A string of embarrassing cyber attacker on US top notch government and organization particularly in the financial sector has prompted US to urge its financial institutions to take up cybercrime insurance covers to hedge against losses from cyberattacks. More importantly, the Bankers are working on easing communications between market players and government agencies.
US is urging its financial institutions to consider cybercrime insurance to help mitigate the impact of cyberattacks which are seemingly growing in intensity and frequency. Cyber-attacks such the JPMorgan, Americas largest bank which almost crumbled US financial sector, seems to have shocked, US regulators to wake up to the reality that cybercrime is an imminent threat and no single organization is large enough in the hands of cyber gangs.
In past two weeks alone, cybercriminals have hacked Sony Pictures, Microsoft’s Xbox Live, Wall Street and infiltrated American Residual & Talent Inc., a Hollywood payroll master which handles billions of dollars in Actors’ residual checks and Equity contracts. The Losses in each attack in terms of time wasted, service delayed and data stolen is immeasurable, explaining why US regulators are urging financial institution to hedge against such risks.
When it comes to attacks on banks and financial institutions which handle customers’ deposits, the losses multiply tenfold and damages are sometimes irreparable. Notably, banks operate in a fragile environment anchored purely on customers’ trust. In such a precarious environment, one successful cyber -attack at one bank such as the JPMorgan, may break this trust and a cause spiraling effect across the whole financial sector.
A worse case scenario would be a bank run which would cause a systemic failure in the financial sector. For this reason bankers “rarely used to talk about” cyber security but with the changing tides in the recent past, “ now this is one topic that comes up every day,” said Treasury Deputy Secretary Sarah Bloom Raskin while addressing the Texas Banker’s Association at a cyber security conference.
Cybercrime insurance won’t be end of cyber-attacks in US nor is a reason for banks and insured companies so slumber on their counter cybercrime measures. However, a wide insurance campaign would help pool resources together in fighting the cybercrime war, in addition to cushioning firms which falls prey to online fraudsters.
A robust cyber insurance market also bring more players from different sectors and of different strengths on table. This implies fighting cybercrime will no longer be a one man’s job left to law enforcement agencies and a few abled organization. Notably, smaller firms will enjoy some positive externalities for participating in such insurance schemes. All parties have something to gain considering the web is a maze in which small firms are connected to larger firm which are in turn connected to even larger firms. In such a scenario, a security breach in one firm affects others equally.
With a bullish insurance industry which runs in billion dollars in terms of written premiums, cybercrime insurance won’t be a new thing in the US insurance market. It is estimated that over 50 insurance companies are currently offering tailor made cyber insurance products. However, given the dynamism of cybercrime, more carriers are jittery about offering cyber insurance covers, another reason the government should step in and boost the growth of this market. “Ideally, we can imagine the growth of the cyber insurance market as a mechanism that bolsters cyber hygiene for banks across the board,” she said
According to Raskin, the Treasury is already working with government agencies on ways of easing communication and coordination between players in the advent of a cyber-attack. More importantly, Bankers and the government must jointly come up with appropriate laws which ensure fair notification, detection and reporting of cybercrimes without violating the privacy of the victims.
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