ISSUES PAPER ON CYBER RISKTO THE INSURANCE SECTOR

AUGUST 2016

About the IAISThe International Association of Insurance Supervisors (IAIS) is a voluntary membershiporganisation of insurance supervisors and regulators from more than 200 jurisdictions innearly 140 countries. The mission of the IAIS is to promote effective and globallyconsistent supervision of the insurance industry in order to develop and maintain fair, safe
and stable insurance markets for the benefit and protection of policyholders and tocontribute to global financial stability.
Established in 1994, the IAIS is the international standard setting body responsible fordeveloping principles, standards and other supporting material for the supervision of theinsurance sector and assisting in their implementation. The IAIS also provides a forum forMembers to share their experiences and understanding of insurance supervision andinsurance markets.
The IAIS coordinates its work with other international financial policymakers andassociations of supervisors or regulators, and assists in shaping financial systems
globally. In particular, the IAIS is a member of the Financial Stability Board (FSB), memberof the Standards Advisory Council of the International Accounting Standards Board (IASB)
and partner in the Access to Insurance Initiative (A2ii). In recognition of its collective
expertise, the IAIS also is routinely called upon by the G20 leaders and other international
standard setting bodies for input on insurance issues as well as on issues related to theregulation and supervision of the global financial sector.

Issues Papers provide background on particular topics, describe current practices, actual
examples or case studies pertaining to a particular topic and/or identify related regulatory
and supervisory issues and challenges. Issues Papers are primarily descriptive and notmeant to create expectations on how supervisors should implement supervisory material.
Issues Papers often form part of the preparatory work for developing standards and may
contain recommendations for future work by the IAIS.

This document was prepared by the Financial Crime Task Force (FCTF).
This publication is available on the IAIS website (www.iaisweb.org).
© International Association of Insurance Supervisors 2016. All rights reserved. Brief excerpts may
be reproduced or translated provided the source is stated.

Issues Paper on Cyber Risk to the Insurance Sector

Contents
I.

Introduction ..................................................................................................................... 4

II.

The Cyber Risk Landscape ............................................................................................. 5

III.

Cyber Threats to the Insurance Sector ............................................................................ 9IV.

Examples of Cybersecurity Incidents in the Insurance Sector.........................................11V.

Insurer Cyber Resilience ................................................................................................13VI.

Applicability of Insurance Core Principles to Cybersecurity.............................................15

VII.

Supervisory Response to Cyber Risk .............................................................................19

VIII.

Conclusion .....................................................................................................................29

Annex I Summary of Responses to IAIS Survey .......................................................................31
Annex II Glossary of Terms .......................................................................................................34
Annex III Further Reading .........................................................................................................36

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I.

Introduction

1.
Concern over cybersecurity is growing across all sectors of the global economy, as cyberrisks have grown and cyber criminals have become increasingly sophisticated. For insurers,
cybersecurity incidents can harm the ability to conduct business, compromise the protection ofcommercial and personal data, and undermine confidence in the sector. The IAIS has noted thatthe level of awareness of cyber threats and cybersecurity within the insurance sector, as well as
supervisory approaches to combat the risks, appear to vary across jurisdictions.
2.
These factors prompted the IAIS to consider the area of cybersecurity in the insurance
sector, including the involvement of insurance supervisors in assessing and promoting the
mitigation of cyber risk.
3.
While many of the most widely publicised cybersecurity incidents involving consumer data
have affected retailers, companies in the financial services sector, including insurers, have been
victimised as well.
4.
All insurers, regardless of size, complexity, or lines of business, collect, store, and sharewith various third-parties (e.g., service providers, intermediaries, and reinsurers) substantial
amounts of private and confidential policyholder information, including in some instances sensitive
health-related information. Protection of the confidentiality, integrity, and availability of insurers’
data is of fundamental importance. Information obtained from insurers through cyber crime may
be used for financial gain through extortion, identity theft, misappropriation of intellectual property,
or other criminal activities. Inadvertent or intentional exposure of private data can potentially result
in severe and lingering harm for the affected policyholders, as well as reputational damage toinsurer sector participants. Similarly, malicious cyber attacks against an insurer’s critical systems
may impede its ability to conduct business.
5.
In 2015, the IAIS surveyed its Members on their perceptions of insurance industry cyberrisk, their involvement as regulators in combating cyber threats, and supervisory approaches tocybersecurity that are in use or under development. Members’ responses to the survey haveprovided input to this paper. Other inputs include consultations with various Members, insurers,
cybersecurity professionals, and other experts, as well as literature cited in this paper. Additional
resources are presented in Annex III.
6.
The objectives of this Issues Paper are to raise awareness for insurers and supervisors of
the challenges presented by cyber risk, including current and contemplated supervisory
approaches for addressing these risks. As an Issues Paper, it provides background, describes
current practices, identifies examples, and explores related regulatory and supervisory issues andchallenges. This paper focuses on cyber risk to the insurance sector and the mitigation of suchrisks. It does not cover IT security risks more broadly, cyber insurance (insurers’ selling or
underwriting that type of insurance product), or risks arising from cybersecurity incidents involving
supervisors, which are important topics but not within the scope of this Issues Paper.
7.
The paper is intended to be primarily descriptive and is not meant to create supervisory
expectations. Nevertheless, the paper may shed light on the need for additional, more specific
IAIS material to support supervisors in addressing cyber risk.

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II.

The Cyber Risk Landscape

8.
There is no standardised definition of the term “cyber risk.” The CRO Forum has broadly
described “cyber risk” to mean: “Any risks that emanate from the use of electronic data and its
transmission, including technology tools such as the internet and telecommunications networks.
It also encompasses physical damage that can be caused by cybersecurity incidents, fraudcommitted by misuse of data, any liability arising from data storage, and the availability, integrity
and confidentiality of electronic information − be it related to individuals, companies, orgovernments.” 1 A working group of the Committee on Payments and Market Infrastructures andthe International Organization of Securities Commissions has described cyber risk as follows:“The combination of the probability of an event occurring within the realm of an organisation’s
information assets, computer and communication resources and the consequences of that event
for an organisation.” 2
9.
Various terms are used to describe adverse outcomes arising from cyber risk. These
include “cyber attack,” defined by the U.S. Federal Financial Institutions Examination Council(FFIEC) as: “attempts to damage, disrupt, or gain unauthorised access to a computer, computer
system, or electronic communications network. An attack, via cyberspace, targeting anenterprise’s use of cyberspace, for the purpose of disrupting, disabling, destroying, or maliciously
controlling a computing environment or infrastructure; or destroying the integrity of the data or
stealing controlled information.” 3 Relatedly, a “cyber incident” is defined by the FFIEC as “actions
taken through the use of computer networks that result in an actual or potentially adverse effecton an information system or the information residing therein.”3
10.
In this paper, the phrase “cybersecurity incident” is used generally to include both cyberattacks and cyber incidents.
11.
In its 2015 Global Risk Report, the World Economic Forum identified technological risks,
in the form of data fraud, cybersecurity incidents, or infrastructure breakdown, as among the top
ten risks facing the global economy. 4 Cyber risk was identified as the fourth largest risk among
surveyed insurers (and first among U.S. and U.K. insurers) in a 2015 report on industry
perceptions of risk. 5

1 CRO Forum, The Cyber Risk Challenge and the Role of Insurance, paragraph 3 (December 2014), available at

http://www.thecroforum.org/cyber-resilience-cyber-risk-challenge-role-insurance/.
2 Committee on Payments and Market Infrastructures and International Organization of Securities Commissions,
Guidance on Cyber Resilience for Financial Market Infrastructures (June 2016), available athttps://www.bis.org/cpmi/publ/d146.htm.
3 FFIEC, Cybersecurity Assessment Tool Glossary (June 2015), available at
http://www.ffiec.gov/pdf/cybersecurity/FFIEC_CAT_App_C_Glossary_June_2015_PDF5.pdf.
4 World Economic Forum, Global Risks 2015 (2015), available at
http://www3.weforum.org/docs/WEF_Global_Risks_2015_Report15.pdf.
5 PWC and Centre for the Study of Financial Innovation, Insurance Banana Skins 2015: The CSFI Survey of theRisks Facing Insurers, paragraph 1 (July 2015), available at
http://static1.squarespace.com/static/54d620fce4b049bf4cd5be9b/t/55dde0fce4b0dff05004146c/1440604412304/201
5+Insurance+Banana+Skins+FINAL.pdf.
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12.

One insurer, Allianz, has identified the following top trends in the cyber risk landscape: 6•

Increasing interconnectivity and “commercialisation” of cyber-crime driving greater
frequency and severity of incidents, including data breaches;•

Data protection legislation will toughen globally. More notifications and significant fines
for data breaches can be expected in the future;•

Business interruption (BI), intellectual property theft and cyber-extortion risks are
increasing. BI costs could be equal to – or exceed – breach losses; and•Vulnerability of industrial control systems poses significant threat.

13.
For context, the remainder of this section of the Issues Paper outlines recently publisheddata concerning the types, frequency, severity, and costs of cybersecurity incidents.
Types of Cybersecurity Incidents
14.
Cybersecurity incidents happen in a variety of ways, exemplified by the different ways thatdata breaches, the most reported type of cybersecurity incident, occur. 7 In a 2015 report, 8 Verizon
concluded that most data breaches arose from one or more of the following causes: point-of-saleintrusions; crimeware (any form of malware used for criminal purpose); cyber espionage; 9 insider
misuse; and web application attacks. The remainder of cybersecurity incidents arose frommiscellaneous errors, physical theft or loss, payment card skimmers, or distributed denial ofservice. These cybersecurity incidents, while often linked to data breaches, might also result inother forms of loss (e.g., theft of intellectual property).
15.
Cyber extortion, usually accomplished through a form of crimeware known as“ransomware,” is an increasingly common cybersecurity incident “in which hackers infiltratecomputers belonging to a business or an individual, encrypt the data thereon, and then demand
a payment to decrypt it.” 10 Certain types of ransomware are very effective, and victims of suchattacks cannot retrieve data without paying ransom unless they have made a backup copy of thedata stored on media not subject to the ransomware attack. 11
Frequency, Severity, and Cost of Cybersecurity Incidents
16.
The frequency of cybersecurity incidents is increasing. In the fall of 2014, thePricewaterhouseCoopers (PwC) annual global information security survey of corporate
executives, which included 9,700 participants, reported that almost 43 million detectedcybersecurity incidents occurred during the previous year – the equivalent of 100,000 attacks per

