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THE INSURANCE INDUSTRY’S SAVING GRACE: AUTOMATED CYBER RISK QUANTIFICATION

Published

2 years ago

August 9, 2021

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By Miles Tappin, VP of EMEA at ThreatConnect

The emergence of sophisticated attacks, particularly ransomware, has placed a cloud over the cyber insurance market. As a result, in recent years, more firms have sought insurance protection to transfer risk and ultimately safeguard themselves and their customers. However, neither carriers nor those seeking insurance have the capacity to automate cyber risk quantification.

The sophistication of cyberattacks and their frequency has resulted in a rise in demand for policies and rising prices. Several carriers have increased rates by 30% to 50%, as well as enacting more stringent policy terms and coverage restrictions. According to some insurance brokers, carriers have reduced the amount of coverage offered by millions, and at least one major insurer, European insurance giant AXA, has stopped providing ransomware coverage altogether.

Ultimately, the cyber insurance industry is confronted with three major problems. When it comes to obtaining data and analysing a company’s cyber risk exposure, insurance underwriters use a very manual, point-in-time method. However, these underwriters are unable to link loss data to vulnerabilities, insufficient controls, misconfigured hardware or software, or an attacker’s ability to successfully infiltrate a vital application or system. Security evaluations are performed only once before binding coverage and are not repeated until the policy is due to be renewed. Security evaluations performed on behalf of an underwriter are frequently never disclosed with the firm seeking insurance.

Miles Tappin

Urgent need to automate the quantitative process

It’s hard to believe, but just one year ago, most cybersecurity insurance questionnaires consisted of less than ten questions, and underwriters would give companies 60 to 90 days to get the required controls in place. Today, most applications involve dozens of questions, are still highly manual, and companies only get 30 days to get their security controls in order.

Today’s manual application process means underwriters are writing policies based on guesswork that is only valid on the day it was produced. Thus, the requirement to automate the quantitative process could not be more urgent.

Automated cyber risk quantification is now a reality. Organisations should move quickly to understand their business more accurately and prioritise efforts so that critical business processes, applications, and data are protected. Automated CRQ provides three specific benefits. It enables companies to proactively model and predict risk, mitigate and monitor for changes and see ‘what-if’ scenarios and recommendations that drive smart actions, mitigation, and response.

The Operationalisation of Risk Data

Cybersecurity insurance is different from other forms of insurance primarily because cyberattacks involve two things insurance can’t measure — the attacker and the defences they try to beat.

The struggle to understand loss exposure in cybersecurity isn’t the lack of loss data – it’s the lack of being able to correlate it to a vulnerability, a deficient control, a misconfigured software or hardware, or the ability of an attacker to reach a critical system or application.

Risk quantification automatically enters data into a risk model and automation engine. Those inputs include data from your organisation as well as industry, attack, and vulnerability data aggregated through various sources. That information is then applied to the risk model and automation engine to determine the financial impact of cyber risks and the probability of success of specific attacks.

These calculations drive a variety of other activities within risk quantification that lead to the operationalisation of information across the rest of your organisation, including:

Prioritisation of vulnerabilities – not only by CVSS score but by relevance in terms of the financial impact to your
‘What-if’ analysis to help you understand what specific effects certain changes may have on your cyber risk before making those
Producing short- and long-term recommendations on how specific changes may affect Annual Loss Expectancy (ALE) and provide guidance into any ‘low hanging fruit’ that may

Tolerate, Treat or Transfer?

Given the advanced capabilities of cyber adversaries and their tactics, techniques, and procedures, the current cyber insurance model almost guarantees that insurance carriers will be forced to pay claims. As a result, point-in-time assessments that are manual guesswork are inadequate for protecting enterprises from the onslaught of cyberattacks.

Being able to track cyber financial risk over time, understand the impact of budget decisions, and ultimately justify spending is now driving business decisions on which risks to tolerate, treat or transfer.

