The relatively new field of cyber insurance offers a potentially valuable shield from the financial toll that a data breach can visit on a company, but that market is held back by a lack of information about the threat landscape and a culture in many firms that too often marginalizes cyber issues, a senior government official warns.
Tom Finan, senior cybersecurity strategist and counsel at the Department of Homeland Security, has been heading up a review of the cybersecurity insurance industry, looking at ways that the government could help advance the market. In remarks at a recent government IT conference, he suggested that insurance carriers would be more generous in their coverage options with more concrete data about the risks that applicants face.
"Perhaps unsurprisingly, companies are not publicly disclosing their own damages from the cyber incidents that they're experiencing. Consequently there's just not enough actuarial data -- yet -- to make these additional categories of first-party coverage more successful," Finan said. "Several of the carriers joining us have told us that big data about cyber incidents could be a potential treasure trove that would aid their efforts immensely."
As a result, insurance carriers are commonly underwriting policies based on an assessment of the security culture at the applying company, finding that, despite the steady diet of high-profile breaches, cyber issues remain marginalized within the IT department, rather than being incorporated into a broader enterprise risk management (ERM) framework.
And that's a problem, according to Finan.
Making a business case for investing against cyber risk
"For many companies, the business case for investing against cyber risk still has not been made. With some exceptions, corporate leaders continue to treat cybersecurity as an IT problem separate and apart from the other business risks that they're addressing as part of their overall corporate risk management strategies," he said.
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"There are probably multiple reasons for this," Finan added. "The key one appears to be that cyber risk still has not been reduced to terms that non-technical business leaders can readily understand -- namely, the financial costs of cyber events and the potential damages to reputation for failing to address them effectively."
In discussions with industry, DHS has determined that larger companies have generally done better than their smaller counterparts on institutionalizing cyber threats as a companywide risk. Still, though, cyber insurance professionals note that businesses still struggle with "how to incorporate cyber risk into existing ERM programs and the challenging business culture issues in doing so," Finan said.
Insurance executives have a menu of recommendations for businesses to improve their cyber culture, including strong executive leadership on the issue, workforce education and awareness, and advancing information-sharing policies to determine "who within the company needs what information and in what formats to help drive more effective cyber risk management investments," Finan explained.
The bottom line with cyber risk and ERM is that organizations need to do more to bring CISOs and other cybersecurity professionals into traditional risk business risk management discussions," he said. "And until they do so, they're going to miss out on otherwise more extensive cybersecurity insurance offerings than would otherwise be available to them."