6 Allianz Global Corporate & Specialty, A Guide to Cyber Risk (September 2015).
7 Data breaches are “security violations in which sensitive, protected or confidential data is copied, transmitted,

viewed, stolen or used by an individual unauthorised to do so.” See, e.g., U.S. Department of Health and Human
Services, Administration for Children and Families, Information Memorandum: ACYF-CB-IM-15-04 (1 July 2015),
available at http://www.acf.hhs.gov/programs/cb/resource/im1504.
8 Verizon, 2015 Data Breach Investigations Report, page 32 (2015).
9 Cyber espionage is defined as: “Unauthorised spying by computer. The term generally refers to the deployment ofviruses that clandestinely observe or destroy data in the computer systems of government agencies and large
enterprises.” PC Magazine, “Encyclopedia,” available at http://www.pcmag.com/encyclopedia/term/64376/cyberespionage.
10 Devlin Barrett, “Paying Ransom to Hackers Stirs Debate,” Wall Street Journal (9 November 2015).
11 Ibid.
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day and a 48 percent increase over the number of incidents reported in the 2013 survey. 12 The
number of cybersecurity incidents reported to the 2015 PwC survey increased by a further 38
percent year over year. 13 Moreover, the number of unreported or undetected cybersecurity
incidents is likely far higher. Attacks through malware are increasingly prevalent: 14 it has beenreported that, across all organisations globally, five malware attacks occur every second of every
day, although not all are successful. 15
17.
Cybersecurity incidents occur at companies of all sizes. Small businesses, however, may
be particularly vulnerable. In a 2015 survey by NetDiligence, for example, responding businesses
with less than $50 million in revenues reported the most incidents (29 percent), followed closely
by businesses with less than $2 billion in revenue (25 percent). 16
18.
The severity of data breaches, the most reported form of cybersecurity incident, varies by
jurisdiction. Among the countries and organisations covered by a report from the Ponemon
Institute (Ponemon), the average number of records lost or stolen per data breach ranges fromapproximately 19,000 to nearly 30,000, with the United States, India, and countries from the
Arabian region experiencing the highest averages. 17
19.
Cybersecurity incidents are also costly. The Center for Strategic and International Studies
and McAfee, for example, have estimated that cyber crime costs the global economy more than$400 billion every year. 18
20.
Recently, Lloyd’s and the University of Cambridge Centre for Risk Studies released areport analysing the financial losses associated with a hypothetical cyber attack on the U.S. power
grid. The report predicted total losses of between $243 billion and more than $1 trillion, withinsured losses of between $21.4 billion and $71.1 billion, depending on the severity of the power
outage. 19
12 PwC, Managing Cyber Risk in an Interconnected World: Key Finding from The Global State of Information Security

Survey 2015, paragraph 7 (September 2014), available at
http://www.pwccn.com/home/eng/rcs_info_security_2015.html.
13 PwC, Turnaround and Transformation in Cybersecurity: Key Findings from The Global State of Information Security
Survey 2016, paragraph 2 (September 2015), available at http://www.pwc.com/gx/en/issues/cybersecurity/information-security-survey.html.
14 “[Malware is] designed to secretly access a computer system without the owner’s informed consent. The
expression is a general term (short for malicious software) used to mean a variety of forms of hostile, intrusive, or
annoying software or program code. Malware includes computer viruses, worms, Trojan horses, spyware, dishonest
adware, ransomware, crimeware, most rootkits, and other malicious and unwanted software or programs. FFIEC,
Cybersecurity Assessment Tool Glossary.
15 Verizon, 2015 Data Breach Investigations Report, page 21. The Verizon report notes that many of these malware
attacks are stopped by “controls like firewalls, intrusion detection systems (IDS)/intrusion prevention systems (IPS),
spam filters, etc.”
16 Net Diligence, 2015 Cyber Claims Study, page 22 (2015).
17 Ponemon Institute, 2015 Cost of Data Breach Study: Global Analysis, page 8 (May 2015). 350 companies
representing the following 11 countries participated in the study: United States, United Kingdom, Germany, Australia,
France, Brazil, Japan, Italy, India, United Arab Emirates, Saudi Arabia, and Canada. Participating organisations
experienced data breaches ranging from a low of approximately 2,200 to slightly more than 101,000 compromised
records. As described in the next section, the “per record” cost of responding to data breaches also varies by country.
18 Center for Strategic and International Studies and McAfee, Net Losses: Estimating the Global Cost of Cybercrime(June 2014), available at http://csis.org/files/attachments/140609_rp_economic_impact_cybercrime_report.pdf.
19 Lloyd’s of London, Emerging Risk Report: Business Blackout – The Insurance Implications of a Cyber Attack on the
U.S. Power Grid (July 2015), available athttps://www.lloyds.com/~/media/files/news%20and%20insight/risk%20insight/2015/business%20blackout/business%
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21.
Ponemon has concluded that the global average cost of a data breach in 2014 was $3.79
million, with a global average cost of $154 for each lost or stolen record. These costs vary
geographically. For example, the average cost per record in the United States was $217, whereas
the cost was $56 per record in India. Costs also varied by industry, with health-related firms($363/record), education firms ($300/record), pharmaceutical firms ($220/record), and financial
firms ($215/record) having the highest average costs associated with breaches. The retailindustry’s average cost per breached record has increased dramatically year-over-year, from
$105/record in 2014 to $165/record in 2015. 20
22.
According to Ponemon, these costs can be viewed as falling into one of four categories:(i) detection and escalation; (ii) notification; (iii) ex-post response; and (iv) lost business. In 2013,2014, and 2015, lost business – which includes unexpected customer turnover, reputation losses,
and decreased goodwill – was the largest cost component associated with data breaches. 21

20blackout20150708.pdf. The report (which assumes that the U.S. Terrorism Risk Insurance Act would not be
triggered) notes that the insured loss figures carry uncertainty of $5 billion or more due to ambiguities surrounding
coverage and exclusions under various lines of business, e.g., property and all risk covers.
20 Ponemon Institute, 2015 Cost of Data Breach Study: Global Analysis, pages 1, 2, and 9 (May 2015). These results
are based on a Ponemon survey of companies experiencing breaches of fewer than approximately 100,000 records.
21 Ponemon Institute, 2015 Cost of Data Breach Study: Global Analysis, paragraph 17 (May 2015).
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III.

Cyber Threats to the Insurance Sector

23.
In general, the insurance sector faces cyber risk from both internal and external sources,
including through third parties. Insurers collect, process, and store substantial volumes of data,
including personally identifiable information. Insurers are connected to other financial institutions
through multiple channels, including investment, capital raising, and debt issuance activities.
Insurers execute mergers and acquisitions and other changes in corporate structure that may
affect cybersecurity. Insurers outsource a variety of services, which may increase, or in somecases decrease, exposure to cyber risk.
Examples of Cybersecurity Weaknesses Involving Insurers Recently Observed by IAIS
Members
Missing or Incomplete Overview of the IT-Landscape
While all insurers should have an inventory of IT hardware and licensed software, even thosemaintaining such records on a current basis may not recognise the data flow between those IT
systems, applications, and components. If data flows exist between systems with high levels ofprotection and systems with lower security levels, cyber criminals may be able to gain access tootherwise secure systems.
Inadequate Control Process Regarding User Privileges
There are typically two types of problems associated with user identity management: (1) the
failure of controls within the allocation process of user rights, i.e., allowing users to have higher
system privileges than warranted; and (2) the failure to recognise when an account no longer
needs certain system privileges. Both types of failures could lead to insider abuse and exposure
to cyber risks. Software products which can perform identity management checks on an
automated basis are available.
Improper Access to Superuser Accounts
Direct employee access to “superuser” accounts (accounts with privilege levels far beyond those
appropriate for most users) without sufficient controls presents risks to insurers. First, if a hacker
gained access to any of the accounts held by the employees with access to the superuser
account, the hacker could effectively control the entire system through the superuser account(including hiding criminal acts by modifying or deleting log files or by disabling detection
mechanisms). Second, common use of superuser accounts could lead to unintended errors
affecting the entire system.
24.
Potential adverse consequences resulting from insurance sector cybersecurity incidents
may include, for example: loss or corruption of confidential or sensitive business, consumer, or
third-party data; disruption of business; physical loss (e.g., damage to hardware); financial loss;
and reputational damage. Some of these are highlighted below.
Loss of Confidential Data
25.
Personally identifiable information collected and stored by insurers, including personal
health information of policyholders and, in some cases, of third parties, may include names,
birthdates, social security numbers, street and email addresses, medical identification numbers,
and employment data such as income. Private health records may be particularly valuable on
black markets as tools for extortion, fraud, and identity theft, making insurers that collect suchinformation high-value targets for criminals.
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26.
For commercial policyholders, insurers may collect sensitive business information that
could be valuable to corporate and foreign spies. In the case of cyber insurance products, forexample, insurers may possess information about a policyholder’s network security controls andother cyber resilience information that could be valuable to hackers and other cyber criminals.
Further, loss of confidential information could harm valuable intellectual property rights of apolicyholder.
Disruption of Business27.
Not all cybersecurity incidents involve data breaches; some cyber attacks can result in
disruption to normal business operations. The cybersecurity incident on Sony Pictures, forexample, was reported to have destroyed the company’s entire network, including emails,
telephone directories, voicemails, and business records such as contract templates. 22 Such a
malicious attack on an insurer could result in significant harm to the firm and substantial recovery
costs.
Reputational Damage
28.
The foundation of the insurance business is policyholder trust: trust that the informationcollected by insurers will be protected, and trust that claims will be paid out in a timely way whenappropriate. If an insurer suffers a data breach, which exposes confidential policyholder
information, that trust may be shaken. Similarly, if an insurer were to suffer a cybersecurity
incident that rendered it unable to make timely claims payments or otherwise interrupted its
operations, that trust may also be shaken. The reputational risk could extend to the insurance
sector as a whole and adversely affect the confidence of consumers, policyholders, investors,
rating agencies, and business partners.

22 Amanda Hess, “Inside the Sony Hack,” Slate (22 November 2015), available at

http://www.slate.com/articles/technology/users/2015/11/sony_employees_on_the_hack_one_year_later.html.

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IV.