While the first step is to understand your organisation’s exposure in financial terms, the next is to decide how to mitigate risk. Risk quantification models leverage many different types of attackers and attacks that may infiltrate an organisation, its controls, vulnerability data and critical applications.

Most risk quantification customers have their controls actively updated inside the tool to assess which applications are most vulnerable. Also, they provide vulnerability data that allows risk quantification to provide short-term recommendations on Common Vulnerabilities and Exposures (CVEs).

The capabilities of risk quantification can give insurance underwriters and their clients a clear picture of inherent and residual risk in a dynamic fashion. Not only is the threat landscape and the parts of it that are relevant to your business changing, but the controls, applications, endpoints, and type of data present in your environment are changing as well. Risk quantification enables you to apply these changes instantaneously to your models, allowing cyber risk measurement to move beyond point-in-time assessments and become programmatic.

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Top 10

5 Often-Overlooked Investment Options To Consider Exploring In 2023

Published

6 days ago

March 17, 2023

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When choosing what to invest in, many people will initially focus on the stock market which is considered a more mainstream investment. However, investments are more than stocks, and there is a wide range of alternative investments you can add to your portfolio to not only add growth to your long-term returns but also to spread the risk. If you’re looking to diversify your investments or if you simply want to get started with something different, this guide will cover the overlooked investment options that you should consider in 2023. From investing in EIS schemes and commercial property to commodities and collectables, there is plenty to discover.

EIS Schemes

One of the first on our list of overlooked investments is EIS investment opportunities, one of many flagship policies developed by the UK government to support early-stage companies. With an EIS investment, you would be helping to support businesses in exchange for various tax reliefs. Depending on your circumstances, this could include 30% income tax relief, tax-free gains, CGT deferral, loss relief, or inheritance tax relief. To understand more about investing in EIS schemes and their benefits, head over to Oxford Capital, to learn more.

Property Bonds

When property developers are looking to finance new commercial or residential projects, they typically do so with property bonds. These bonds are used to raise capital for the projects from investors and typically last for a fixed term, between two and five years. This form of investment is attractive due to the higher interest rates, ranging from 4% to 15%, offered in comparison to traditional government bonds, which generally perform at under 4%.

While there is a risk that the project could be abandoned due to external factors such as a rise in material costs, disruptions to supply, and a lack of finances, if the project goes to plan, you will see a return of your original investment as well as any interest accumulated. However, you can also opt to receive the interest payments monthly, quarterly, or annually throughout the course of the project, in which case, at the end of the project, your original investment will be returned with any leftover interest that has not yet been paid.

Commodities

The term commodity encompasses a variety of physical investments you can make. Unlike traditional investments such as stocks, bonds, or funds, these investments have both a use-value and an exchange value. This is because when you invest in commodities, you gain ownership over a small amount of the resource you are investing in. As there is always a need for physical goods, these commodities are an excellent way to diversify your investment portfolio and hedge against inflation, market changes, and the depreciating value of different currencies.

Some of the most common commodities you can invest in include:

Gold.
Agricultural products.
Crude oil.
Precious metals.
Timber.
Diamonds and other precious stones.
Spices, sugar, and salt.

Commercial Property

When looking into properties to invest in, many people choose residential options as they can renovate and sell or rent these homes. However, as the property market can be particularly volatile, a great option when you want to invest in properties is to look to commercial options instead. When it comes to commercial property, there are many ways you can invest, and these include:

Direct investment:This means buying a share or all of a property, which can then be rented out to businesses.
Direct commercial property funds:Often referred to as bricks-and-mortar funds, this is the most popular way to invest in commercial property. With this fund, you invest into a scheme that invests directly into an existing portfolio of commercial properties, which pays out the interest of your investment monthly, quarterly, or annually.
Indirect property funds:Similar to the direct commercial property fund, with this fund, you would invest in a collective investment scheme that invests in the shares of property companies in the stock market.

