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Formerly Moody’s RMS

This article was originally published in The Insurer, click here to access the original article.

Examples of data theft continue to stream through; no one brand seems immune from having to announce major losses of customer data records. Uber paid US$148 million to settle a legal action over a cyberattack in 2016 that exposed data from 57 million customers and drivers. Forbes reported that Yahoo agreed to pay a US$50 million settlement to roughly 200 million people affected by the email service’s 2013 data breach.

It is still the case that data theft is the leading source of loss for both insurers and reinsurers that cover cyber. The cyber insurance market is still in an early growth stage as the overall economic impact on the global economy from cyberattacks in 2017 was estimated at US$600 billion. Insured loss for standalone cyber policies was a fraction of this, at around US$1 billion to US$1.5 billion. But with cyber risk continually evolving, insurers may have to contend with a new, growing source of loss as cyber attackers are turning to ransomware, as it offers a potentially easier and more lucrative attack method.

Ransomware sees malware infiltrated into the networks of a company and disables servers or locks up data until a ransom is paid. This contagious malware, of which WannaCry and NotPetya are probably the most renowned examples, can even plague companies with high standards of security, and has the ability to scale and to cause systemic loss to thousands of companies. Attackers have also stolen data from a company, and then attempt to extort a ransom from the victim company in return for the data.

Overall, the number of ransomware attacks are increasing each year, and for cyber attackers there is the easy availability of ransomware to buy on the dark web. As outlined in our recent RMS Cyber Risk Outlook Report, estimates of ransomware extorted in 2017 exceed five billion dollars, a 15-fold increase over the previous two years.

Ransomware

The size of their intended targets is also growing. Attempts to extort major companies using cyberattacks have grown in frequency, scope and ambition. Ransomware has historically afflicted personal computers and small and medium sized enterprises, but recent developments have seen large multinational corporations affected, with security companies seeing some 42 percent of all ransomware infections in the first half of 2017 targeting organizations in an interconnected and networked environment.

The attack mode is certainly evolving. More attackers are changing their ransomware deployment from a “spray and pay” approach across thousands of accounts to a more targeted approach – with the aim to demand more money from a single victim, and especially larger companies. The attackers’ rationale is rather than having to handle the administration of thousands of smaller payments from smaller companies, attackers are looking for hundreds of thousands of dollars from a few companies that they believe to be more likely to pay.

Ransomware attacks place companies in an ethical dilemma — is it ethical to pay a ransom and fuel this crime, or should the company (and thereby the shareholders) take the hit? It is often quicker and cheaper to pay the ransom than rebuild whole IT systems, so should companies take the moral high ground or focus on the interests of the company’s shareholders? What’s clear is that many companies are developing contingencies for ransomware attacks in the future, with some commentators suggesting that companies stockpiling BitCoin in case of extortion attacks may have fueled the recent surges in BitCoin demand.

So, with the increasing number of ransomware type events, the rising dollar amount of the ransom being asked for, coupled with the growing sophistication of the ransomware increases, there is potential that looking forward, ransomware may overtake data theft as the main source of loss.

As ransomware rises, there are encouraging signs that data breaches at the smaller end of the scale are decreasing. The implementation of sound security processes has helped to reduce accidental data loss, such as when a laptop is lost or stolen, and defenses will have an effect on low-sophistication attacks or accidental events. But if a cyber attacker wants to attack you, they will, with increasing armory of tools and techniques.

Cyber modeling that can accommodate the ever-changing threat landscape presented by cyber is becoming more and more necessary for insurers and reinsurers, and without the ability to anticipate trends and spot patterns it will become harder for an insurance business to stay credible and profitable in this fast-growing and fast-evolving market.

This article was originally published in The Insurer, click here to access the original article.

