from the GIMO:-Garbage-in-Money-out dept.
...with reliance on all things digital skyrocketing, cyber threats now pose grave, even existential, dangers to corporations as well as the entire digital economy. In response, companies have begun to develop a cyber insurance market, offering corporations a mechanism to manage their exposure to these risks. Yet the prospects for this market now seem uncertain in light of a major court battle. Mondelez International is reportedly suing Zurich Insurance in Illinois state court for refusing to pay its $100 million claim for damages caused by the 2017 NotPetya attack.
Mondelez's claim represents just a fraction of the billions of dollars in collateral damage caused by NotPetya, a destructive, indiscriminate cyberattack of unprecedented scale, widely suspected to have been launched by Russia with the aim of hurting Ukraine and its business partners... According to reports, Zurich apparently rejected Mondelez's claim on the grounds that NotPetya was an act of war and, therefore, excluded from coverage under its policy agreement. If the question of whether and how war risk exemptions apply is left to the courts to decide on a case-by-case basis, this creates a profound source of uncertainty for policyholders about the coverage they obtain.
Many hurdles stand in the way of insurance providing a more robust solution. Data on cyber risks are scarce, and the threat is evolving constantly, often rendering data obsolete before they can be used. That means actuaries lack a credible repository of information to accurately price cyber risk. Moreover, NotPetya and other attacks with cascading effects have reinforced fears of aggregation risk, meaning the potential for a single incident to cause simultaneous losses across multiple policyholders. If Zurich had underwritten even a handful of the major corporations disrupted by the attack, it could have faced catastrophic losses from just one incident. This is a particularly acute concern for reinsurers—companies that provide stop-loss coverage, or protection against unsustainably costly claims, to other insurers—making both reinsurers and primary cyber insurance providers naturally hesitant to support more extensive cyber underwriting. The lack of adequate reinsurance backing means that carriers may become overwhelmed with claims if a systemic cyber incident causes simultaneous losses across many policyholders.
The Insurance Journal is asking if the NotPetya Windows worm was an act of war. If so, that would change any potential obligations carried by insurance policies towards claimants, in this case Merck & Co. NotPetya took over Windows computers in 2017 but was apparently originally intended to target Ukrainian Windows computers. The rest of the Windows computers may have just been collateral damage.
By the time Deb Dellapena arrived for work at Merck & Co.’s 90-acre campus north of Philadelphia, there was a handwritten sign on the door: The computers are down.
It was worse than it seemed. Some employees who were already at their desks at Merck offices across the U.S. were greeted by an even more unsettling message when they turned on their PCs. A pink font glowed with a warning: “Ooops, your important files are encrypted. … We guarantee that you can recover all your files safely and easily. All you need to do is submit the payment …” The cost was $300 in Bitcoin per computer.
The ransom demand was a ruse. It was designed to make the software locking up many of Merck’s computers—eventually dubbed NotPetya—look like the handiwork of ordinary criminals. In fact, according to Western intelligence agencies, NotPetya was the creation of the GRU, Russia’s military intelligence agency—the same one that had hacked the Democratic National Committee the previous year.
In all, the attack crippled more than 30,000 laptop and desktop [Windows] computers at the global drugmaker, as well as 7,500 servers, according to a person familiar with the matter. Sales, manufacturing, and research units were all hit. One researcher told a colleague she'd lost 15 years of work. Near Dellapena's suburban office, a manufacturing facility that supplies vaccines for the U.S. market had ground to a halt. "For two weeks, there was nothing being done," Dellapena recalls. "Merck is huge. It seemed crazy that something like this could happen."
Earlier on SN:
Windows 7 and Server 2008 End of Support: What Will Change on 14 January? (2020)
Cyber Insurance claims NotPetya was an act of war (2019)
Original Petya Master Decryption Key Released (2017)
The knock-on effects for the rest of the world might not be limited to intentional reprisals by Russian operatives. Unlike old-fashioned war, cyberwar is not confined by borders and can more easily spiral out of control.
Ukraine has been on the receiving end of aggressive Russian cyber operations for the last decade and has suffered invasion and military intervention from Moscow since 2014. In 2015 and 2016, Russian hackers attacked Ukraine's power grid and turned out the lights in the capital city of Kyiv— unparalleled acts that haven't been carried out anywhere else before or since.
The 2017 NotPetya cyberattack, once again ordered by Moscow, was directed initially at Ukrainian private companies before it spilled over and destroyed systems around the world.
NotPetya masqueraded as ransomware, but in fact it was a purely destructive and highly viral piece of code. The destructive malware seen in Ukraine last week, now known as WhisperGate, also pretended to be ransomware while aiming to destroy key data that renders machines inoperable. Experts say WhisperGate is "reminiscent" of NotPetya, down to the technical processes that achieve destruction, but that there are notable differences. For one, WhisperGate is less sophisticated and is not designed to spread rapidly in the same way. Russia has denied involvement, and no definitive link points to Moscow.