Peer-To-Peer Lending

Peer-to-peer lending is a risky venture where you would invest directly into start-up enterprises in order to help them get off the ground. It’s an excellent way to help small business owners get going with their dreams while also creating a lucrative investment. When you choose peer-to-peer lending, you loan the start-up a specific amount with the promise to pay back with interest. You can determine a timeline for this, or you can also choose to have the interest paid back monthly, quarterly, or annually.

However, as already mentioned, peer-to-peer lending is a risky venture, as the company you invest in could fail, and in that case, they would default on your loan. With this in mind, before you choose peer-to-peer lending, you should always thoroughly research the start-up’s fundamentals first, as this will give you a better insight into the viability of the business.

Finance

Innovating inclusivity: How invoice financing is diversifying access to financial streams

Published

1 week ago

March 15, 2023

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“Entrepreneurs, particularly those in the supply chain in Europe, the United Kingdom, and indeed the rest of the world, frustrated with the lack of access to traditional financial streams should consider invoice financing,” writes Morgan Terigi, Co-Founder and CEO of Incomlend

While the COVID-19 pandemic negatively impacted many businesses, the crisis was a moment of opportunity for others: As norms related to work, schooling, and life changed in the blink of an eye, many entrepreneurs started businesses to address related needs.

Many of these businesses grew dramatically. Now that the pandemic has settled, however, some of these businesses are hitting a plateau. Despite being profitable, they do not have enough working capital to grow the business further. They only have enough to maintain their current levels of profitability, but nothing more.

Some of these entrepreneurs will seek financing the most common way, via a bank loan. Unfortunately, this avenue will likely be inaccessible to them. Bank loans will favor organisations that have been in business for a long time, not those newly formed within the last few years. They may also require collateral that such businesses will not have right now. Some businesses created during the COVID-19 pandemic may meet the bare minimum requirements and go through the lengthy application process. They will meet with a banker, submit the necessary financial documents, including everything from financial statements to trade references, and then wait. This waiting period is actually the longest part and may encompass anywhere from a few weeks to months. After all this bureaucracy, the entrepreneur will get a denial from the bank. But, they will not be getting any financing.

Such time represents a major opportunity cost for the business leader. They could have spent the same amount of time either focused on the operations or seeking capital that is more friendly to newer businesses.

Entrepreneurs, particularly those in the supply chain in Europe, the United Kingdom, and indeed the rest of the world, frustrated with the lack of access to traditional financial streams should consider invoice financing. Many may have heard the term before but may be unsure how it actually works. Invoice financing is simple. Upon onboarding, exporters upload the export receivable that they want to be factored into the invoice financing platform, which then pays them cash in as little as 48 hours. They are spared the need of having to wait anywhere from 60 to 90 to 120 days to collect in a traditional payment cycle. They get working capital, which can be used to grow their business beyond the current plateau.

Invoice financing is also friendly for importers. Following a buyer-led approach, they can also upload their suppliers’ export receivables that they wish to be paid. Their trade partner will likewise be paid within 48 hours, and the importer gains a longer runway, anywhere up to 120 days depending on the terms, to pay back the platform. The importer can thus enjoy more working capital today, rather than worry about paying off vendors. As a result, they can also focus on revenue-generating activities that grow the business.

Investors benefit from both importer- and exporter-led invoice financing because they can back individual receivables or groups of receivables. Either situation represents a promising asset class that offers stable returns.

While invoice financing is subject to similar requirements as more traditional forms of financing – it is a financial instrument after all – it is arguably more accessible. To be eligible, importers or exporters need to have a trade history with their corresponding trade partner. They also do not need to be corporate (i.e. which is the preferred lending partner of banks), invoice financing platforms generally work with SMEs and other enterprises. It also does not require any form of collateral, so it is friendly to businesses without significant assets that they are willing to take a loan against. Finally, invoice financing occurs off-the-balance-sheet, so it does not saddle businesses in debt at a time they need positive income statements the most.

For all these reasons, I think invoice financing should not just be looked at as a financial innovation. It is very much a social one as well, opening up access to financial streams to entrepreneurs in the supply chain who may otherwise not have had access. Invoice financing, in short, has innovated how we extend inclusivity.