Examples of Cybersecurity Incidents in the Insurance Sector

29.
The insurance sector has experienced a variety of cybersecurity incidents in recent years,
including well-publicised data breaches at several U.S. health insurers. Some examples of thesecybersecurity incidents are provided below.
30.
In 2015, Anthem Blue Cross Blue Shield and Premera Blue Cross experienced data
breaches in which credit card data and personally identifiable information, including health data,
were compromised. 23 The breaches potentially exposed the personal information of up to 91
million policyholders – as many as a quarter of the people in the United States. 24 The insurers
had to react swiftly to mitigate reputational damage and to minimise litigation costs, although it iscurrently unknown how much loss the insurers will ultimately incur due to this breach.
31.
In another recent U.S. example, a data server operated by the state of North Dakota wascompromised, potentially exposing a range of personal information related to workers
compensation claimants – including 43,000 Incident Reports and 13,000 Payroll Reports that had
been filed online by workers and employers. Reportedly, medical information and claim files were
not exposed, but data at risk was said to include individuals’ names, social security numbers, birthdates, descriptions of injury, descriptions of incidents, names of employers, and employer
addresses. 25
32.
A group of cyber extortionists known as the “DD4BC” has been targeting a range of firms
including financial institutions in Europe, Australia, Canada, and the United States with threats of
distributed denial-of-service (DDoS) 26 attacks in order to extort money from them. DD4BC has
demanded ransoms of varying amounts, to be paid in bitcoins (crypto-currency), threatening tolaunch DDoS attacks unless the target pays the ransom by a specified deadline. Two German
insurance groups experienced this type of attack in mid-2015, receiving threats of a DDoS-attack
on company web servers unless they paid 40 bitcoins. The insurers refused, as they assessed
the extortionists would have caused only minor damage in those instances, but these incidents
could have been far more serious if the attacks had concentrated on more critical systems.
33.
In 2015, penetration testing performed by the internal audit team of an insurer in France
found that unauthorised access to accounting tools had occurred. Although in this instance there
were no further consequences, this cybersecurity incident could have had a substantial impact
not only on the company but also on partners, service providers, and policyholders.
34.
As a reminder that cybersecurity incidents can also include acts by insiders, an internal
fraud was identified in 2012 in a French mutual insurance company. This fraud, resulting from an

23 Anthem, Inc., Statement Regarding Cyber Attack Against Anthem, available at https://www.anthem.com/health-insurance/about-us/pressreleasedetails/WI/2015/1813/statement-regarding-cyber-attack-against-anthem; Premera
Blue Cross, Premera Targeted by Cyberattack (17 March 2015), available athttps://www.premera.com/wa/visitor/about-the-cyberattack/?WT.z_redirect=www.premera.com/cyberattack/.
24 NAIC, Cybersecurity Breach Response HQ, available at http://www.naic.org/index_security_breach.htm.
25 North Dakota Workforce Safety & Insurance, Cyber-Attack on State Server May Impact WSI Information (July
2015), available at https://www.workforcesafety.com/news/news-item/cyber-attack-on-state-server-may-impact-wsiinformation.
26 In a DDoS attack, an adversary directs a flood of illegitimate service requests to overwhelm the targeted computeror network in an attempt to make the resource unavailable to intended users, thereby seizing control of multiple
systems by infecting them with malware. See Committee on Payments and Market Infrastructures, Cyber Resiliencein Financial Market Infrastructures (November 2014), available at http://www.bis.org/cpmi/publ/d122.pdf.
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internal data theft on a replicated environment with sensitive client information, led to a case ofidentity theft and false claims.
35.
In the Netherlands, an insurer was recently subject to the so-called “CEO hack,” a specificform of phishing cyber attack. 27 Pretending to be the CEO of a major and well-known commercial
customer of the insurer, the criminals tried to persuade employees of the insurer to transfer money
into a certain account. The criminals had apparently researched certain operational details of theinsurer.
36.
A recent report from PwC identified several additional cybersecurity incidents experienced
by insurers in multiple jurisdictions, including attacks against personal lines, travel, health, andmarine insurers. 28

27 This type of cyber attack has been observed as an emerging threat. See, e.g., U.S. Federal Bureau of

Investigation, “Business E-Mail Compromise - An Emerging Global Threat,” (28 August 2015), available athttps://www.fbi.gov/news/stories/2015/august/business-e-mail-compromise/business-e-mail-compromise.
28 PwC, Under the Lens: Threats to the Insurance Sector (November 2015).
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V.

Insurer Cyber Resilience37.
The varied challenges presented by cyber risk should be met with a broad response by
insurers. Appropriately high-level management attention is a necessity, as is an effective
governance structure able to understand, prevent, detect, respond to, and address cybersecurity
incidents. In addition, a well-functioning risk management programme consistent with cyber
resilience best practices should be in place and verified through supervisory review. As described
below, this level of response is consistent with the Insurance Core Principles.
38.
To be effective, cybersecurity needs to be addressed at all levels of an institution and withrespect to relevant third-party arrangements. Generally, an effective cyber risk management
programme includes ongoing process and control improvements, incident management
procedures such as response and disaster recovery, appropriate network policies andprocedures, rigorous management and control of user privileges, secure configuration guidance,
appropriate malware protection procedures, consistent control of removable media usage,
monitoring of mobile and home working procedures, and ongoing awareness and educational
initiatives for all personnel.
39.

For example, it is generally recognised that best practices for cyber resilience include: 29•

Governance
Together with the engagement and commitment of the Board and Senior Management, aproper cyber resilience framework contributes to the mitigation of cyber risk. For example,
Senior Management should include an official with access to the Board, who is responsiblefor developing and implementing the cyber resilience framework.

•

Identification
Identification means identifying those business functions and processes that should beprotected against compromise. Information assets (including sensitive personal
information) and related system access should be part of the identification process.
Regular reviews and updates are key factors, as cyber risk is constantly evolving and“hidden risks” can emerge. Connected entities are part of the whole picture; significanceof the risks they pose is not necessarily proportionate to criticality of the particular service.
For example, the well-known cyber attack against retailer Target involved entry via a
ventilation service provider. 30•

Protection
Resilience can be provided by design. Comprehensive protection entails protecting
interconnections and other means of access to insider and outsider threats to theinstitution. When designing protection, the “human factor” should be taken into

29 U.S. National Institute of Standards and Technology (NIST), Framework for Improving Critical Infrastructure
Cybersecurity (February 2014), available at http://www.nist.gov/cyberframework/upload/cybersecurity-framework021214.pdf; FFIEC, Cybersecurity Assessment Tool (June 2015), available athttps://www.ffiec.gov/cyberassessmenttool.htm; Committee on Payments and Market Infrastructures and International
Organization of Securities Commissions, Guidance on Cyber Resilience for Financial Market Infrastructures (June2016), available at http://www.bis.org/cpmi/publ/d146.htm.
30 SANS Institute, Case Study: Critical Controls that Could Have Prevented Target Breach (5 August 2014), available
at http://www.sans.org/reading-room/whitepapers/casestudies/case-study-critical-controls-prevented-target-breach35412.

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consideration. Therefore, training is also an essential part of the safety net against cyberrisk. Controls should be in line with leading technical standards, as strong IT controls
contribute to protection.
•

Detection
Continuous and comprehensive cybersecurity monitoring is essential for detection ofpotential cyber incidents. Performing security analytics also helps to detect and mitigate
cyber incidents.

•

Response and Recovery
It is not always possible to detect or prevent cyber incidents before they happen, evenwith the best processes in place. For this reason, incident response planning is of great
importance. Resumption of services (if interrupted) should be achieved within areasonable timeframe, depending on the impact of the incidents and the criticality of theservice. Contingency planning, design, and business integration as well as data integrity(also in the case of data sharing agreements) are key enablers for fast resumption. To
make contingency planning effective, it should be subject to regular testing. Steps toprevent contagion can mitigate further risks. A disclosure policy should be in place in orderto enhance crisis communication. Last but not least, forensic readiness is essential fordeep dive investigations. Business continuity planning should consider these elements.

•

Testing
Testing programmes, vulnerability assessments, scenario-based testing, penetration
tests, and red team tests are cornerstones in the testing phase. Cybersecurity testingshould be included when systems are specified, developed, and integrated.

•

Situational Awareness
Awareness contributes to the identification of cyber threats. Accordingly, theestablishment of a threat intelligence process helps to mitigate cyber risk. In this regard,
insurers should consider participating in established information sharing initiatives.

•

Learning and Evolving
Insurers should continually revaluate the effectiveness of cybersecurity management.
Lessons learned from cyber events and cyber incidents contribute to improved planning.
New developments in technology should be monitored.

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VI.

Applicability of Insurance Core Principles to Cybersecurity

40.
While the Insurance Core Principles (ICPs) do not specifically address cyber risk andcyber resilience, they provide a general basis for supervisors to address the insurance sector withrespect to cyber risk and cyber resilience by requiring the management of significant risks andrelated internal controls.
41.
The ICPs that may be most relevant for the supervision of cyber risk in the insurance
sector include: 31
•
•
•
•
•

ICP 7 (Corporate Governance)
ICP 8 (Risk Management and Internal Controls)
ICP 9 (Supervisory Review and Reporting)
ICP 19 (Conduct of Business)
ICP 21 (Countering Fraud in Insurance)

And, particularly regarding information exchange and supervisory cooperation, the following
ICPs are relevant as well:•••

ICP 3 (Information Exchange and Confidentiality Requirements)
ICP 25 (Supervisory Cooperation and Coordination)
ICP 26 (Cross-border Cooperation and Coordination on Crisis Management).

ICP 7 - Corporate Governance42.
ICP 7 was revised in November 2015. Under this ICP, insurers are expected to be able todemonstrate the effectiveness of systems and controls and corporate governance framework.
The Guidance for this ICP states: “It is the Board’s responsibility to ensure that the insurer has
appropriate systems and functions for risk management and internal controls and to provide
oversight to ensure that these systems and the functions that oversee them are operating
effectively and as intended.” Identifying and addressing cyber risk should be an integral part of
the risk management of an insurer.
ICP 8 - Risk Management and Internal Controls
43.
ICP 8 was revised in November 2015. This ICP requires an insurer to have, as part of its
overall corporate governance framework, effective systems of risk management and internal
controls, including effective functions for risk management, compliance, actuarial matters, andinternal audit.
44.
ICP 8 Guidance lists a minimum set of categories that the risk management system should
cover. With respect to cyber risk, the Guidance is relevant as it refers to “operational risk
management,” “conduct of business,” and “other risk-mitigation techniques.” In addition, theGuidance states that the risk management system should take into account all reasonably
foreseeable and relevant material risks, including current and emerging risks.
45.
The Guidance also describes typical components of an effective internal control system.
Under the “policies and processes” that are listed as one of these components, the Guidancedescribes such internal control system as having “appropriate controls for all business processes
31 Other ICPs, such as ICPs 16 (Enterprise Risk Management for Solvency Purposes) and 18 (Intermediaries), mayalso be relevant.

