Aon: Business interruption due to a breach is top cyber risk concern

Aon: Business interruption due to a breach is top cyber risk concern

Findings underscore importance of conducting a cyber risk assessment, Aon outlines three-step approach for assessing cyber risk

Press Release:

CHICAGO (April 11, 2016) – Aon Global Risk Consulting, the risk consulting business of Aon plc (NYSE:AON), the leading global provider of risk management and human resource consulting and outsourcing, today released its 2016 Captive Cyber Survey report, which finds that the costs of business interruption due to a breach is the top cyber risk concern for businesses across all industries.

As Aon’s first cyber captive survey,  the findings offer a better understanding of organizations’ current attitude towards cyber threats, risk assessment, insurance purchasing trends and loss adjustment concerns and provides insight into current retail market trends, including captives and other risk financing solutions.

“Our findings also indicate that there is a disparity between companies recognizing that cyber is one of the fastest growing and permeating risks, and actually understanding what their individual exposures and coverage needs are,” said Peter Mullen, chief executive officer of Aon Risk Solutions’ Aon Captive and Insurance Management practice, who spearheaded the report. “Captives are a great alternative risk transfer solution for bridging this gap while the industry’s approach to cyber risk management catches up to the evolving pace of technology.”

The survey findings indicate that 94 percent of companies would share risk with others in their industry as part of a captive facility writing cyber. What’s more, Aon experts anticipate alternative risk transfer options to become increasingly sought after as these solutions give companies some control over underwriting, coverage scope and claims adjustment, while providing an opportunity to share best practices, experience and data in a private setting.

Additional highlights of the report include:

  • 61 percent of survey respondents buy cyber limits in the $10-25 million range, but overall 60 percent of large companies do not buy cyber insurance
  • Of those that do, 68 percent of companies surveyed buy cyber for balance sheet protection closely followed by ensuring due diligence comfort for the board
  • Only 25 percent of respondents that buy limits are confident that they comply with international best practices and standards for information security  governance
  • 95 percent of companies surveyed state clear policy wording as the most important issue in the cyber risk market, and 75 percent of large companies express concerns about the loss adjustment process

“Given the evolving nature and complexity of cyber exposures, we found that the use of cyber risk assessments is surprisingly low,” said Kevin Kalinich, global practice leader for cyber/network risk at Aon Risk Solutions. “Conducting such an assessment is a useful tool for improving risk understanding and maturity as well as for helping organizations better prepare for potential business interruption during or after a breach. Aon is at the forefront of assisting clients to develop and implement a risk assessment approach that is cross departmental and can translate cyber exposures into financial impact.”

Aon recommends the following three steps to begin a cyber risk assessment:

  1. Scenario Analysis: Benchmark the existing cyber risk profile and work with business stakeholders to prioritize cyber risk scenarios
  2. Financial Modeling: Leverage advanced financial simulation tools using deterministic modeling to quantify first and third party costs of select cyber scenarios. Consider performing an analysis on non-damage business interruption scenarios using forensic accounting capabilities.
  3. Insurability Risk Review: Test the adequacy of limits against the assessed cyber risk as well as review the optimization of the proposed insurance program

About the 2016 Aon Captive Cyber Survey

Aon’s 2016 Captive Cyber Survey is designed to offer analysis of top cyber risk concerns, risk assessment approaches, attitudes toward cyber insurance and policy cover and structure. The survey, conducted for the first time in fall 2015, gathered input from risk managers and directors of more than 125 captive insurance companies. The 2016 findings will allow organizations to gain insight into the mounting threat of cyber risk, benchmark their risk management practices and identify approaches that may increase their preparedness.

More information about the 2016 Aon Captive Cyber Survey can be found here:

Edmonton casino victim of cyberattack; employee, customer information stolen

Edmonton casino victim of cyberattack; employee, customer information stolen

The Canadian Press

EDMONTON — Officials at an Edmonton-area casino are doing damage control after finding out they were the target of a cyberattack that put employee and customer information at risk.

Over the weekend, computer systems at the River Cree Resort and Casino went down, but what happened wasn’t made clear until this week.

General manager Vik Mahajan says at first they thought it was a technical failure but later realized it was an actual attack.

He says there was theft of customer and employee information — though he won’t say how many people are involved — but the incident didn’t affect the casino floor.

Officials say as soon as the attack was discovered, police were contacted, along with cyber security experts at a private company.

Mahajan wouldn’t say what type of cyberattack took place, or what information was compromised.

