it is not a silver bullet for the cyber security challenge. It is important to remember that the primary purpose of cyber insurance is not to improve cyber security, but to transfer residual risk. As such, it should be one of many tools that governments and businesses can draw on to manage cyber risk more effectively.


Complete Paper: Cyber Insurance and the Cyber Security Challenge (PDF) – Mouseover to Scroll

Cyber Insurance and the Cyber Security Challenge

Read the original overview and paper.

* Royal United Services Institute for Defence and Security Studies (RUSI)

Note: The Royal United Services Institute (RUSI) is the world’s oldest and the UK’s leading defence and security think tank. Its mission is to inform, influence and enhance public debate on a safer and more stable world. RUSI is a research-led institute, producing independent, practical and innovative analysis to address today’s complex challenges.


Additional Reading

Source: ComplexDiscovery

Have a Request?

If you have information or offering requests that you would like to ask us about, please let us know and we will make our response to you a priority.

ComplexDiscovery is an online publication that highlights cyber, data and legal discovery insight and intelligence ranging from original research to aggregated news for use by business, information technology, and legal professionals. The highly targeted publication seeks to increase the collective understanding of readers regarding cyber, data and legal discovery information and issues and to provide an objective resource for considering trends, technologies, and services related to electronically stored information.

ComplexDiscovery OÜ is a technology marketing firm providing strategic planning and tactical execution expertise in support of cyber, data and legal discovery organizations. Registered as a private limited company in the European Union country of Estonia, one of the most digitally advanced countries in the world, ComplexDiscovery OÜ operates virtually worldwide to deliver marketing consulting and services.

U.S. Department of Treasury Takes Actions to Counter Ransomware

According to Treasury Secretary Janet L. Yellen, “Ransomware and cyber-attacks are...

The NATO Cooperative Cyber Defence Centre of Excellence (CCDCOE): September 2021 Cyber Events Report

The twelfth installment in the cyber events series published by the...

[Legal Education Webcast] Breaches, Responses, and Challenges: Cybersecurity Essentials That Every Lawyer Should Know

Every large corporation and organization today face the significant threat of...

Classifying Ransomware? A Ransomware Classification Framework Based on File-Deletion and File-Encryption Attack Structures

This paper evaluates attack methodologies of a ransomware attack: the underlying...

Mitratech Acquires Alyne

According to Mike Williams, CEO of Mitratech, "The combination of Alyne...

Magnet Forensics Acquires DME Forensics

According to the announcement, under the terms of the agreement, Magnet...

Consilio to Acquire Legal Consulting and eDiscovery Business Units of Special Counsel from Adecco

According to Laurie Chamberlin, Head of Professional Recruitment and Solutions North...

Nuix Acquires Natural Language Processing Company

According to Nuix CEO Rod Vawdrey, “Topos will strengthen Nuix’s product...

A New Era in eDiscovery? Framing Market Growth Through the Lens of Six Eras

There are many excellent resources for considering chronological and historiographical approaches...

An eDiscovery Market Size Mashup: 2020-2025 Worldwide Software and Services Overview

While the Compound Annual Growth Rate (CAGR) for worldwide eDiscovery software...

Resetting the Baseline? eDiscovery Market Size Adjustments for 2020

An unanticipated pandemeconomic-driven retraction in eDiscovery spending during 2020 has resulted...

Home or Away? New eDiscovery Collection Market Sizing and Pricing Considerations

One of the key home (onsite) or away (remote) decisions that...

Five Great Reads on Cyber, Data, and Legal Discovery for September 2021

From countering ransomware to predictive coding and packaged services, the September...

Five Great Reads on Cyber, Data, and Legal Discovery for August 2021

From the interplay of digital forensics in eDiscovery to collecting online...

Five Great Reads on Cyber, Data, and Legal Discovery for July 2021

From considerations for cyber insurance and malware to eDiscovery business confidence...

Five Great Reads on eDiscovery for June 2021

From remediating cyberattacks to eDiscovery pricing, the June 2021 edition of...

More Keepers? Predictive Coding Technologies and Protocols Survey – Fall 2021 Results

From the most prevalent predictive coding platforms to the least commonly...

Glowing Expectations? Eighteen Observations on eDiscovery Business Confidence in the Summer of 2021

In the summer of 2021, 63.3% of survey respondents felt that...

Issues Impacting eDiscovery Business Performance: A Summer 2021 Overview

In the summer of 2021, 24.4% of respondents viewed increasing types...

Looking Up? eDiscovery Operational Metrics in the Summer of 2021

In the summer of 2021, 80 eDiscovery Business Confidence Survey participants...