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and policies,” including “critical IT functionalities,” “access to databases” and to “IT systems by
employees.” This clearly encompasses cyber risk.
46.
In addition, the Guidance calls for sufficient resources for control functions, including
appropriate IT/management information systems.
47.
Finally, ICP 8 Guidance states that the internal audit function should provide independent
assurance to the Board and Senior Management in respect of matters including capacity andadaptability of the IT architecture to provide accounting, financial, and risk reporting information
in a timely manner.
48.
When entering into or revising an outsourcing arrangement, the Board and Senior
Management should consider how the insurer’s risk profile and business continuity will be affectedby the outsourcing. This can apply to service provider’s governance, risk management, andinternal controls with respect to cyber risk.
ICP 9 - Supervisory Review and Reporting49.
ICP 9 addresses the general processes and procedures supervisors should have in placewith respect to supervisory review and reporting. These processes include analysing thesupervisory framework for review and reporting, to ensure that it pays due attention to the evolving
nature, scale, and complexity of risks which may be posed by insurers and of risks to which
insurers may be exposed. Under this ICP, the supervisory framework should require an insurer
to report promptly any material changes or incidents that could affect the insurer’s condition or
customers. As part off-site monitoring and on-site inspection supervisors should obtain sufficient
information to assess and analyse the risks to which an insurer and its customers are exposed,
and should review the effectiveness of the insurer’s management of the risks. ICP 9 is currently
under review.
ICP 19 - Conduct of Business
50.
The requirements for the conduct of insurance business include provisions relating to
privacy protection under which insurers and intermediaries are allowed to collect, hold, use, orcommunicate personal information of customers to third parties.
51.
ICP 19 requires insurers and intermediaries to have policies and procedures for theprotection of private information on customers. The Guidance describes a number of measures
to ensure privacy protection and prevent security breaches, focusing on prevention of the misuse
or inappropriate communication of personal information to third parties.
ICP 21 – Countering Fraud in Insurance
52.
Under ICP 21, supervisors require that insurers and intermediaries take effective
measures to deter, prevent, detect, report, and remedy fraud in insurance. Fraud in insurance
may occur through cyber incidents. ICP 21 is currently under review, in part to consider whether
it should be revised to address cyber risk more directly.

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ICP 3, ICP 25, and ICP 26 - Information Sharing and Supervisory Cooperation
53.
ICP 3 (Information Exchange and Confidentiality Requirements) is relevant because given
the nature of cyber risk, it is possible that more than one jurisdiction would be involved in theidentification, management, and mitigation of such risks. ICP 3 is currently under review.
54.
The ability to share information with other jurisdictions – as set out in ICP 25 (Supervisory
Cooperation and Coordination) – is an important tool for supervisors given the potential for a cyberincident to have cross-border impact. The ability of supervisors to act quickly to identify, manage,and mitigate risks will be enhanced by having an efficient mechanism for information sharing.
Such mechanisms might include bilateral or multilateral memoranda of understanding, such as
the IAIS Multilateral Memorandum of Understanding (the global standard for information sharing
among insurance supervisors), or other cooperation agreements, such as those established, forexample, in relation to supervisory colleges. In addition, the IAIS survey results described in thispaper suggest that most jurisdictions may benefit from sharing regulatory and supervisory
initiatives pertaining to cybersecurity, notably on issues such as cyber education and training, andtreatment of cyber risk with respect to outsourcing. ICP 25 is currently under review.
Examples of Cybersecurity Work of Other Global Financial Sector Standard Setting
Organisations
Committee on Payments and Market Infrastructures (CPMI) and International Organization of
Securities Commissions (IOSCO)In June 2016, the Joint Working Group on Cyber Resilience of CPMI and IOSCO released the“Guidance on Cyber Resilience for Financial Market Infrastructures.” 32 This guidance aims toenhance the ability of financial market infrastructures (FMIs) to prevent cyber attacks, respondrapidly and effectively to them, and achieve faster and safer recovery objectives. The guidance
does not establish additional standards for FMIs beyond those already set out in the Principles
for Financial Market Infrastructures (PFMI) but aims to elaborate on the PFMI. 33
Basel Committee on Banking Supervision (BCBS)
In October 2014, the BCBS published “Review of the Principles for the Sound Management of
Operational Risk,” 34 which reviews implementation of the Principles for the Sound Managementof Operational Risk published in 2011. 35 The report addresses the operational risk management
practices of 60 systemically important banks, and observes that some banks have developed
scenarios concerning catastrophic events, such as cyber attack.
55.
Under ICP 26 (Cross-border Cooperation and Coordination on Crisis Management), thesupervisor cooperates and coordinates with other relevant authorities such that a cross-bordercrisis involving a specific insurer or group can be managed effectively. Accordingly, it is expectedthat supervisors would cooperate and coordinate with other relevant authorities in respect of across-border crisis involving the cybersecurity of a specific insurer or group. Advance planning fortimely and consistent coordination and management of a cross-border crisis (including policy
32 Available at http://www.bis.org/cpmi/publ/d146.htm (29 June 2016). At the invitation of the joint working group, theChair of the FCTF served as an observer during the development of this guidance.
33 CPMI and IOSCO, Principles for Financial Market Infrastructures (April 2012), available at
http://www.bis.org/cpmi/publ/d101a.pdf.
34 Available at http://www.bis.org/publ/bcbs292.htm.
35 Available at http://www.bis.org/publ/bcbs195.htm.
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measures, crisis response decisions, and external communications) is a component of effective
crisis management. ICP 26 is currently under review.
56.
Further IAIS material specific to this area may be useful to help supervisors implement
consistent and sound supervisory practices, and to help insurers implement appropriate
cybersecurity practices.

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VII.

Supervisory Response to Cyber Risk

57.
This section considers the role of supervisors, includes a summary of the 2015 survey of
IAIS Members on combatting cyber risk, and provides examples of ongoing and evolving
supervisory responses to cybersecurity issues.
58.
The mission of the IAIS includes developing and maintaining fair, safe, and stable
insurance markets for the benefit and protection of policyholders. Within this context, insurance
supervisors have a role in addressing risks (including cyber risk) that could pose threats to thesafety and stability of, and confidence in, insurance markets, and that could compromise
policyholders.
59.
The supervisor can address cyber risk through appropriate regulation and the supervisory
process. Supervisory areas that may have particular relevance for cyber risk and cyber resilience
include:•••The security of private information held by insurers and intermediaries;
Financial crime undertaken through cyber means; andBusiness continuity and disaster recovery planning – for individual insurers andintermediaries and potentially for the insurance sector as a whole.

60.
In addition, cross-border and cross-sectoral supervisory cooperation may be important foraddressing cyber risk, as the issue is global in nature.
IAIS Survey on Cyber Risk and Supervisory Practices
61.
During January and February 2015, the IAIS conducted a survey of its Members to gain
insight about current supervisory approaches to cyber risk. Specifically, the survey was intended
to assist the FCTF in understanding Members’ perception of cyber risk, their involvement incombating cyber threats, and the supervisory approaches that are used or are under developmentin this area. Approximately 30 Members responded. Based on the survey responses received,
supervisory practices and views on cybersecurity vary widely among IAIS Members. Following
are some notable trends observed from the survey responses. A summary of the survey results
is provided in Annex I.
62.
Most respondents indicated that they have established or will establish regulatory or
supervisory requirements for insurers’ corporate governance with respect to cybersecurity.
Although many of the survey respondents have not yet defined specific cybersecurity provisions,they expect that insurers will cope with cyber risk under broader regulatory and supervisory
requirements, i.e., through enterprise risk management activities, particularly through IT risk
assessments. In addition, some of the survey respondents reported adherence to relevant
standards, notably the ISO standard for information security management, 36 as well as the
National Institute of Standards and Technology (NIST) framework for improving infrastructure. 37
A few respondents have published cybersecurity guidelines applicable to financial institutions.

36 The ISO 27000 standards help organisations keep information assets secure. ISO/IEC 27001 is the standard thatprovides requirements for an information security management system. International Organization forStandardization, ISO/IEC 27001 - Information Security Management, available at
http://www.iso.org/iso/home/standards/management-standards/iso27001.htm.
37 NIST, Framework for Improving Critical Infrastructure Cybersecurity (12 February 2014), available at
http://www.nist.gov/cyberframework/upload/cybersecurity-framework-021214-final.pdf.

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63.
Yet, cyber resilience did not appear to be perceived as a regulatory priority for most survey
respondents. Reasons given include the current stage of IT development, the lack of specificregulatory requirements for cyber resilience, and reliance on insurers’ self-assessments.
Furthermore, most survey respondents appeared to have limitations on staff with responsibility
for and expertise in cybersecurity monitoring and supervision.
64.
The survey results indicated that there are a variety of supervisory approaches to cyber
resilience. For example, some respondents assess the nature and scale of cyber risk faced by aninsurer through on-site inspections. Some expect to adopt holistic self-assessment exercises orthematic inspections focusing on cyber resilience of insurers. Others do not focus specifically on
cyber risk but may assess cybersecurity as part of a business continuity plan or risk management
framework of an insurer. Also, a minority of the respondents define the type or severity of cyberincidents that an insurer needs to report to its supervisory authority, while the majority of
respondents have no specified requirements for notification, and a few rely on annual audit
reports.
65.
Although the number of survey responses was limited, the answers from responding
Members and other information described in this report demonstrates that there is no uniform
practice among IAIS Members with respect to supervision concerning cybersecurity.
Examples of Supervisory Responses to Cyber Risk
66.
In addition to survey responses, certain IAIS members provided examples of some cyberrisk initiatives undertaken in Member jurisdictions, including, in some instances, public—private
cooperation and market-wide approaches. These examples are described below.
67.
France. L’Autorité de Contrôle Prudentiel et de Résolution (ACPR) categorises
supervision related to cyber risk under Information System (IS) control. The ACPR establishedthe following four criteria for cybersecurity supervision: (1) Confidentiality: Information isaccessible only to those who are authorised to access. Information is protected throughout its
lifecycle; (2) Integrity: Stored data is accurate and consistent. There is no need for alteration
among data records; (3) Availability: Information is accessible by authorised persons at the righttime with the right performance; and (4) Auditability: Access to IS, attempts to access IS, or
activities in IS are logged and stored. The logged files must not be modified or deleted. With thesecriteria, the ACPR looks into the following areas: governance; identification, and assessment ofIS risks; responses to IS risks; and, evaluation of controls, risk management, and follow-up
activity.
68.
Germany. The supervisory examination of the management of cyber risk is usually
performed through on-site inspections. The exact procedure depends on the size and risks of theparticular undertaking and on the size of the team of supervisors. For smaller undertakings, theBundesanstalt für Finanzdienstleistungsaufsicht (BaFin) addresses this aspect in the context ofrisk management. For larger undertakings, it often arranges a meeting focused on information
security issues. During such a meeting, the team discusses those aspects of cybersecurity andIT risk management which are of high importance. Further areas of cybersecurity may be
addressed when taking a closer look at other IT related aspects such as the software development
process or identity management.

