ICNZ/NZ Insurance Law Association “Cyber risks: year in review” Auckland – 16th November, 2017 Ian Pollard, Managing Director, Delta Insurance

Delta Insurance

–Locally owned but global outlook & expertise

–Passion for Specialty & Niche products – best of NZ, Singapore and overseas

–Not the biggest but the best at what we do

–Operations in New Zealand and Singapore

–DELTA = "Change":

• The best of traditional insurance (personalised service; relationships)

• Better, more efficient delivery, harness technology

• Thought Leadership & Risk Management

–Coverholder at Lloyd’s

–NZTE Focus 700

–Deloitte Fast 50 2017

Intro – A Year in Review…Some Highlights (or lowlights)

a)Ransomware

b)NZ Cyber Security Strategy

c)NZ Cert

d)State Sponsored Threats

e)Cyber Criminals

f) Equifax

g)Lloyd’s / Cyence – “Counting the Cost:

Cyber exposure Decoded”

Panellists

–Jeremy Jones – Theta

–Isaac Holliss - NCPO

–David Maritz - MDD Forensic Accountants

Cyber security threats

Jeremy Jones

Head of Cyber Security

Theta

“A computer lets you make more

mistakes faster than any invention in

human history, with the possible

exceptions of handguns and

tequila”

0 20 40 60 80 100 120

Ac

tivit

y

Days

Cyber Kill Chain: Attacker v Defender

detect

protect

recover

target

deliver

exploit install

command

& control evade &

conceal execute recon weaponise

understand

The NZ context

mentality

time zone

not a target

rich

environment

…and was significant because?

Rapid weaponisation of tools into commodities

…that caused or enabled…

More effective ransomware attacks

Attack mechanism

Stolen/leaked NSA/CIA capabilities

Wannacry

…and was significant because?

Information warfare now capable of altering the geo-political balance

…that caused or enabled…

Disruption to democratic processes

Attack mechanism

Manipulation of social media

Information warfare

…and was significant because?

Even “good guys” get hacked

Reputational damage?

…that caused or enabled…

Unauthorised access to email accounts

Attack mechanism

Weak login protection

Deloitte data breach

Attack

mechanism

…that caused

or enabled…

…and was

significant

because?

Web application

vulnerabilities

+

Poorly

coordinated

incident response

+

Weak corporate

governance

Large data

breach

+

Protracted,

expensive and

embarrassing

coverage

+

C-Suite share

sell-off

Need to do the

basics

+

Spread

investment

across range of

defensive

activities

+

Cyber security is

driven from the

top down

Equifax data breach

Where do we start?

roles and

responsibilities

Management oversight

Response plans

Support training and

awareness campaigns

appoint a cyber

specialist

Or an independent expert

Present on cyber issues

Be responsive to new or elevated threats

quantify cyber risk

Cyber risk in financial terms

Annualised Loss Expectancy by

threat and cost type

Track cyber maturity

regulatory &

compliance

Establish how cyber risk affects

share value

Data breach notification

obligations

Personal privacy protection

disclosure

Describe cyber risks in any capital

raising prospectus, mergers or

acquisitions

review cost of

protection

Cyber insurance

Training and certification

IT security budget

theta.co.nz /solutions/cyber-security/

Questions?

New Zealand’s Cyber Security Strategy A secure, resilient and prosperous online New Zealand

Isaac Holliss National Cyber Policy Office 16 November 2017

Principles

• Partnerships are essential

• Economic growth is enabled

• National security is upheld

• Human rights are protected online

It’s not just about risk

Source: Building a Digital Nation, MBIE, March 2017

NZILA / ICNZ Liability

Discussion Group

16 November 2017

Presenter

David Maritz, Senior Manager

• Originally founded in the US in 1933.

• Over 40 offices with over 300 professional staff globally.

• MDD’s forensic accountants specialize in a wide range of insurance

and litigation matters.

• Routinely retained for evaluations that require an extensive

knowledge of accounting, business, operational and manufacturing

processes across many industries.

• Global experience in a wide range of cyber related losses acting on

behalf of insurers, reinsurers and underwriters.

• Local association with Gallagher Bassett Cyber Services offering a

comprehensive response to claims

23

MDD

Very sophisticated and difficult to trace

Uses an NSA hacking tool called Eternal Blue that was created by

exploiting a vulnerability in Windows

• 2 other methods also used (one was stealing victims’ credentials) to promote the

spread

Microsoft issued fix in March but many companies didn’t install it or installed

it wrong

May have disguised itself as a M.E.Doc accounting software update;

• M.E.Doc reportedly didn’t update software for 4 years and were backdoored

(meaning security was bypassed) multiple times

• M.E.Doc server equipment seized by Ukrainian police after officials detected another

cyber attack coming from their infrastructure

What We Know About Petya

You Have Been a Victim!

