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Singapore working towards building financial sector’s resilience to cyber risk

Ms Elean Chin, Division Head, Monetary Authority of Singapore, spoke at the Cyber Risk Management Project’s ‘Bashe Report’ Launch on 29 January 2019.

She opened by saying “In Asia, the likelihood of cyber-attacks is unfortunately disproportionately higher than in other regions. Asia is one of the most digital connected economic blocks, with high internet connectivity and smartphone penetration levels.  Yet, cybersecurity investment and data breach protection laws remain inadequate.”

She added “As a result, Asia Pacific saw the highest number of compromised records and security events in the first half of last year, accounting for close to 40% of global cybersecurity incidents and 30% of compromised records worldwide. In 2017, Asia suffered US$1.75 trillion in economic losses, or 7% of its GDP from cyber attacks.”

Cost of a global cyber attack

A coordinated global cyber attack spread by email could have an economic impact of between $85bn and $193bn, according to a report by the Cyber Risk Management (CyRiM) project. The report was co-produced by Lloyd’s of London, Aon and other CyRiM partners. It creates and evaluates a hypothetical scenario in which companies’ devices are infected with malware that threatens to destroy or block access to files unless a ransom is paid.

The Bashe (Ba She) Report  aims to highlight the cost and repercussions of a serious cyber attack. According to the report, in the event of a major cyber attack originating from Asia, within 24 hours, data within 30 million devices could be encrypted, impacting over 600,000 firms worldwide, and costing Asia US$19 billion in economic losses.

Takeaways for the insurance sector

The report states that there are valuable lessons for the insurance sector, as the report highlights potential insurance policy, legal, and aggregation issues in cyber insurance offerings.

It also finds that there are opportunities for insurers to grow their business in the insurance classes associated with ransomware attacks. For example, Asia is one of the fastest-growing markets for cyber insurance. The market saw an 87% increase in cyber insurance take-up rates in Asia in 2017 with the current global premiums estimated to total $50 million. The increase in cyber-attacks in 2017 in Asia over recent years means companies are more likely to have standalone cyber insurance than before. Further insurance take-up is likely in the future.

Singapore to build financial sector’s resilience to cyber risk

Within the financial sector in Singapore, Ms Chin said that MAS is updating the Technology Risk Management Guidelines. This update is intended to give a greater focus on cyber resilience, as well as to provide further guidance on new technologies and emerging cyber threats. MAS will also be issuing legally binding requirements on cyber hygiene to help strengthen our financial sector’s resilience to cyber risk.

Another way Singapore was working to tackle this issue was through the Cyber Security Act which came into force in August 2018, creating a regulatory framework for the monitoring and reporting of cybersecurity threats. Breach notification to the Cyber Security Agency and sector leads, such as MAS, for the financial sector, is currently mandatory for Critical Information Infrastructure (CII) owners. Proposed revisions to the Personal Data Protection Act will also make it mandatory to notify the Personal Data Protection Commission and impacted individuals of certain data breaches

Aside from regulation, efforts are also underway to strengthen the cyber security ecosystem, with particular emphasis on knowledge and information sharing with the region. The ASEAN-Singapore Cybersecurity Centre of Excellence will be launched this year to strengthen ASEAN member states’ cyber strategy development, legislation and research capabilities.

Within the financial services sector, MAS has partnered the Financial Services Information Sharing and Analysis Centre, or FS-ISAC, to establish its Asia Pacific Regional Analysis Centre in Singapore. The Regional Centre, which supports member financial institutions across nine Asia Pacific countries, allows its members to share and receive cyber threat intelligence

Insurance plays a critical role in mitigating cyber risk

Despite the benefits of cyber insurance, take-up is lagging globally, the report finds the gaps in cyber insurance policies often stems from insufficient historical data and supporting models to support risk assessment, quantification and underwriting of cyber risk. Insurers try to deal with this uncertainty by setting high deductibles, low coverage limits and significant exclusions.

She also added that “As part of broader cyber risk management strategy, the role of insurance in assessing, mitigating and responding to cyber risk is often an understated one. Insurance plays a critical role in pricing cyber risk through the premiums that firms pay, and through this pricing mechanism creates incentives for firms to mitigate cyber risk.

Insurers are increasingly teaming up with technology and threat intelligence partners to assess a client’s cyber risk profile as part of their underwriting process, and work with clients on an ex-ante basis, to provide insights on preventative measures which can be taken to improve the firms’ cyber resilience.

Cyber insurers are therefore key partners in promoting cyber hygiene, an important factor in building cyber resilience.

Ms Chin concluded by saying that “CyRiM’s research on definitions, data, scenarios, risk assessment frameworks and policy aims to address some of the challenges of underwriting this complex, interconnected and dynamic risk. Can we make this uninsurable risk insurable? It is possible. However, we need to make deep foundations for the development of an efficient cyber insurance marketplace in Singapore.”

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