“We’re trying to sift through all that,” Mahajan says. “I know there’s some personal information in our system that would relate to associates as well as customers and how much of that information is gone, we are trying to determine that.”

River Cree has been contacting people whose information may have been compromised.

The Alberta Gaming and Liquor Commission has been contacted, and is investigating as well.


(CTV Edmonton)

Canada: Legal Trends 2016: Cybersecurity

Article by Blake, Cassels & Graydon LLP

New privacy torts have recently emerged in certain Canadian jurisdictions, including intrusion upon seclusion and publicity given to private life. Intrusion upon seclusion allows a plaintiff to sue if (1) a person has intentionally or recklessly invaded his/her private affairs without justification and (2) a reasonable person would view the invasion as highly offensive. In Ontario, damages of up to C$20,000 are available, even if the plaintiff suffered no economic harm. Publicity given to private life allows a plaintiff to sue for publication of private facts when there is no legitimate public interest. Courts are increasingly certifying class actions for such privacy claims, even absent proof of harm. We expect the number of privacy class actions to continue to grow given the increasing number of data breaches.


Currently, Alberta is the only Canadian jurisdiction that has mandatory requirements to report data breaches outside the health-care context. New mandatory breach notification provisions of the Personal Information Protection and Electronic Documents Act, the federal statute that applies to collection, use and disclosure of personal information for commercial purposes, received Royal Assent on June 18, 2015. However, the act will not become effective until regulations are approved, which is expected to occur in 2016. These regulations will require organizations to notify the Privacy Commissioner of Canada if there is a breach of data security involving personal information in an organization’s control that poses a “real risk of significant harm” to affected individuals. Organizations will also be required to notify government institutions and other organizations of the breach in certain circumstances, including when those other entities may be able to reduce or mitigate the risk of harm to the affected individuals. Additionally, organizations will have to keep records of all sufficiently serious data breaches, even those that do not meet the harm threshold. Knowingly failing to report or record a data breach is an offence punishable by a fine of up to C$100,000.

When the new notification duties become effective, the number of privacy class actions will inevitably increase, as more information about data breaches will be available to plaintiff class counsel.


The rash of recent high-profile cyber breaches, including that of Canadian-based, has made cybersecurity a top concern for Canadian boards. Boards want to better understand not only their role in managing cyber risks in their organizations, but also their exposure for failing to do so. When there is a breach, shareholders and others may sue directors and officers directly for the breach. Under the Canada Business Corporations Act, directors and officers are required to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. As a result, Canadian boards are increasingly trying to determine how to provide effective oversight of cyber risks within their organizations. Questions that Canadian boards are frequently asking relate to the board’s role in ensuring that effective governance structures for managing cyber risks are established, top-level security and privacy policies are put in place, security programs are implemented and regularly assessed, and security incident response protocols are established and regularly tested.


It is no longer sufficient for organizations to focus only on the security of their own internal networks. As a result of cloud computing, data is increasingly in the custody of third-party service providers. Recognizing the risks posed by working with external providers, Canadian organizations are taking steps to better understand their external providers’ security practices and business continuity programs. While pre-engagement security assessments are currently quite common for organizations that entrust sensitive data to external providers, in light of information security management industry standards, the trend is moving toward regular, in-term security assessments.

An organization should consider imposing information security obligations in its contract with an external provider, where the provider has custody of the organization’s sensitive data or where the provider’s network “connects” to the organization’s network. Careful thought should be given to the appropriate security controls to apply to the provider, which may include a requirement for the provider to comply with one or more (or a combination) of the organization’s own security policies, the provider’s security policies and/or applicable ISO or other industry security standards. Rights to conduct security audits or assessments of the provider’s operations and receive audit reports or other regular reporting on security events from the provider should also be considered and spelled out in the contract. The contract with the provider should also specifically address how security breaches suffered by the provider should be reported, handled and managed. Of course, the contract should include sufficient provider obligations to enable the organization to comply with its data breach notifications and any other privacy and security obligations under applicable laws. Liability for data breaches should be allocated between the organization and the provider.

An organization should also consider whether a provider should be required to purchase cyber-liability insurance (if practicable) and whether the organization itself should obtain additional coverage to further mitigate its cyber-risk exposure.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Canada: Cyber Security: What The Hack?

Posted in Corporate finance

The cyber security risk

Although businesses have been ramping up their information security systems, the pace of cyber security breaches is not slowing down. One study estimates that cybercrime will cost businesses $2.1 trillion globally by 2019. And, as recent security breaches have taught us, a security breach can have reputational, moral, and deeply political complications. The 2014 hack of Sony Pictures cost the company $100 million, derailed plans for the distribution a movie concerning North Korea, and raised ethical questions about the appropriate response to cyber terrorism.

