While the concept of “cyber maturity” might not be a familiar term for many businesses, its profound significance should not be underestimated. Cyber insurance is more than just protection against cyber incidents; it entails understanding the broader implications that cyber threats have on a company’s governance, reputation, and commitment to environmental, social, and governance (ESG) principles. A prominent voice in this discussion is Eric Alter, an expert from Marsh, Senior Vice President, UK Corporate and Commercial Risk and Cyber Engagement Leader, who sheds light on the pivotal role of cyber insurance as a business-critical asset that transcends traditional notions of safeguarding.

Shifting Perspectives

Viewing cyber insurance through a static lens is a misconception that industry experts aim to dispel. By drawing parallels to health and safety insurance, they emphasise the role of qualified individuals who assess an organisation’s policies and procedures for their ability to withstand potential claims. Just as breaches of health and safety regulations can lead to legal ramifications and harm a company’s reputation, inadequate cybersecurity measures can expose organisations to cyberattacks and their subsequent consequences. This extends beyond mere insurability concerns; it encompasses areas such as corporate governance, directorial accountability, errors, and omissions, all of which significantly impact a company’s standing.

Cyber Resonance with ESG

The resonance of these insights extends to the realm of ESG principles, which are particularly relevant for businesses. Consider a scenario involving a manufacturer that faces a cyber breach resulting in an environmental incident, such as a chemical leak. This would directly contradict the “E” aspect of ESG. Similarly, if sensitive employee and customer data are compromised, the “S” aspect of ESG comes into question. Equally significant is the “G,” or governance, factor. Cyber threats have the potential to disrupt core operations and compromise a company’s functional integrity, raising concerns about operational credibility.

Key Elements of Comprehensive Cyber Insurance

Experts highlight seven crucial components that a comprehensive cyber insurance policy should encompass:

1. Post-Attack Forensics: Experts who rigorously analyse the aftermath of a cyber attack.
2. Incident Response Services: Third-party support for efficient recovery.
3. Business Interruption Coverage: Mitigating losses during downtime resulting from cyber incidents.
4. Restoration and Reinstatement: Swift recovery, including rebuilding servers if necessary.
5. Machinery and Software Damage: Addressing irreparable harm to technology assets.
6. Ransom Payment Facilitation: Enabling the ability to respond to ransom demands.
7. Legal Liability Protection: Safeguarding against potential legal actions.

For example, a retail company experiencing a ransomware attack that locks down its point-of-sale systems, leading to a loss of revenue during the busy holiday season. Comprehensive cyber insurance covers the business interruption and facilitates ransom payments to restore operations.

Strategic Considerations

There are three key considerations for effectively integrating cyber insurance into an organisation’s financial management:

• Coverage Assessment: Evaluating whether the policy aligns with potential costs and needs.
• Contractual Alignment: Ensuring policy costs align with contractual obligations, particularly pertinent in the evolving legal landscape.
• Alternative Approaches: Exploring alternative risk-transfer methods in cases where cyber coverage isn’t feasible.

For instance, imagine a financial institution evaluating its cyber insurance policy to ensure that the coverage aligns with the potential costs of data breach response, regulatory fines, and customer notification. The institution’s risk management team meticulously reviews the policy terms, assessing their ability to cover various scenarios such as customer data exposure, business interruption, and legal defence costs. By quantifying the potential expenses associated with these incidents, the institution ensures that the chosen policy provides adequate financial protection.

An Investment, Not Just an Expense

Shifting our perspective towards cyber insurance as an investment rather than an expenditure brings its significance into sharper focus. Just as businesses allocate resources for growth and development, allocating funds for cyber insurance signifies a commitment to bolstering operational resilience, upholding regulatory standards, and preserving client trust.

By adopting a mindset of investment, businesses align themselves with the evolving landscape of cyber threats and position themselves to thrive in a digitally driven world.

A Blueprint for Resilience

Referencing the National Institute of Standards and Technology’s (NIST) information security protocols, these are 12 fundamental controls that businesses should adopt:

• Multi-Factor Authentication
• Email Filtering and Web Security
• Encrypted Backups
• Privileged Access Management
• Endpoint Detection and Response
• Patching and Vulnerability Management
• Incident Response Plans
• Cybersecurity Training
• Remote Desktop Protocol Mitigation
• Network Activity Monitoring
• Upgrading End-of-Life Hardware
• Digital Supply Chain Risk Management

Summary

In the realm of cyber insurance, accountants and auditors play a pivotal role in ensuring that businesses have a comprehensive understanding of the financial and operational risks associated with cyber threats. They can assist in evaluating the adequacy of cyber insurance coverage by assessing potential costs, analysing policy terms, and identifying coverage gaps. Furthermore, they can help organisations align their cyber insurance strategy with their financial goals and regulatory requirements, providing valuable insights into risk management. Accountants and auditors can serve as advisors who guide businesses in making informed decisions about cyber insurance as a strategic investment to enhance operational resilience and safeguard against potential cyber incidents.

As we reflect on the strategic significance of cyber insurance and its implications for businesses, TGS Bulgaria encourages organisations to proactively consider the insights provided by experts. Taking steps to integrate robust cyber insurance policies, aligned with comprehensive risk management strategies, is vital for navigating the ever-evolving landscape of cyber threats. Contact TGS Bulgaria today to explore how our expertise can support your journey towards enhanced cyber maturity, fortified governance, and sustained success in an increasingly digital world. Together, let’s build a resilient future.