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69.
European Union. The proposal for a Directive 38 concerning measures to ensure a highcommon level of network and information security across the Union was put forward by theEuropean Commission in 2013. On 7 December 2015, the European Parliament and the Council
reached an agreement on the Commission’s proposed measures to increase online security inthe EU. This Directive is the first piece of European legislation on cybersecurity. Its provisions aim
to make the online environment more trustworthy and, thus, to support the smooth functioning of
the EU Digital Single Market. The new rules will: (1) improve cybersecurity capabilities in Member
States; (2) improve Member States' cooperation on cybersecurity; and (3) require operators ofessential services in the energy, transport, banking and healthcare sectors, and providers of key
digital services like search engines and cloud computing, to take appropriate security measuresand report incidents to the national authorities. 39

70.
A proposed regulation on the protection of individuals with regard to the processing of
personal data and on the free movement of such data entered into force on 24 May 2016 andshall be applicable from 25 May 2018. 40 This text includes security incident notification provisions
relating to personal data and empowers national data commissioners to impose significant fines.
71.
Netherlands. One of the deliverables from thematic investigations by the central bank of
the Netherlands (the De Nederlandsche Bank, or DNB), is to provide individual financial
institutions with a benchmark with which they are compared in each sector (e.g., insurers, banks,and pension funds) based on results of investigations. Individual financial institutions can see
where they are positioned compared to the average for each sector. This applies to cyber risk
management.
72.
The DNB also supervises large international insurers jointly with supervisors of otherjurisdictions. A number of joint research projects for supervision of such groups have been
conducted. In addition, during investigations, two groups of people from different supervisory
authorities have worked together in one team. Through such cooperation, the DNB intends toobtain insight into management of cyber risk within insurance groups. Moreover, some units withina group provide services internally for multiple group entities while the individual group entities
may be subject to separate financial regulations applicable in each jurisdiction. The DNB intends
to obtain better insight into such units from a perspective of the entire group through such work.
Good examples of this type of supervisory cooperation include supervision focusing on groupwide asset management and IT systems.

38 Proposal for a Directive on Measures to Ensure a Common High Level of Network Security and Information inUnion – 2013/048 (called SRI or NIS).
39 European Commission, Network and Information Security Directive: co-Legislators Agree on the First EU-wide
Legislation on Cybersecurity (9 December 2015), available at http://ec.europa.eu/digital-agenda/en/news/networkand-information-security-directive-co-legislators-agree-first-eu-wide-legislation.
40 The European Parliament and the Council of the European Union, Regulation 2016/679 of the European
Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of
personal data and on the free movement of such data, and repealing Directive 95/46/EC (General Data Protection
Regulation) (4 May 2016), available at http://eur-lex.europa.eu/legalcontent/EN/TXT/PDF/?uri=CELEX:32016R0679&from=EN.

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Private Sector Information Sharing Initiatives in the Netherlands
In the Netherlands, the central bank (De Nederlandsche Bank, or DNB) has found that insurers
recognise the danger presented by cyber risk and are willing to cooperate with one another.
The Dutch Association of Insurers currently has two active working groups in the field of IT
risks and a separate consultation group made up of insurer IT directors. The two working
groups work respectively on information security (IS) and Business Continuity Management(BCM). In these two groups, specialists from the largest insurers exchange information about
their experiences, what they are doing, and how to learn from each other. The working groups
meet three to four times per year. The DNB has given presentations to both groups andobserved that the information exchange process still has room for improvement. For example,
information about attacks on insurers could be shared more extensively.
73.
Singapore. The Monetary Authority of Singapore (MAS), together with the Association of
Banks in Singapore, organises an industry-wide exercise triennially to enable financial institutions
to practice and improve coordination with key government partners to minimise the impact of acrisis arising from a cybersecurity incident. Exercise Raffles IV, the 2014 exercise, saw some 141
financial institutions, including banks, finance companies, insurance companies, asset
management firms, and securities and broking houses participate in a half-day exercise that
tested participants’ response to a massive cybersecurity incident on the financial industry.
Financial institutions and market infrastructures faced a combination of simulated cybersecurity
incidents, including theft of information; compromise of financial institutions’ core systems; ATMoutages, disruptions in online services; and website defacement. The simulated attacks required
financial institutions to assess the impact of the attacks on the institutions’ businesses in five
broad categories: customer, reputational, regulatory and legal, financial, and operational. 41
74.
United Kingdom. The UK financial authorities 42 have undertaken a number of projects tounderstand and seek to mitigate cyber risk. In 2005, 2007, and 2009, the UK financial authorities
undertook projects to benchmark the operational resilience of the UK financial sector. 43 In 2012,
the authorities responded to increasing cyber threats and feedback from the sector and focusedon developing smaller, more targeted surveys to delve deeper into the theme of technology andcyber resilience. This led to a desk-top exercise in 2013 to test the wholesale banking sector’s
response to a sustained and intensive cyber attack. 44
75.
The Financial Policy Committee (FPC) recommended that HM Treasury, collaborating with
relevant government agencies and the other financial authorities, should work with the core UK
financial system and its infrastructure to put in place a programme of work to improve and test
resilience to cyber risk. In response, the authorities issued a cyber-risk management
questionnaire to core UK firms and themes from this survey have been used to identify areas for
future work. Based on this assessment, the capabilities needed to address cyber risk can usefully
be divided into three categories: defensive capabilities, recovery capabilities, and effective
governance. The resulting programme of work is set around four themes: (1) enhancing
41 Association of Banks in Singapore, “Financial Sector Tests Response to Cyber Attacks in Fourth Industry-wide

Business Continuity Exercise” (21 November 2014), available at
http://abs.org.sg/docs/library/mediarelease_20141121.pdf.
42 Prior to 1 April 2013, the financial authorities were the Bank of England, the Financial Services Authority, and HM
Treasury.
43 Bank of England: http://www.bankofengland.co.uk/financialstability/fsc/Pages/bcinformation.aspx.
44 Ibid.
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understanding of the threat to the financial sector; (2) strengthening work to assess the sector’scurrent resilience to cyber risk; (3) developing plans to test the resilience of the sector; and, (4)improving the sharing of information.
76.
In June 2015, the FPC recommended further that the Bank of England, the Prudential
Regulatory Authority (PRA), and the Financial Conduct Authority (FCA) should work with firms at
the core of the UK financial system to ensure that they complete CBEST tests (a framework totest for cyber vulnerabilities) and adopt individual cyber resilience action plans. The Bank, the
PRA, and the FCA should also establish arrangements for CBEST tests to become one
component of regular cyber resilience assessment within the UK financial system. In August 2015
the PRA and FCA began a project to assess the resilience of the insurance sector. 45
Additional Supervisory and Cooperative Measures in the United Kingdom
The UK government views cyber attacks as a highest-level risk to national security, alongsideterrorism threats. Accordingly, it has set up a number of initiatives to help prevent cyber attacks,
including.
•
•
•
•

•
•

Cyber Essentials 46 – a basic cybersecurity hygiene standard launched in 2014 to helporganisations protect themselves against common cyber attacks
A National Cyber Crime Unit within the National Crime Agency
A Cyber Information Sharing Partnership to allow Government and industry to exchange
information on cyber threats 47
A single reporting system for people to report financially motivated cyber-crime throughAction Fraud, 48 a UK National Computer Emergency Response Team (CERT) to improve
national co-ordination of cyber incidents 49
A new Cyber Incident Response scheme in Government Communications Headquarters to
help organisations recover from a cyber attack
A network of Centres of Excellence for Cyber Security Research within UK universities in
2013, to help provide reliable and up to date research and academic prowess.

45 Prudential Regulation Authority, Bank of England:

http://www.bankofengland.co.uk/pra/Documents/about/insuranceletter100815.pdf.
46 Government of the United Kingdom, Department for Business, Innovation & Skills and Cabinet Office, Guidance –Cyber Essentials Scheme (April 2014), available at https://www.gov.uk/government/publications/cyber-essentialsscheme-overview.
47 Government of the United Kingdom, Cabinet Office, Department for Business, Innovation & Skills, Foreign &Commonwealth Office and National Security and Intelligence, Policy Paper – 2010 to 2015 Government Policy: Cyber
Security (February 2013), available at https://www.gov.uk/government/policies/keeping-the-uk-safe-incyberspace/supporting-pages/establishing-a-cyber-security-information-sharing-partnership.
48 Action Fraud is the UK’s national fraud and internet crime reporting centre. Information available at:
http://www.actionfraud.police.uk/about-us.
49 CERT-UK (https://www.cert.gov.uk/) is the UK National Computer Emergency Response Team, formed in March2014 in response to the National Cyber Security Strategy (November 2011), available athttps://www.gov.uk/government/uploads/system/uploads/attachment_data/file/60961/uk-cyber-security-strategyfinal.pdf).
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77.
United States. There are several initiatives and programmes in the United States that
focus on the cyber resilience of the financial sector, including insurers. These include, but are notlimited to, the following.
78.
Financial and Banking Information Infrastructure Committee. The United States
Department of the Treasury serves as chair of the Financial and Banking Information
Infrastructure Committee (FBIIC), which is a committee of 18 federal and state financial regulatorsand related organisations, including the Board of Governors of the Federal Reserve System andstate insurance regulators. FBIIC was chartered to focus on: (1) improving coordination andcommunication among financial regulators; (2) enhancing the resiliency of the financial sector;and (3) promoting public-private partnership. Treasury coordinates U.S. financial sector
cybersecurity efforts through the FBIIC. To fulfil its mission, FBIIC: (1) identifies criticalinfrastructure assets, along with their locations and potential vulnerabilities, and prioritises theirimportance to the financial system of the United States; (2) establishes secure communications
capability among the financial regulators and protocols for communicating during an emergency;and (3) ensures that sufficient staff at each member organisation have appropriate security
clearances to handle classified information and to coordinate in an emergency. 50
79.
Federal Sanctions Power. On 1 April 2015, the President signed Executive Order 13694,
Blocking the Property of Certain Persons Engaging in Significant Malicious Cyber-Enabled
Activities. This Executive Order authorises the Secretary of the Treasury, in consultation with the
Attorney General and the Secretary of State, to impose sanctions on individuals or entities thatengage in certain significant malicious cyber-enabled activities. 51
80.
NIST Framework. The Framework for Improving Critical Infrastructure Cybersecurity(NIST Framework) was released by the U.S. National Institute of Standards and Technology in
February 2014. The NIST Framework was created through collaboration between industry andgovernment, and sets out a voluntary, prioritised, flexible, repeatable, and cost-effective approachto managing cybersecurity. 52 Although originally created for applicability to critical infrastructure(i.e., essential services that underpin the U.S. economy, security, and health), the NIST
Framework was also designed to be used by firms of all sizes and from all sectors andjurisdictions. Authorities in the United States continue to promote widespread adoption of baseline
cybersecurity best practices through the use of the NIST Framework with the aim of broadening
the understanding of cyber risk and improving collective cybersecurity. 53
81.
FFIEC Cybersecurity Assessment Tool. Although designed specifically as a voluntary selfassessment tool for banks, the Cybersecurity Assessment Tool (Assessment) developed by the
U.S. Federal Financial Institutions Examination Council (FFIEC) 54 in 2015 provides a logical
50 Financial and Banking Information Infrastructure Committee: https://www.fbiic.gov/index.html.
51 Executive Office of the President, Executive Order: Blocking the Property of Certain Persons Engaging in