Companies Impacted

Company/Entity Type of Business Impact of Attack Financial Impact

(if known)

BNP Paribas (France)

Banking Real estate division affected

SNCF (France)

Railway

Has been able to stop attempted

intrusions thus far

Chernobyl Nuclear Plant (Ukraine)

Power Generation

Workers manually monitoring

radiation at the exclusion zone

Merck (International)

Pharmaceutical

Computer network compromised

Rosneft (Russia) Energy Switched to reserve IT system;

reportedly had to turn off network at

oil refinery in Ryazan; servers hit

Saint-Gobain (France) Construction Isolated its computer systems to

protect data

WPP (UK) Advertising Several IT systems affected

Home Credit Bank (Russia) Banking All offices closed

MAERSK (International) Shipping Multiple systems and business

units impacted globally; 17 shipping

terminals hacked (including those in

Rotterdam and the Port of NY &

NJ); container terminal at Mumbai’s

Jawaharlal Nehru airport also

affected

"It is too early to predict what the

impact will be on the quarter-two, or

potentially the quarter-three result."

DLA Piper (International) Law Firm Disabled its email; all network

services down

Companies Impacted

Company/Entity Type of Business Impact of Attack Financial Impact

(if known)

Heritage Valley Health Systems

(US)

Healthcare Affiliated hospitals in

Pennsylvania had to cancel

operations (we don’t know how

many)

Mondelez International Food Preparation Computer outage across global

operations; Cadbury factory in

Tasmania impacted; 5

manufacturing facilities in

Australia and NZ all hit but some

were able to carry out limited

production

Growth would be reduced by 3 % due

to the recent global cyber attack.

Qantas Airline Booking system failed

Nuance Communications (U.S.) Software Affected portions of network

Metro (Germany) Retailer Affected wholesale stores in

Ukraine

Bashneft (Russia) Oil Servers attacked

Evraz Steel Manufacturing and Mining Company said output not affected

Beiersdorf (Germany) Personal Care Products Affected IT and telephone

systems in Hamburg and affiliates

worldwide

MARS Inc. Food Manufacturer Spokeswoman said company had

isolated the issue

Reckitt Benckiser Consumer Goods Disrupted production and

deliveries of goods to customers

in several countries

Expecting a 3% annual increase for

2017, but now only 2% which equates

to around £100m in lost revenue

Map of Disrupted Areas

Business is a international pet food manufacturer.

• Petya affected 95% of servers (3,000 units) and 90% of

workstations (4,000 units)

• Affected all manufacturing locations (13 locations) spread across

the world, company also had to operate an order – to - cash

system following the loss until systems back up and running

• Significant claim – EUR60m to EUR80m. BI – EUR42m to

EUR51m) for GP and EUR10m to EUR15m for Additional

Costs. PD is EUR8m to EUR13m

• Claim currently goes to October 2017 (systems were fully

restored in late September 2017) however there may be ongoing

losses / make up to the end of the year.

Case Study 1 - Scale

Business is a large US retailer with nearly 1,800 stores across the US:

• 40 million credit and debit card details hacked over Thanksgiving

holiday

• Profits down 50% of that quarter, shares down 11% on NYSE,

proceedings for class actions issued and $3.6bm liability for fines

• Online business not affected by attack but severely affected as a

consequence

• Banks froze credit cards after unaffected card holders shopped there

Case Study 2– Reputational Loss

Business is an international financial services provider

• Major DoS attack partially shut down services for a week

• Concerns that customer data may have been compromised

• MDD asked to measure damages but not allowed to disclose the name

of the Insured in reports

• Main issue was the understanding of recouped fixed expenses

• Company hit again and shut down for another week.

• PR successfully kept identity and nature of both attacks out of the public

domain.

Case Study 3 – Secrecy

THANK YOU!

L31 Vero Centre

48 Shortland Street

Auckland

Phone 09 363 3826

Mobile 021 2985 159

www.mdd.com

The Future / 2018 Outlook

a) Threats

b)Ransomware

c)Legal Developments – May 2018 EU GDPR

d)Cloud Exposures

e)New Risks – IOT / AI / AR

f) New Solutions – Security / Insurance

g)Home / Personal Cyber Risk – FT 8th Nov, 2017 “Should

individuals buy insurance against cyber attacks?”

https://www.ft.com/content/72e11ca6-98ad-11e7-8c5c-c8d8fa6961bb

3

4

OECD work on cyber insurance

In May 2017, the OECD delivered a report to the G7 Finance

Ministers and Central Bank Governors , providing an overview

of the market for cyber insurance and identifying potential policy

measures to address some of the main challenges to its

development.

In mid-November, the OECD intends to release a

more comprehensive report on these issues,

examining :

- The type and magnitude of losses incurred from

cyber incidents

- The insurance coverage available for cyber-

related losses

- Challenges to the development of the cyber

insurance market

- Initiatives aimed at addressing challenges to

market development

“Unleashing the potential of the cyber insurance market” 22-23

February 2018, OECD - Paris (in partnership with MMC)

Questions