Safety concept: data security on digital background

On top of this, businesses will soon face stricter legal requirements around the disclosure of security breaches in Canada. New rules regarding the mandatory disclosure of security breaches were approved by Parliament in June 2015 and may come into force at any point. The Digital Privacy Act amends the Personal Information Protection and Electronic Documents Act and requires that an organization report any breach of security safeguards that reasonably creates a real risk of significant harm to an individual. Notification must be made to the Privacy Commissioner and to the individual involved. Significant harm under the statute includes financial loss, bodily harm, damage to reputation or relationships, and loss of employment, business or professional opportunities.

Cyber security breaches and their associated financial, reputational, and regulatory risks are here to stay.

Insurance as part of the solution

While the key to managing cyber security breaches will always be to implement strong data protection systems, cyber security insurance is becoming a popular way to address the financial consequences of cyber security breaches. A cyber security policy insures against risks to a company’s information technology and data assets, and leaves the insurance company with the uncertainty of actual damages in the case of a breach.

In the context of M&A, the problem with cyber security risk is valuing and allocating risk among parties. Similar to reps and warranty insurance (which we discuss here), cyber security insurance allows a company to allocate risk by transferring some to the insurance company and leaving the buyer and seller to allocate any remaining risk that falls outside the policy. Cyber security insurance is also valuable before M&A. Having a policy in place may help ease concerns of acquirers as the insurance would cover security breaches that may have already occurred prior closing but have yet to materialize. This has been found to hold true in jurisdictions that have data breach notification laws like the ones currently pending in Canada. Coverage can be a standalone product or can be built into existing policies such as business continuity insurance or supplier chain insurance.

Cyber security risk represents a new and significant risk to businesses. Simply being aware of this risk is critical in an M&A deal. Once recognized, however, placing appropriate security measures, conducting IT due diligence, and allocating risk by way of negotiation or insurance will help all parties cut through data breach uncertainty and settle material issues efficiently.

Norton Rose Fulbright Canada LLP

Norton Rose Fulbright is a global legal practice. We provide the world’s pre-eminent corporations and financial institutions with a full business law service. We have more than 3800 lawyers based in over 50 cities across Europe, the United States, Canada, Latin America, Asia, Australia, Africa, the Middle East and Central Asia.

Recognized for our industry focus, we are strong across all the key industry sectors: financial institutions; energy; infrastructure, mining and commodities; transport; technology and innovation; and life sciences and healthcare.

Wherever we are, we operate in accordance with our global business principles of quality, unity and integrity. We aim to provide the highest possible standard of legal service in each of our offices and to maintain that level of quality at every point of contact.

Norton Rose Fulbright LLP, Norton Rose Fulbright Australia, Norton Rose Fulbright Canada LLP, Norton Rose Fulbright South Africa (incorporated as Deneys Reitz Inc) and Fulbright & Jaworski LLP, each of which is a separate legal entity, are members (‘the Norton Rose Fulbright members’) of Norton Rose Fulbright Verein, a Swiss Verein. Norton Rose Fulbright Verein helps coordinate the activities of the Norton Rose Fulbright members but does not itself provide legal services to clients.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Companies turn to cyber insurance after Ashley Madison and other high profile hacks

In the wake of the Ashley Madison hack and other high-profile data breaches, Canadian companies are turning to so-called cyber insurance to protect themselves from the fallout of data leaks.

In July, adultery website Ashley Madison made headlines after hackers broke in to the company’s network and leaked customers’ personal information, including their messages to other members and sensitive financial data.

The ensuing class-action lawsuit – and founder and CEO Noel Biderman’s decision to step down in late August – were the latest in a series of incidents that experts say represent a wake-up call for executives about the real-world consequences of digital vulnerabilities.

Duncan Stewart, director of technology research at Deloitte, said the past year has seen a surge in awareness about cyberattacks, and companies are turning to insurers to prepare for what seems an inevitability in an increasingly interconnected world.

“The number of attacks are rising, the severity is rising, and when they come, they’re more difficult to deal with,” he said.

There is no legal requirement for companies to report a hack in Canada, making the true number difficult to determine, but security company Websense said in August 2014 that 36 per cent of Canadian businesses had observed a breach in their IT security last 12 months.