Significant Malicious Cyber-Enabled Activities (1 April 2015), available at https://www.whitehouse.gov/the-pressoffice/2015/04/01/executive-order-blocking-property-certain-persons-engaging-significant-m.
52 NIST, Framework for Improving Critical Infrastructure Cybersecurity (12 February 2014), available at
http://www.nist.gov/cyberframework/upload/cybersecurity-framework-021214.pdf.
53 White House, Administration Efforts on Cybersecurity: The Year in Review and Looking Forward to 2016 (2February 2016), available at https://www.whitehouse.gov/blog/2016/02/02/administration-efforts-cybersecurity-yearreview-and-looking-forward-2016.
54 The FFIEC is a formal U.S. interagency body empowered to prescribe uniform principles, standards, and reportforms for the federal examination of financial institutions by certain U.S. banking regulators. See FFIEC’s website:
http://www.ffiec.gov/.
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approach to cyber risk management, aspects of which could be considered by other financial
institutions, including insurers. The Assessment is designed to provide financial institutions within
its purview with a “repeatable and measurable process” to inform Senior Management and Boardsof Directors of the institutions cyber risk and cybersecurity preparedness. 55 The Assessment canbe used to: (1) identify factors contributing to and determining the institution’s Inherent Risk
Profile, or its overall cyber risk; (2) assess the institution’s Cybersecurity Maturity in five separate
domains, and whether that cybersecurity preparedness is aligned with the institution’s Inherent
Risk; and (3) identify specific risk management practices or controls that are needed to improvecybersecurity.

55 Federal Financial Institutions Examination Council (FFIEC), Cybersecurity Assessment Tool Glossary (June 2015),
available at https://www.ffiec.gov/cyberassessmenttool.htm.

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Additional Federal Supervisory and Cooperative Measures in the United States
Cyber Information Sharing. In December 2015, the President signed into law the Cyber
Information Sharing Act of 2015 (CISA), which establishes a system for private companies tovoluntarily share cybersecurity threat information with federal agencies. Companies that sharesuch information receive specific liability protections. Personally identifiable information notdirectly related to a threat must be removed prior to sharing the data. 56
National Cybersecurity Plan. On 19 February 2016, the President directed Executive Department
agencies to implement a Cybersecurity National Action Plan (CNAP) that takes near-term actions
and puts in place a long-term strategy to enhance cybersecurity awareness and protections,protect privacy, maintain public safety as well as economic and national security, and empower
Americans to take better control of their digital security. In addition to establishing the Commission
on Enhancing National Cybersecurity to develop a roadmap for future actions, CNAP calls on
health insurers and healthcare stakeholders to take significant steps to enhance their data
stewardship practices and ensure that consumers can trust that their sensitive data will be safe
and secure. 57
Financial Services Information Sharing and Analysis Center. The Financial Services Information
Sharing and Analysis Center (FS-ISAC) was established by the private sector to share threat,vulnerability, and incident information, including anonymised reporting from member institutions
and several public authorities. Membership in FS-ISAC is recommended by several agencies,
including the FFIEC, its member agencies, Department of Homeland Security, and theDepartment of the Treasury. Homeland Security Presidential Directive 7 (2003) established therole of the federal government in providing sanitised threat and vulnerability information to FSISAC and private sector entities operating critical infrastructure, assisting critical infrastructure
protection through public/private partnerships, and the coordinating role of Treasury related toresponse to incidents affecting financial services critical infrastructure. 58 In addition, private criticalinfrastructure firms in the financial services sector formed the Financial Services Sector
Coordinating Council (FSSCC) to coordinate critical infrastructure protection activities for thefinancial sector, including incident response and related information sharing. 59 Insurers are
involved in both the FS-ISAC and the FSSCC.
83.
National Association of Insurance Commissioners (NAIC) Cyber Initiatives. The NAIC is
pursuing several initiatives in response to emerging cyber threats. State insurance regulatorsserve on the FBIIC and on the Cybersecurity Forum for Independent and Executive Regulators,
where they work with federal regulators to develop best practices and discuss common
approaches to cybersecurity challenges. In late 2014, the NAIC formed the Cybersecurity (EX)Task Force to coordinate insurance regulators’ efforts to address cybersecurity issues. Shortly
after its formation, the Task Force established 12 Principles for Effective Cybersecurity Insurance
Regulatory Guidance, which set forth a framework for regulators to evaluate efforts by insurers,

56 Consolidated Appropriations Act, 2016, Pub. L. 114-113 (Dec. 15, 2015).
57 White House Press Release, Fact Sheet: Cybersecurity National Action Plan (9 February 2016), available athttps://www.whitehouse.gov/the-press-office/2016/02/09/fact-sheet-cybersecurity-national-action-plan.
58 Financial Services Information Sharing and Analysis Center (https://www.fsisac.com/about).
59 Financial Services Sector Coordination Council for Critical Infrastructure Protection and Homeland Security(https://www.fsscc.org/).

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producers, and other regulated entities to protect consumer information. 60 These principles wererevised and adopted by the NAIC Executive/Plenary Committee in June 2015. The Task Forcethen developed the Cybersecurity and Identity Theft Coverage Supplement for insurer financial
statements to gather financial performance information about insurers writing cybersecurity
coverage. The revised supplement was adopted by the NAIC Executive/Plenary Committee inAugust 2015 and filings began in the first quarter of 2016. 61 The Task Force is also working with
the NAIC’s Information Technology Examination Working Group and the Market Conduct
Examination Standards Working Group to develop and update protocols for inclusion as guidancein the Financial Condition Examiners Handbook and Market Regulation Handbook, respectively,
as cyber threats continue to evolve. Financial Examination revisions included in the 2016
Handbook are being used for examinations with an effective date of 31 December 2015. Finally,
the Task Force also developed the NAIC Roadmap for Consumer Cybersecurity Protections to
describe protections the NAIC believes consumers are entitled to from insurance companies,
agents, and other businesses when these entities collect, maintain, and use personal
information. 62 First adopted by the Task Force in October 2015, the Roadmap was adopted by
the NAIC Executive/Plenary in December 2015. These protections will be incorporated into
updates of relevant NAIC model laws and regulations, as well as into a new “Insurance Data
Security Model Law” that was exposed in March 2016, and which may be considered for adoption
later in 2016.
84.
Role of the U.S. State Supervisor. In general, in the event of a breach at a domestic
insurer, the lead state may use its regulatory authority in the following ways: (1) coordinate callswith the insurer to determine: when breach took place; who is affected by such breach and, usingthat information, determine which regulators need to be informed of this impact on state residents;
and, how notifications will be made to affected individuals (e.g. mail, email, newspaper ads, etc.);(2) ensure that appropriate actions are taken by the insurer in response to the breach (e.g., identity
theft protection, etc.); (3) communicate with state/federal regulators as appropriate; and (4)determine if a targeted exam is necessary/appropriate and, if so: coordinate selection of vendor
to perform cybersecurity exam; coordinate the execution of the examination procedures;
determine the scope of work using Financial Condition Examiners Handbook concepts whereappropriate; communicate the results of the exam; and, determine if regulatory action isnecessary. Relevant state insurance regulators have joined multi state market conduct
examinations following insurer data breaches, looking into, among other things, the details of thebreaches, the insurers’ responses to the breaches, and the financial impact of the breaches onboth policyholders and the insurers.
85.
New York Department of Financial Services. In November 2015, the New York
Department of Financial Services (DFS) issued a letter to the members of the FBIIC indicatingthat it is considering a new cybersecurity regulation for financial institutions. The letter sets forth
key regulatory proposals that the DFS is considering as part of those regulations and invites
feedback. Among other provisions, the potential regulations would require financial institutions to
adopt written cybersecurity policies and procedures overseen by a designated Chief Information
60 NAIC, Principles for Effective Cybersecurity: Insurance Regulatory Guidance (April 2015), available at

http://www.naic.org/documents/committees_ex_cybersecurity_tf_final_principles_for_cybersecurity_guidance.pdf.
61 NAIC, Cybersecurity and Identity Theft Insurance Coverage Supplement (June 2015), available at
http://www.naic.org/documents/committees_ex_cybersecurity_tf_related_cyber_id_theft_ins_suplement.pdf.
62 NAIC, Roadmap for Cybersecurity Consumer Protections (December 2015), available at
http://www.naic.org/documents/committees_ex_cybersecurity_tf_related_roadmap_cybersecurity_consumer_protecti
ons.pdf
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Security Officer (CISO) on: (1) information security; (2) data governance and classification; (3)access controls and identity management; (4) business continuity and disaster recovery planningand resources; (5) capacity and performance planning; (6) systems operations and availability
concerns; (7) systems and network security; (8) systems and application development and quality
assurance; (9) physical security and environmental controls; (10) customer data privacy; (11)vendor and third-party service provider management; and (12) incident response, including by
setting clearly defined roles and decision making authority. Moreover, institutions would be
required to implement and maintain policies and procedures to ensure the security of sensitive
data or systems that are accessible to, or held by, third party service providers, and the policies
and procedures would be required to include internal requirements for minimum preferred terms
to be included in contracts with third-party service providers addressing information security risks.
Further, the CISO would be required to submit to the DFS an annual report, reviewed by the
Board, assessing the cybersecurity programme and the cyber risk to the institution. The New York
initiative remains at the proposal stage.

