The number of cyber attacks is on the increase and so is their level of sophistication. Because insurance companies are data driven businesses holding vast amounts of customer data (personal information, health and financial data), cyber attacks are a real threat and should be prioritised as one of their key operational risks. Most of the attacks against insurance companies have taken place in the US but insurers in Asia cannot afford to be complacent. In 1997, a multinational insurer in Singapore lost the personal data of over 5,000 of its customers as a result of a cyber attack. The cyber attack on the Marriott hotel group which compromised about 500 million guests' data is a stark reminder of how devastating an attack can be. There is a pressing need for insurers to establish robust cybersecurity frameworks to protect their business data and the personal data of their customers. The issues faced by insurers which seek to improve their cyber resilience are not trifling as many of them are still using legacy systems which they chose to patch up. The increase in the volume of data collected across various business applications adds to the complexity of the situation. Yet, it must not be forgotten that intrusions in the system can happen as simply as a hacker stealing the identity of a claims processor.
The risks faced by insurers in Hong Kong has been put at the forefront by the Insurance Authority ("IA"). The new Guideline on Cybersecurity (GL20) issued by the IA introduces cybersecurity requirements for authorised insurers, reflecting the minimum standard for cybersecurity that authorised insurers are expected to have in place. Although the general guiding principles under the Guideline do not have the force of law, the IA will take such principles into account in assessing the fitness and properness of insurers. Importantly, GL20 makes it clear that the board of directors of an insurer has overall responsibility for cyber security controls and ensuring accountability. Except for captive insurers and marine mutual insurers, the Guideline applies to all authorised insurers in relation to the insurance business they carry on in or from Hong Kong. The Guideline will take effect from 1 January 2020 in tandem with the Guideline on Enterprise Risk Management (GL21), which requires authorised insurers to establish enterprise risk standards with regards to cybersecurity.
The Guideline provides for six main areas of cybersecurity requirements, as summarised below.
- Sanctioned cybersecurity strategy and framework: Insurers should establish a cybersecurity strategy and framework, endorsed by the board of directors of the insurer. To ensure that the strategy remains relevant, it should be reviewed and updated regularly (for example, on an annual basis, upon a cyber incident or a major systems change).
- Systematised governance: The board of directors of an insurer should hold overall responsibility for overseeing and implementing cybersecurity controls. To help it conduct its duties, it may establish a designated management team with the appropriate skills. The designated management team should consist of members with the appropriate skills and knowledge to understand and manage cyber risks.
- Risk identification, assessment and control: Insurers should identify cyber risks and conduct assessments on the effectiveness of cybersecurity measures to protect against cyber risks within an internally-set risk appetite. A self-assessment tool should be put in place to identify business functions, evaluate inherent cyber risks and analyse business impact.
- (Controlled monitoring) Stable monitoring: Insurers should establish a monitoring process that detects cybersecurity incidents and evaluates the effectiveness of internal control procedures. Tests of all elements of the cybersecurity framework should be conducted annually.
- Prompt response and recovery: Insurers should develop a cybersecurity incident response plan that sets out scenarios of cybersecurity incidents and corresponding strategies on response and recovery. In the event of a cybersecurity incident, the insurer should notify internal stakeholders and the IA within 72 hours. Incident response drills should be conducted annually.
- (Information sharing and training) Information sharing, training and awareness: Insurers should establish a process that gathers and analyses cyber risk information and participate in cyber risk information sharing groups. All system users should also undergo cybersecurity awareness training.
The Guideline provides guidance to insurers on the expected standard for cybersecurity frameworks, but the requirements listed therein are not intended to be exhaustive. In considering what measures should be adopted for compliance, reference should be made to internationally recognised standards, such as ISO/IEC 27001 and the Framework for Improving Critical Infrastructure Cybersecurity issued by the National Institute of Standards and Technology of the US. The moral of all this is that devil is in the detail.
Insurers are expected to implement adequate cybersecurity measures commensurate with the size, nature and complexity of their business. The recommendation for regular testing of the cybersecurity framework should not be underestimated. Such tests must be effective and should simulate realistic cyber attacks that the insurer might face. Insurers should also be confident that the designated management team possess strong collaborative skills to enhance cooperation within the organisation in a crisis.
Last but not least the recommendation on risk identification and assessment is also important. With attacks increasing in sophistication, are insurers aware where their critical security gaps are?
With the Guideline taking effect shortly, insurers need to consider how they can ensure compliance fast. As responsibility has been placed on the shoulders of the board of directors, they will need to make it a key priority for the last quarter of 2019 that their businesses are cyber resilient.
Originally published September 24 2019
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