Rising fears of cybercrime are prompting financial services firms to increase their spend on security, according to new research from Lloyds Bank Commercial Banking, which canvassed the views of the world’s largest financial institutions.
The research found that six out of seven (85%) financial services firms have spent more on tackling cyber risks in the past 12 months, with one in seven (14%) having significantly increased their spend.
Over the same period, almost nine in 10 (87%) have become more concerned about cyber-risks, with nearly a quarter (23%) becoming significantly more concerned.
Priorities and risks
When asked about what they wanted to achieve from their technology investment in the coming year, one in seven (14%) financial firms cited improved cyber-security as their top priority. It was the third highest priority area flagged behind reducing operating costs (17%) and revenue growth (26%).
The picture was similar when firms were asked about risks to their UK operations for 2018. Respondents said cyber security was one of the most significant risks, alongside increased market competition and geopolitical uncertainty, but behind macro factors such as the effects of Brexit and economic uncertainty.
Robina Barker Bennett, Managing Director, Head of Financial Institutions, Lloyds Bank Commercial Banking, said: “The pace of technological advancement continues to offer tremendous opportunities to financial institutions, but this has been mirrored by the rising threat of attacks from increasingly sophisticated cyber criminals. As a Group, we work closely with businesses across the UK to help build their digital skills, so it’s encouraging to see the UK’s financial sector is alive to the issue and responding with increased investment.”
Preparing for the worst
Despite firms prioritising investment in new technology to safeguard against cybercrime for the year ahead, one in 10 (10%) are still not insured against a cyber-attack.
A similar number (nine%) said they have taken no steps to arrange contingency funding, and seven% have made no contingency arrangements with banking providers, such as to guarantee payments, for example.
However, almost all (95%) firms questioned did say they were confident their finance and treasury functions were suitably prepared to recover from an attack, with one in five (20%) saying they were very confident.
Robina Barker Bennett added: “While reassuring overall, there are still a small minority of organisations that aren’t mitigating risk with insurance or contingency measures.
“The financial and reputational impact of a successful cyber-attack is becoming more severe. Investment in proactive, preventative cyber security measures should go hand-in-hand with robust planning for the worst-case scenario.”
(Source: Lloyds Bank Commercial Banking)
Speciality MGA Fiducia has teamed up with a Lloyd’s insurer, Atrium Underwriting, to produce a new terrorism product which will allow brokers to offer specific cover to their clients of all sizes.
Fiducia and Atrium have developed the terrorism and sabotage policy which takes account of the changing risks associated with the latest types of terror threats.
While the UK insurance sector’s specialist terrorism risk pool, Pool Re, offers cover, it does so in most cases only if the insured’s building suffered physical damage.
However, there is now a real demand for terrorism cover which is triggered if a business suffers business interruption, although there is no physical damage to the insured’s premises.
Many firms in the recent attacks on the Manchester Arena and Borough Market found they were unable to access their buildings due to the ongoing police operations for some days or weeks afterwards. Businesses in Borough Market have also said they have seen a significant fall in trade as visitors are concerned to go to the area following the attack.
Underwriter at Fiducia, David Heeney says: “Understanding the benefits of having a standalone terrorism policy is a difficult proposition for many clients but we at Fiducia have developed, for UK regional brokers, a market leading terrorism product to assist them in engaging with clients who feel their property and assets may not be vulnerable to an act of terrorism.
“Following previous terrorism events 70% of the companies that went out of business due to the after effects had suffered no physical damage or loss. They simply were unable to access their buildings and the area, which had been popular with visitors, no longer held any attraction so business was dramatically reduced.”
He adds: “There has been a demand for terrorism cover that offers protection above and beyond that offered by the Pool Re scheme. While Lloyd’s underwriters have been providing cover with extensions for business interruption, denial of access and loss of attraction, regional brokers have not really had the ability to access it until now.”
He says that the policy comes with access to Atrium’s unique risk management analysis software that will enable brokers to provide detailed advice on the level and type of insurance needed by their clients on an individual basis.
“Blast Zone Exposure Management is a unique risk management analysis software,” he explains. “Our experience shows us that the largest single location often isn't the largest accumulation of exposure a client has within a 200 metre blast zone where they can suffer both physical damage and business interruption that reaches far beyond a top single location value. We can analyse the insured’s assets and assist them in selecting a level of cover to match their accumulation of exposure, eliminating under and over insurance.”
Stuart Harmer Underwriter Political Violence at Atrium said: “We are excited to be supporting the Fiducia team. The company has put first class service levels at the heart of their business. At Atrium we choose our partners carefully and we are confident that Fiducia and the innovative products they have designed and created will provide a very attractive alternative to those currently in the market. From the outset of our discussions we have been impressed by the drive, professionalism and depth of knowledge within Fiducia and we look forward to a long and successful partnership”
(Source: Fiducia)