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VIII.

Conclusion

87.
Cyber risk presents a growing challenge for the insurance sector, and one which, underthe ICPs, supervisors are obliged to address. Insurers collect, store, and manage substantial
volumes of confidential personal and commercial information. Because of these reservoirs ofdata, insurers are prime targets for cyber criminals who seek information that later can be used
for financial gain through extortion, identity theft, or other criminal activities. In addition, because
insurers are significant contributors to the global financial sector, interruptions of insurers’ systems
due to cybersecurity incidents may have far-reaching implications.
88.
The insurance sector faces cyber risk from both internal and external sources, including
through interconnections with third parties. Insurance sector cybersecurity incidents may result insevere and lingering harm for the policyholders affected and significant legal, regulatory, andoperational costs, including reputational damage. Moreover, the insurance sector as a whole may
be affected by a loss in public trust. Because of the growing frequency and severity ofcybersecurity incidents on all commercial entities, cyber resilience must be achieved by all
insurers, regardless of size, specialty, domicile, or geographic reach.
89.
The global scale of cyber risk dictates the need to address these risks on a global basis,
exemplified by ongoing work at the international level, including by financial sector standardsetting bodies such as CPMI and IOSCO. Effective cross-border cooperation and coordination is
an important component of the supervisory response to cyber risk.
90.
Insurance supervisors have an important role in enhancing cyber resilience in theinsurance sector. The nature of cyber risk requires increased scrutiny by supervisors andincreased cooperation and information sharing, with appropriate safeguards, between and among
the private and public sectors to enhance cyber resilience.
91.
Although the ICPs do not explicitly address cyber risk or cyber resilience, the terms of theprinciple statements and accompanying standards and guidance encompass all of the issues
presented by these risks. Accordingly, the ICPs provide a general basis for supervision of theinsurance sector with respect to cybersecurity. Moreover, consistent with its mandate, in 2016-17
the FCTF will be investigating whether – and if so, how – ICP 21 should be extended to specificallyaddress elements of cybersecurity.
92.
There is a diversity of sophistication on cyber-related issues among IAIS Members. Some
insurance supervisors have taken meaningful steps to address the cyber resilience of insurers
under their jurisdiction. However, based on the results of the 2015 IAIS survey on cyber risk,
among other indications, the degree to which supervisors prioritise cyber risk and the tools
available to address such risks varies across the globe.
93.
Given past experience and forecasted trends, cyber risks and the impact of cyber incidents
will continue to grow. Supervisors should seek to increase their understanding of cyber risk andtheir supervisory capabilities concerning the insurance sector’s cyber resilience. Such supervisory
focus might appropriately include, but should not be limited to, insurers’ awareness of cyber risk
and cyber resilience, and insurers’ development and implementation of policies, procedures, andtechnology to increase cyber resilience, including the implications of outsourcing and other thirdparty connections on cyber resilience.
94.
The IAIS will monitor initiatives and issues related to cyber risk as they continue to evolve.
Additional IAIS supporting material addressing cyber resilience best practices in line with the ICPs
may be helpful for supervisors and insurers. In this regard, in accordance with its mandate theIssues Paper on Cyber Risk to the Insurance Sector
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FCTF recommends that the IAIS consider following this Issues Paper with one or more Application
Papers further exploring these topics. It has identified, in particular, that guidance for supervisors
on cybersecurity would be useful for the following facets of the insurance sector: (1) examination
practices for supervisors; and (2) risk management practices for insurers.

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Summary of Responses to IAIS Survey

Annex I

Over January-February 2015, the FCTF conducted a survey of IAIS Members on the subject ofcyber crime. The survey was intended to assist the Task Force in understanding Members’
perception of the risks, their involvement in combating cyber threats, and the supervisory
approaches that are used or are developing in this area. Approximately 30 Members responded.
This section provides major points from the responses, set out in accordance with the main
themes of the survey.
Regulatory and Supervisory Contexti)
Cyber risk is considered within the scope of operational risk and is addressed within IT
regulatory frameworks, either through operational risk guidelines or specified IT standards. In
general, respondents considered cyber threats to be increasing within their jurisdiction. However,
the majority did not perceive cyber resilience to be a regulatory priority. Some of the factors for
not prioritising cyber resilience included the current stage of development of their own insurance
sector, the lack of a regulatory framework, and reliance on insurers’ self-assessments.
Supervisory Expectationsii)
Some authorities provided feedback assuming their regulatory frameworks that are
expected to be updated in near future are already in place while others described how theirregulatory frameworks addressing operational risk or IT risk address cyber risk. In general, mostsurvey respondents expect to include governance requirements within their own cyber regulatory
framework, particularly regarding roles in respect of the three lines of defence. 63 However,
responses in other areas, such as monitoring cyber incidents or staff training and awareness, cast
doubt on whether these areas are being addressed within the cyber regulatory framework.
iii)
For example, while more than half of the respondents indicated that they monitor a projectof an insurer, including its deliverables and action plans, to remediate root causes of cyberincidents, others indicated that they do not have a specific framework to monitor projects
addressing cyber incidents. Some authorities, however, indicated that if they identify any
weaknesses of an insurer in dealing with a cyber incident during an on-site visit or on otheroccasions, they will assess and monitor follow-up actions of the insurer to address those
weaknesses and its progress.
Supervisory Review and Assessment
iv)
Certain survey respondents had no staff specifically devoted to cybersecurity surveillance,
whereas a few have experienced teams of IT specialists that continuously receive training on
cybersecurity issues. Between these extremes, most survey respondents appeared to have
limitations on the number of staff with responsibility for cybersecurity monitoring.

63 Commonly observed practices in the industry for sound risk governance three lines of defence often rely on threeline of defence – (i) business line management, (ii) an independent corporate operational risk management functionand (iii) an independent audit review. For example, see Basel Committee on Banking Supervision, Sound Practices
for the Management and Supervision of Operational Risk (June 2011).

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Governancev)
Two-thirds of survey respondents confirmed that they check whether periodic reporting to
the Board and Senior Management on cyber risk and control assessments takes place. The same
proportion reported that they verify the audit function’s validation of the cybersecurity framework.
A little over half of respondents confirmed that supervisors review the alignment of cyber risk
management with the organisational strategy.
Cyber Risk Control Environmentvi)
Half the survey respondents appeared to have regulatory provisions and supervisory
practices in place to evaluate insurers’ cyber risk control environment. However, many of them
have not defined specific cybersecurity provisions, but rather follow cyber threats through risk
management activities and particularly through IT risk assessments. A few respondents rely on
periodic audit reports to monitor insurers’ cybersecurity surveillance, while others include
cybersecurity provisions as part of licensing requirements.
Threat and Vulnerability Risk Managementvii)
A third of survey respondents clearly indicated that they assess insurers’ management ofcyber risk, including insurers’ usage of software security tools. Around the same proportion
confirmed that they keep up to date with recent developments on management of cyber risk. For
those which do not follow such practices, some indicated that they only expect to be informed
when insurers are subject to major cyber threats, while others rely on insurers’ internal audit
reports supported by conclusions from external IT specialists.
Addressing Cybersecurity Incidents
viii)Over two thirds of the respondents have no specific requirements for notifying authorities
of cyber incidents. A few authorities nevertheless expect to be informed by insurers of any
incidents that have significant impact on policyholders under regulatory requirements to protect
personal information or with respect to major operational risk incidents, or they expect to be
informed by another government agency that is responsible for information protection in general,
but not directly reported by insurers. There is clearly scope to further develop the collection of
statistics on the number of cybersecurity incidents.
ix)
Also, over half of the respondents indicated that they monitor how an insurer follows up acyber incident, including its deliverables and action plans, to remediate root causes of cyberincidents. A few others indicated that if they identify any weaknesses of an insurer in dealing witha cyber incident through an on-site visit, they will assess and monitor follow-up actions of theinsurer to address the weaknesses.
x)
Further, with respect to business continuity related to cyber incidents, a large majority of
respondents indicated that they assess the effectiveness of insurers’ business continuity plans
after a cyber incident. Approaches vary among the respondents. Several look into a business
continuity plan or a crisis management framework from a broader perspective where cyber
resilience is part of the plan or framework.

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Supervisory Measures
xi)
Although the majority of respondents indicated that there is no regulatory requirement
specifically addressing cyber risk, most of them indicated that there are a number of supervisory
measures available. These included a letter of warning, an additional reporting request, a
remediation plan, fine, or suspension of business. Over half of survey respondents reported nothaving used supervisory enforcement measures to address weaknesses and deficiencies ininsurers’ cybersecurity practices, over the past five years.
Supervisory Approaches and Other Initiatives to Address Cyber Risk
xii)
Supervisory approaches vary for a number of reasons, including the priority given to
cybersecurity initiatives as compared to other risk categories. Supervisory approaches also differ
depending on the level of maturity of insurers’ IT and telecommunications infrastructures. It should
be noted that guidelines and other documents referred to in this section are considered to be ofpotential benefit to most jurisdictions, although there could be others of similar or even better levelof detail and clarity. Bearing this in mind, the observed approaches have been subdivided into thefollowing sections:xiii)
Compliance with Standards. Survey results clearly indicated that most jurisdictions
associate cybersecurity with standards compliance. Though cybersecurity practices arecontinuously evolving, certain standards are relevant and applicable to most organisations. One
such standard is ISO 27001, an international norm with the objective of providing requirements
for sound information system security management. 64 More specifically related to cybersecurity
is the “framework for improving critical infrastructure” published by the U.S. National Institute ofStandards and Technology (NIST), 65 which focuses on using business drivers to guidecybersecurity activities and considers cybersecurity risks as part of an organisation’s risk
management processes.
xiv)
Guidelines and on-Site Inspections. A few survey respondents noted having publishedguidelines specific to cybersecurity. For example, the U.S. NAIC has published principles for
effective regulatory guidance specific to the insurance industry. In other cases the guidelines havebeen conceived to be applicable to all kind of organisations, such as the U.K.’s “Cyber Essentials”
scheme, while others are specific to financial institutions, as in the case of OSFI’s cyber selfassessment guide in Canada, or ASIC’s cyber resilience health check in Australia.
xv)
Even though most jurisdictions have only developed best practices documents, a few
jurisdictions are already in the process of implementing updated examination frameworks, suchas the one being developed by the New York State Department of Financial Services.

