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A great Sunday read. The Munich Re cyber insurance trends for 2023 report paints an interesting picture of cyber risks. That in part demonstrate why the current approach cyber insurers have adopted to support the management cyber risk will be difficult if not impossible to economically deliver for their clients.
The first is geopolitical risk and nation state cyber. Cyber is a weapon of choice for several nation states. Well placed attacks on CNI such as digital infrastructure, energy and Financial Institutions is enough. The recent declaration by the Head of the FBI that China has 50 times the number of hackers than the U.S is a concern.
Supply chains are a well known and demonstrated threat vector. Manufacturing dependance on JIT, single points of failure for manufacturing or distribution (chip manufacturing, logistics), and consolidated risks associated with cloud. As demonstrated the SolarWinds SDLC security. Targeted cyber attacks across supply chains have a big aggregation affect up supply chains.
The report raises the question ‘Is cybersecurity set to become as important as ESG?’, the simple answer is no. Cybersecurity will dwarf ESG, cybersecurity is a national security, corporate security and economic security issue. An issue the U.S, EU and Australia are moving to regulate quickly, holding boards liable for cyber compliance. ESG compliance may see boards held liable for compliance; cyber regulation will see board held liable. While ESG compliance is important, the effects of a cyber attack are rather more immediate, costly and cyber affects each aspect of E, S and G.
Finally, the report misses out one important factor that is cybersecurity risk management regulation. Cybersecurity risk management regulation from the U.S and EU will hit corporates of all shapes and sizes over the next 24 months. It will also affect the insurance industry, including the D&O insurance market, as legal and compliance risks rise in board rooms. It will affect cyber insurance, as cyber risk management will be transferred from cyber insurance to corporate financial statements.
Will a failure to comply to cyber regulation see D&O and cyber insurance policies invalidated, as much as nation state backed cyber attacks?
Ted Dziekanowski Stephen Pitt-Walker, JD, FGIA Rachel V. Rose, JD, MBA
#cybersecurity #cyberriskmanagement #esg #cyberregulation #governace
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