Risk & Insurance
By Jonathan McGoran
Two of the most dynamic trends in insurance today are emerging cyber risks and the growth of the high net worth category. But until recently, the space where these trends meet has been underserved. This at a time when cyber risk for high net worth families is intensifying.
“As hackers and cyber crime increases, the high net worth are going to become more of a target,” said Kurt Thoennessen, vice president of Ericson Insurance Advisors.
For insurance purposes, given their assets, high net worth families have exposures at least the size of many small companies.
“The ultra high net worth are both people and also a series of mini businesses,” said Martin Hartley, executive vice president and chief operating officer of PURE group of insurance companies.
“There are foundations… family offices. There are homes in different countries, there are multiple lines in the U.S. with… access to various networks.”
But while their attack surfaces can be similar, the risks they face can be quite different, and the nature of those risks is changing.
“Generally speaking ID theft has been the most prevalent of the cyber threats to the high net worth space at this point, but I think that’s going to change,” said Ericson’s Theonnessen.
Hartley agrees. “The social engineering or targeting of wealthy folks is very, very specific spearfishing, looking at transactions that are happening, identifying people who are wealthy or neighborhoods that are wealthy, and going after them,” he said.
One of the most devastating is an increasingly familiar social engineering attack, in which bad actors using various cyber and non cyber means insinuate themselves into correspondence involving financial transactions, disguising themselves as legitimate participants in the transaction and inducing other parties, either high net worth individuals or their approved subordinates, such as personal assistants, to send funds, sometimes millions of dollars, to illegitimate destinations.
Since an authorized person made the transaction, banks generally won’t accept liability, nor is it covered by most traditional cyber policies, which tend to focus on identity theft, data breach and cyber bullying. To the extent that it is covered, limits have historically been well below the levels of likely damage.
But a new generation of family cyber coverages is stepping up to fill this gap, with higher limits, fraud coverages, and innovative partnerships with cyber monitoring firms to help reduce risk.
“There is coverage for it through some of these new cyber products that are coming out,” said Thoennessen. “But there’s only three to my knowledge, with others being developed feverishly to get them out there, because there’s so much buzz around this topic.”
Perhaps the most innovative of the three is Starling, from PURE.
“This is not a cyber product per se. This is a fraud product,” said Hartley.
“The reality of today is that most stuff takes place online or involving the transfer of data, that’s just life. So the product is fraud; it happens to take up both the traditional form and what is more commonly taking place online.”
Starling offers limits up to $1 million to members who enroll in an active monitoring program through a partnership with a company called Rubica.
“You put an app on your phone, on your laptop, on all your endpoint devices. It creates a V.P.N. connection through our operations center, where we can keep your traffic secure,” explains Frances Dewing, Rubica’s co-founder and CEO.
Rubica checks all traffic against open source and proprietary blacklists of potentially problematic servers, but more importantly, they also monitor against any anomalous behaviors.
“If we see something that doesn’t look like you, it’s just traffic that could be not necessarily on the blacklist, but it’s unlikely part of your normal pattern, we flag it and we have a human team of experts look at what that is and determine if it’s safe or not,” said Dewing.
“In order for us to put out a high limit of insurance for our members, we need some assurance that they’re taking appropriate steps to protect their cyber world… And that’s where Rubica comes in,” said Hartley.
The offering has been very popular. “We’ve got about half of our eligible membership who are choosing to purchase the coverage. And about half who are not,” says Hartley. “So that’s a pretty remarkable success.”
“PURE is an innovator,” said David R. Russell, Sr. Vice President and National Sales Leader, Marsh Private Client Services. “They do an exceptionally good job of identifying gaps in the space and how to bring a more robust solution to clients.”
Chubb and AIG are also offering cyber coverage for High Net Worth families.
“Chubb’s Masterpiece homeowner and personal liability policy addresses several cyber risks including: digital content coverage; unauthorized charge reimbursements; document recovery; coverage for allegations of unintentional online libel, slander or invasion of privacy; and, coverage to help you recover from identity theft,” says Patrick Thielen, Senior Vice President, Chubb’s North America Cyber Practice.
Launched earlier this year, Chubb’s new cyber endorsement is currently available in 18 states, with more on the way.
“Most clients can purchase maximum annual limits ranging from $25,000 to $250,000, and in some cases, we can offer higher limits,” said Thielen.
Chubb offers its clients complimentary cyber vulnerability analysis by the Ackerman Group, and through a partnership with Norton, the opportunity to protect personal information on connected devices with a secure, high-performance Wi-Fi router.
AIG’s Family CyberEdge was launched in January 2017. “At the time, this coverage was the first comprehensive personal cyber insurance product to become available in the market,” said Anna Brusco, Vice President, New Product Development, AIG Private Client Group.
Family Cyber Edge offers coverage up to $250,000, but, Brusco adds, “We will continue to evaluate our coverage limits as we gauge our clients’ appetite.”
AIG partners with K2 Intelligence, a global investigative and consulting firm to help assess and remediate clients’ vulnerabilities, and with Cyberscout to monitor, mitigate, and manage against identity theft.
“In the event a personal computing device is breached such as through a social engineering scheme, we would provide assistance with restoring data and cleaning devices and would cover those costs,” says Brusco. “Family CyberEdge acts as a complement to another insurance coverage provided by AIG Private Client Group that provides coverage for financial loss as a result of fraud committed digitally.”
While PURE’s Starling is the only product that requires participation in cyber monitoring to be eligible for coverage — and only at the $1 million limit — Hartley doesn’t think it will be alone for long.
“I’m sure that there will be an evolution that more insurance products will have requirements around the standards you maintain in terms of cyber hygiene,” he said.
With the growth of the high net worth sector, demand for such products is almost certain to grow. “There’s 51 million Americans right now that have a million dollars in investable assets, which is kind of the tier at which high net worth is defined,” said Jason Hogg, Leader of Aon Cyber Solutions and Chief Executive Officer, Stroz Friedberg. “And that’s growing on a compound annual growth rate of 8 percent.”
According to Thoennessen, such products are very likely on the way.
“This is a real risk for everybody and so I’m sure [many other companies] will follow suit shortly,” said Thoennessen.
“Verisk, which is a company that develops product policy language and product language for these types of products, announced a month or so ago that they came out with a cyber risk policy for small commercial for all fifty states, and so I’m sure they’ll follow with personal lines products shortly after that.”
This article initially appeared on Family Wealth Report's website on June 1st. You can access the article here.