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October 10, 2019
Cyber Risk Seminars Introduce New Solutions to Address Evolving Threat Landscape

During September, RMS ran a series of cyber risk seminars in London and New York. These half-day events coincided with the release of RMS Cyber Solutions version 4.0 and featured both RMS and industry experts discussing cyber risk and the opportunities for the cyber insurance industry. At both events, the day kicked off with Dr. Andrew Coburn, senior vice president for RMS, examining recent developments within the cyber risk landscape by outlining the approach RMS takes to tracking and categorizing the wide range of evolving threat actor groups. He also proposed some key future trends, such as the potential impact of a “gloves-off” nation-state cyberattack and its implications for the cyber insurance industry. Former ethical hacker Eireann Leverett dug deep into the topic of contagion mapping and how hacking groups – both good and bad, are utilizing innovative techniques to map out the digital world. He also touched on the growing use of deepfakes in spear phishing attacks, whereby executive identities are faked to trick employees into fraudulently transferring funds out of the business. To provide the industry’s perspective, we were delighted to be joined by two expert panels in London and New York discussing the cyber market and the role of models to support growth. Thanks to Jamie Pocock (Guy Carpenter), Laila Khudairi (Tokio Marine Kiln), Rory Egan (Munich Re), and Kirsten Mitchell-Wallace (Lloyd’s) for participating in London, and to Anthony Shapella (AIG), Jon Laux (Aon), and Kara Owens (Markel) in New York. RMS Cyber Risk Seminars held in London (left) and New York (right)For the second half of the agenda, members of the RMS cyber team focused on the release of RMS Cyber Solutions version 4.0. This release features substantial enhancements to the RMS model and capabilities across several key areas including exposure data enrichment, expanded model data sources, and new stochastic modeling approaches to quantify cyber risk. Dave Gatey, senior director – modeling for RMS, revealed how new modeling methods, such as agent-based modeling and multi-compartment models were being used in RMS Cyber Solutions v4. Chris Vos, lead modeler for RMS, took to the stage in New York, and myself in London, to give context as to how these improvements to the model and software will assist clients in understanding their cyber risk and therefore making better decisions for their business. In New York, the RMS cyber seminar was followed by a half-day terrorism seminar. Introducing RMS Cyber Solutions Version 4.0 For many insurers, obtaining complete and accurate exposure data from cyber submissions remains a challenge. Often, these submissions are missing key information such as business revenue, profit, or business sector – all attributes that are critical to understanding the potential effect of cyber events. To address this, RMS has released a company database consisting of 13 million companies across 30 countries, alongside a data enrichment engine that uses a custom similarity matching algorithm to allow users to enrich their exposure data. This will help ensure the inputs into the model are as accurate as possible, reducing model uncertainty, and minimizing an insurer’s data collection efforts. Although historical data does not show you the whole picture when it comes to cyber risk, it is still critical to inform the lower return period scenarios. To enable this, RMS has invested substantially in automating our historical event data collection techniques by employing bespoke machine learning algorithms that extract event data from hundreds of thousands of unstructured data sources. These new data sets cover multiple event types including breach, malware, ransomware, and cloud outages and allows our v4 model to be run at a significantly increased level of granularity, supporting greater risk differentiation. RMS has continued to research the causal processes that drive cyber risk, working closely with our partners across cybersecurity and academia, to map out and build simulations of these underlying processes. By stochastically modeling these individual components and applying game theory models to explore threat actor behavior, we can extract probabilities associated with both short- and long-tail cyber events. Investing in Cyber-Physical Loss Models Finally, RMS has maintained its substantial investment in cyber-physical loss models. These models take data from the EDM (the RMS property exposure data store) and other casualty classes to quantify the impact of clash-type cyber catastrophe events such as power blackouts. This allows insurers to explore the potential for silent cyber losses across their business, supporting regulatory reporting. Many insurers are exposed to this type of cyber risk, even if they don’t write affirmative cyber insurance policies. These new insights and models continue to be delivered within an open modeling framework, allowing complete transparency into each of the modeling components. This transparency allows users to validate each component and create custom models to support their own view of risk. This new solution from RMS represents a significant step forward for the insurance industry to model its cyber risk. For more information, please contact cyberrisk@rms.com.…

cyber event
July 03, 2019
The Future of Cyber Risk
Tom Harvey
Tom Harvey
Head of Cyber Product Management, RMS

Tom is the Head of Cyber Product Management for RMS, and since early 2015 has worked together with the Cambridge Centre for Risk Studies and RMS’ development partners to bring the RMS Cyber Accumulation Management System and subsequent RMS Cyber Solutions to the market. Tom joined RMS in 2013 as a technical sales expert assisting a number of leading (re)insurers further their catastrophe management practices.

Prior to joining RMS, Tom spent 4 years at Hewlett Packard Software within the European presales team working closely with a number of HPS’ IT security products.

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