64. International Organization for Standardization, ISO/IEC 27001 - Information Security Management.
65. NIST, Framework for Improving Critical Infrastructure Cybersecurity.
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Annex II

Glossary of Terms
Definitions of some of the key terms used in the paper are as follows: 66
Cyber attack

Attempts to damage, disrupt, or gain unauthorised access to acomputer, computer system, or electronic communications network.
An attack, via cyberspace, targeting an enterprise’s use of cyberspace
for the purpose of disrupting, disabling, destroying, or maliciously
controlling a computing environment or infrastructure; or destroying the
integrity of the data or stealing controlled information. 67

Cyber incident

Actions taken through the use of computer networks that result in an
actual or potentially adverse effect on an information system or the
information residing therein. 68

Cyber risk

Any risks that emanate from the use of electronic data and its
transmission, including technology tools such as the internet andtelecommunications networks. It also encompasses physical damage
that can be caused by cybersecurity incidents, fraud committed bymisuse of data, any liability arising from data storage, and theavailability, integrity and confidentiality of electronic information − be it
related to individuals, companies, or governments. 69

Cyber resilience

The ability to anticipate, withstand, contain and rapidly recover from acyber attack. 70

Cybersecurity

The term refers to strategies, policies, and standards encompassing
the full range of threat reduction, vulnerability reduction, deterrence,
international engagement, incident response, resilience, and recovery
activities, and policies regarding the security of an insurer’s
operations. 71

66 In providing these definitions, it is recognised that there is limited standardisation and hence alternative definitions
for some terms can be found in other sources.
67 Federal Financial Institutions Examination Council (FFIEC), Cybersecurity Assessment Tool Glossary (June 2015),
available at http://www.ffiec.gov/pdf/cybersecurity/FFIEC_CAT_App_C_Glossary_June_2015_PDF5.pdf.
68 Ibid.
69 CRO Forum, The Cyber Risk Challenge and the Role of Insurance (December 2014), available at
http://www.thecroforum.org/cyber-resilience-cyber-risk-challenge-role-insurance/.
70 Committee on Payments and Market Infrastructures and International Organization of Securities Commissions,
Guidance on Cyber Resilience for Financial Market Infrastructures (June 2016), available at
http://www.bis.org/cpmi/publ/d146.htm.
71 Committee on Payments and Market Infrastructures, Cyber Resilience in Financial Market Infrastructures(November 2014), available at http://www.bis.org/cpmi/publ/d122.pdf. Consistent with the definition used in theglossary.

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Cybersecurity
incident

In this paper, the phrase “cybersecurity incident” is used generally tocapture both cyber attacks and cyber incidents.

Cyber threat

A circumstance or event with the potential to intentionally orunintentionally exploit one or more system vulnerabilities resulting in aloss of confidentiality, integrity, or availability. 72

Data breaches

Security violations in which sensitive, protected or confidential data is
copied, transmitted, viewed, stolen, or used by an individual
unauthorised to do so. 73

MalwareMalware is designed to secretly access a computer system without theowner’s informed consent. The expression is a general term (short formalicious software) used to mean a variety of forms of hostile,
intrusive, or annoying software or programme code. Malware includes
computer viruses, worms, Trojan horses, spyware, dishonest adware,ransomware, crimeware, most rootkits, and other malicious andunwanted software or programmes. 74

NIST framework

National Institute of Standards and Technology, Framework for
Improving Critical Infrastructure Cybersecurity, February 2014. 75

72 Ibid. Consistent with the definition used in the glossary.
73 U.S. Department of Health and Human Services, Administration for Children and Families, Information
Memorandum: ACYF-CB-IM-15-04 (July 1, 2015), available at
http://www.acf.hhs.gov/sites/default/files/cb/im1504.pdf.
74 FFIEC, Cybersecurity Assessment Tool Glossary.
75 Available at http://www.nist.gov/cyberframework/upload/cybersecurity-framework-021214-final.pdf.

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Further Reading

Annex III

Atlantic Council and Zurich Insurance Group, Risk Nexux – Beyond Data Breaches: Global
Interconnections of Cyber Risk (April 2014), available at
http://www.atlanticcouncil.org/publications/reports/beyond-data-breaches-globalinterconnections-of-cyber-risk.
Atlantic Council, Frederick S. Pardee Center for International Futures and Zurich InsuranceGroup, Risk Nexus - Overcome by Cyber Risks? Economic Benefits and Costs of Alternate
Cyber Futures (September 2015), available at http://publications.atlanticcouncil.org/cyberrisks/.
Committee on Payments and Market Infrastructures and International Organization of Securities
Commissions, Principles for Financial Market Infrastructures: Assessment Methodology for theOversight Expectations Applicable to Critical Service Providers (December 2014), available at
http://www.bis.org/cpmi/publ/d123.htm.
Council of Europe, Convention on Cybercrime (November 2001), available at
http://www.coe.int/en/web/conventions/full-list/-/conventions/treaty/185.
Deborah Bodeau and Richard Graubart, “Cyber Resiliency Assessment: Enabling Architectural
Improvement,” MITRE Technical Report MTR120407 (May 2013), available at
http://www.mitre.org/publications/technical-papers/cyber-resiliency-assessment-enablingarchitectural-improvement.
European Commission, “Cyber Security,” Special Eurobarometer 390 (July 2012), available at
http://ec.europa.eu/public_opinion/archives/ebs/ebs_390_en.pdf.
Angelia Herrin, “Meeting the Cyber Risk Challenge,” Harvard Business Review (27 November2012), available at https://hbr.org/webinar/2012/12/meeting-the-cyber-risk-challen.
International Cyber Security Protection Alliance, “Project 2020 -Scenarios for the Future ofCybercrime,” available at https://www.icspa.org/wpcontent/uploads/2015/03/ICSPA_Project_2020__Scenarios_for_the_Future_of_Cybercrime.pdf.
International Telecommunication Union and United Nations Educational, Scientific and Cultural
Organization, Broadband Commission for Digital Development, The State of Broadband 2012:
Achieving Digital Inclusion for All (September 2012), available at
http://broadbandcommission.org/documents/bb-annualreport2012.pdf.
International Telecommunication Union, “Cybersecurity Guide for Developing Countries,”
available at http://www.itu.int/ITU-D/cyb/publications/2009/cgdc-2009-e.pdf.
International Organization for Standardization, ISO 31000: 2009, Risk management -- Principles
and guidelines (November 2009), available at
http://www.iso.org/iso/home/store/catalogue_tc/catalogue_detail.htm?csnumber=43170.

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-ISO/IEC 27005:2011, Information technology – Security techniques – Information
security risk management (June 2011), available at
http://www.iso.org/iso/home/store/catalogue_tc/catalogue_detail.htm?csnumber=567
42.

-

ISO/IEC 27032:2012, Information technology – Security techniques – Guidelines forcybersecurity (July 2012), available at
http://www.iso.org/iso/home/store/catalogue_tc/catalogue_detail.htm?csnumber=443
75.

-

ISO/IEC 27000:2016, Information technology - Security techniques -- Information
security management systems - Overview and vocabulary (February 2016), availableat
http://www.iso.org/iso/home/store/catalogue_tc/catalogue_detail.htm?csnumber=664
35.

International Organization of Securities Commissions, Mechanisms for Trading Venues toEffectively Manage Electronic Trading Risks and Plans for Business Continuity, (December2015), available at http://www.iosco.org/library/pubdocs/pdf/IOSCOPD522.pdf.
Information Systems Audit and Control Association, Control Objectives for Information and
Related Technology, available at http://www.isaca.org/COBIT/Pages/default.aspx.
Organisation for Economic Co-operation and Development, Future Global Shocks, Improving
Risk Governance (September 2011), available at
http://www.oecd.org/governance/48329024.pdf.
-

Cybersecurity Policy Making at a Turning Point, Analysing a New Generation of
National Cybersecurity Strategies for the Internet Economy (2012), available at
http://www.oecd.org/sti/ieconomy/cybersecurity%20policy%20making.pdf.

-

The Evolving Privacy Landscape: 30 Years After the OECD Privacy Guidelines (April2011), available at http://www.oecd-ilibrary.org/science-and-technology/the-evolvingprivacy-landscape-30-years-after-the-oecd-privacy-guidelines_5kgf09z90c31-en.

-“Information security and privacy,” available at
http://www.oecd.org/sti/ieconomy/informationsecurityandprivacy.htm.

Rohini Tendulkar, “Cyber-crime, securities markets and systemic risk,” Joint Staff Working
Paper, International Organization of Securities Commissions Research Department and World
Federation of Exchanges, (July 2013), available at
http://www.iosco.org/research/pdf/swp/Cyber-Crime-Securities-Markets-and-Systemic-Risk.pdf.
SANS Institute, CIS Critical Security Controls - Version 6.0 (January 2013), available at
http://www.sans.org/critical-security-controls/.
Securities Industry and Financial Markets Association, Principles for Effective Cybersecurity
Regulatory Guidance (October 2014), available at
http://www.sifma.org/issues/item.aspx?id=8589951691.
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UK National Computer Emergency Response Team, Cyber-security Risks in the Supply Chain(February 2015), available at https://www.cert.gov.uk/resources/best-practices/cyber-securityrisks-in-the-supply-chain/.
United Nations, Creation of a Global Culture of Cybersecurity, Resolution 57/239 adopted by
the General Assembly (January 2003), available at http://www.itu.int/ITU-D/cyb/cybersecurity/
docs/UN_resolution_57_239.pdf.
United Nations Office on Drugs and Crime, Comprehensive Study of the Problem of Cybercrime
and Responses to it by Member States, the International Community and the Private Sector(February 2013), available at http://www.unodc.org/documents/organizedcrime/UNODC_CCPCJ_EG.4_2013/CYBERCRIME_STUDY_210213.pdf.
U.S. Securities and Exchange Commission, Division of Corporation Finance, CF Disclosure
Guidance: Topic No. 2, Cybersecurity (October 2011), available athttps://www.sec.gov/divisions/corpfin/cfdisclosure.shtml.
World Economic Forum, Building Resilience in Supply Chains (January 2013), available at
http://www3.weforum.org/docs/WEF_RRN_MO_BuildingResilienceSupplyChains_Report_2013.
pdf.
-

Risk and Responsibility in a Hyperconnected World: Pathways to Global Cyber
Resilience (May 2012), available at
http://www3.weforum.org/docs/WEF_IT_PathwaysToGlobalCyberResilience_Report_2012.pdf.

-

Partnering for Cyber Resilience – Towards the Quantification of Cyber Threats(January 2015), available at
http://www3.weforum.org/docs/WEFUSA_QuantificationofCyberThreats_Report2015.
pdf.

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