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Is state intervention needed for cyber insurance?’, more importantly can the state afford to cover the potential liabilities? The recent Lloyds of London report highlighted the outcome of a possible system cyber attack. Landing on a $3.5trn figure for global economic damage. If these figures are close to being accurate, the insurance industry does not have the capital to cover the losses. Consider the outcome of a systemic cyber attack on society, law and order. Insurance payouts will be the least of concerns, there’re aren’t enough resources in the market place to fix the problems associated with a systemic cyber attack.
The insurance industry should also pay attention to the recent charges levied against SolarWinds by the SEC. They describe a number of alleged failings by the company to manage cybersecurity. They demonstrate the challenges ahead for U.S listed firms in the management of cybersecurity. Ahead of December 2023 when covered entities will be required to report material cyber risks and incident to the SEC. 2024 will also be an interesting year for cyber regulatory compliance as the EU NIS 2 and DORA will be transposed by EU nation states into local regulations, effective well over 50,000 Eu firms, third party suppliers and companies trading with the EU. regulation that shifts risk to the financial statements of covered firms.
Of course there’s an alternative, build a combined model that transfers risk back to financial statements through cyber regulation, such as that now being implemented in the U.S and EU. Require public and private sector companies to demonstrate adequate compliance before they can claim against the combined pool (Pool Re). A solution we discussed in 2021 and 2022 (https://augustagrp.com).
Ted Dziekanowski Brian D. McCarthy Rachel V. Rose, JD, MBA Bob Dix
#paravasecuritysolutions #cybersecurity #cyberriskmanagement #cyberinsurance
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