U.S. Prods Banks to Buy Cyber Insurance, Insurers to Develop Products

December 4, 2014

Banks should consider cyber risk insurance to help deal with the financial fall-out from the growing threat of cyber attacks, a top U.S. regulator said on Wednesday.

Bankers and officials have become more vocal lately about concerns that malicious hacks could put customer data and the stability of the financial system at risk.

Cyber insurance will not stop hackers, but it can help banks improve their broader cyber controls, Treasury Deputy Secretary Sarah Bloom Raskin told the Texas Banker’s Association at a cybersecurity conference.

“Bankers rarely used to talk to me much about cybersecurity,” she said at the event in Austin, according to prepared remarks. “Now, this is one topic that comes up every day.”

The Federal Bureau of Investigation warned that hackers have used malicious software to launch destructive attacks on companies, following a massive breach at Sony Pictures Entertainment last week.

In August, JPMorgan Chase & Co. was subject to a new kind of phishing scam that sought to access customer credentials not just for the bank but for other financial institutions.

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Raskin said more than 50 carriers now offer some form of cyber risk insurance, and Treasury is encouraging companies to develop insurance products that could improve firms’ overall cyber protection.

“Ideally, we can imagine the growth of the cyber insurance market as a mechanism that bolsters cyber hygiene for banks across the board,” she said.

The insurance broking arm of Marsh & McLennan Companies estimates the U.S cyber insurance market was worth $1 billion last year in gross written premiums and could reach as much as $2 billion this year. But many insurers are still trying to develop their skills in handling hackers and data breaches.

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Raskin also said Treasury was working on an exercise to test communication among government agencies and financial institutions during a cyber attack.

Bankers and the government say they want to figure out ways law enforcement can alert financial firms about cyber attacks without violating the privacy of businesses that are victimized. Both sides have long complained that such concerns have hindered notification, preventing the industry from quickly adapting to emerging threats.

U.S. lawmakers were working on legislation that would lay out how companies can exchange more cybersecurity-related information with each other and the government, but made little progress in a busy election year.

(Reporting by Anna Yukhananov; Editing by Leslie Adler)

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