In a KPMG survey of Canadian property insurance executives, data security even beat out unexpected catastrophic events as the third-biggest risk facing Canadian companies in 2015 after regulatory burdens and low interest rates.

Stewart compared significant breaches like the Ashley Madison hack to automobile collisions that result in a total write-off, yet he said companies also require coverage for the small attacks and fender-benders of cybersecurity that happen far more often.

Insurance against cyberattacks is now just a part of the cost of doing business, he said.

“You wouldn’t have a factory and not have fire insurance, so why would you think about not having cyber insurance?”

Technology analyst Carmi Levy said in an email that insurance providers are stepping in to meet the needs of companies as they find themselves handling more and more data on behalf of their clients and suppliers.

“In the process, they are increasingly liable for what happens when hackers manage to break in and snag some of that data,” he said.

Insurance expert Paul Kovacs, president and CEO of the industry-funded oversight body PACICC, said insurance companies are expanding their offerings to provide more than just compensation and protection from liability in the event of a cyberattack.

“When this happens, you are going to need professional help with communications, with forensic investigation, with restoring your systems and putting the protections back in,” he said.

Kovacs pointed to the example of Sovereign General, part of the Co-Operators Group, which offers coverage for privacy breaches, business interruptions, extortion, and data recovery stemming from a cyberattack, as well as crisis management services.

He said companies and organizations used to dealing in sensitive information, such as hospitals and financial institutions, were among the first to become targets and have developed comprehensive cybersecurity policies.

Yet what used to be a concern just for the obvious targets is now a business risk for almost everyone, he said, and it’s not just customer data that’s at risk.

In July, security company Symantec issued a report detailing the “Butterfly” hacking group that it said is responsible for at least 40 attacks since 2012 meant to steal trade secrets and industrial data in order to sell it to the highest bidder.

Kovacs said industrial espionage is spreading out from the large companies that have long been in the crosshairs as hackers become more sophisticated.

“Now, they’re still going after the big companies but they’re going after the mid-size companies and even some relatively small companies,” he said. “The threat is spreading.”


Hard drive with personal info on 3.4 million B.C. and Yukon students lost

A team of 50 bureaucrats spent much of the summer rummaging through boxes in a secret Victoria warehouse, searching for a hard drive containing records of 3.4 million British Columbia and Yukon students and teachers, some dating back almost 30 years.

Extensive physical and electronic searches came up empty, and on Tuesday the B.C. government officially declared the unencrypted hard drive lost.

Technology, Innovation and Citizens’ Services Minister Amrik Virk said the province’s chief information officer will review the government’s management of personal information.

He said information and privacy commissioner Elizabeth Denham will conduct her own review.

Virk said there is no indication that data from the lost hard drive has been accessed or used, adding he believed the risk to individuals was low because the data does not contain social insurance or driver’s licence numbers or financial or banking information.

But he said he was concerned the hard drive had disappeared.

“This should not have happened. Any time personal information may be at risk, it is a cause for concern,” Virk told a news conference.

“I’m troubled to have learned that government is unable to locate the backup hard drive that contains a variety of reports, data and information.”

He said data from 1986 to 2009 contains names, grades, postal codes and personal education numbers. It also includes potentially sensitive information about children in care, teacher retirements and graduation dates for cancer survivors who participated in a research project.

From the years 1991 to 2009, the hard drive contains more detailed information on 3.16 million people, including each student’s full name, birth date and home address on their Grade 12 transcript.

The government said a second file on 1.8 million students from kindergarten to Grade 12 contained data on special needs status of students, including intellectual difficulties, physical disabilities or chronic health impairments.

Yukon students write B.C. exams and are taught the province’s curriculum. The province and territory have a agreement to store Yukon student data.

The drive also contains a list of children under custody orders and those involved with the Ministry of Children and Family Development, including health and behaviour issues, participation in intellectual disability programs and adoption status.

The Education Ministry discovered the drive was lost while reviewing records to ensure compliance with data-storage standards.

Jim Iker, president of the BC Teachers’ Federation, said the data breach impacts students, parents and teachers.

“This is such a serious breach of security,” he said in Victoria. “The biggest impact here is on our students and those students who are now adults, and some of those adults could be teachers, and there’s all sorts of information about them that shouldn’t fall into the wrong hands.”

Opposition New Democrat education critic Rob Fleming said British Columbians need more answers from the government about how the information disappeared.

“Now we have disturbing details that at an unsecured location, in an unsecured server, three and a half million files are now potentially in the hands of someone who could use it.”

Virk said residents can call Service BC, a government information line, to find out if their information was on the drive.


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