...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 [ft.com] 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.
Interesting times: IT is no longer an engineering problem.
"We can continue to ignore those devs, sysadms, sysops or whatever you call those janitors. Yes, we will continue buying Windows and cloud services. 'Cause we can has lawyerpult [dilbert.com], baby, and we need entities that we can sue when they fail. Even better, we can use them lawyers for our consumers too."