Cybersecurity is back in the news this week, with Yahoo’s announcement that more than 1 billion user accounts, many of them containing sensitive information, were compromised in a 2013 cyber attack. Recently, Novarica held a Working Group on the new cybersecurity regulations that will go in force on January 1, 2017 in New York State. The law was drafted from the NAIC Cybersecurity Task Force’s Insurance Data Security Model Law but goes further in many cases than the draft law did. The new standards will apply to insurers offering licensed products in New York State. While some proposed requirements stand as general best practices most insurers have already established, others will require carriers to implement significant changes. Although financial and insurance institutions have until June 2017 to comply, carriers are already considering the upcoming shifts in resources and strategies. The regulations will mandate:
- Annual submission of a written statement to the Department certifying compliance, with all supporting data, records and schedules maintained for five years.
- Regular cybersecurity awareness training for all personnel, updated to reflect the annual risk assessment.
- Appointing a Chief Information Security Officer.
- Documentation of “areas, systems, or processes that require material improvement, updating or redesign” along with planned and in-progress efforts toward remediation.
- Employment of cybersecurity personnel who must attend regular update and training sessions.
- Establishing cybersecurity policies to address areas like access controls and identity management, business continuity and disaster recovery, capacity and performance planning, customer data privacy, data governance and classification, incident response, information security, physical security and environmental controls, risk assessment, systems and application development and quality assurance, systems and network monitoring and security, and vendor and third-party service provider management.
- The policies must be reviewed by the board of directors or similar governing body, and approved by a senior officer.
- Establishing and maintaining cybersecurity programs to:
-detect incidents, identify internal and external risks
-to implement defensive infrastructure, policies, and procedures
-to respond to detected or identified incidents to mitigate the impact
-to recover from incidents and restore normal operations
-to fulfill regulatory reporting requirements
Most of the carriers present at the working group focused on the compliance expectations for vendors and third-party service providers. If partners do not comply with the regulations, the carriers manufacturing the products will be liable. We are unsure today if the carriers can get the penalties back from the MGA’s, agents and partners if the security breach was due to that agent’s or partner’s lack of compliance with the law.
Another area of focus was encryption. In the current draft of the legislation, carriers will have up to five years to implement encryption of nonpublic information both in transit and at rest. Many participants saw this as an onerous task, as PII data is already difficult to manage. Although the clause allows for “compensating controls” to stand in place of the encryption leading up to the five-year mark, carriers are already apprehensive of the burdens of such a large feat. In a similar context, multi-factor authentication will be required as well, but an extension of 1 year is being considered.
Some attending carriers with operations in Europe and the UK brought up concerns for how the cybersecurity legislation will affect international relationships. However, while there are some differences between the NYS regulation and the GDPR (General Data Protection Legislation), we don’t expect these difference to drastically impact the carrier’s ongoing technology activities.
Many carriers discussed the security and reliability of Cloud. While some saw Cloud as an additional risk, others saw it as a faster, seamless way to fortify cybersecurity. There was a general concern that because data centers from Cloud providers house different “tenants,” there is a risk of the data being exposed. There was a discussion of “accumulation risk” caused by a cloud which means that a hack of the cloud could automatically trigger a security event for everyone in the cloud. However, other attendees suggested that because it is easier to add a security tool to a Cloud solution, the risk of data exposure is mitigated.
Happy Holidays & Happy New Year!!!!