Specialty MGA

AI and the Sophistication of the Cyber-threat Landscape

1 February 2024

A version of this article was first published in the February 2024 edition of FA News.

 

As the reliance on advanced and new digital platforms from businesses across the globe grows, the threat and impact of cyber-attacks continues to rise.

These attacks can result in extreme damages for firms including lost revenue, as well as severe legal and reputational costs.

Cyber-attacks in South Africa

South Africa has experienced one of the most substantial year-on-year increases in cyber-attacks globally, registering a surge of over 200% in cybersecurity breaches since 2019.

Multiple factors have contributed to this, including the absence of comprehensive cybercrime legislation in South Africa and inadequate investment in cybersecurity, making the country an appealing target for cybercriminals.

Most notably, we have seen Transnet, the South African state-owned rail, port and pipeline company, suffer from an extremely serious ransomware attack in 2021, forcing the company to declare force majeure in multiple key terminals including the Port of Durban, Port Elizabeth and Cape Town, leading to severe disruption.

Growing cyber threat caused by AI

More recently, there has been an increase in the use of AI in cyber-attacks in South Africa, to maximise efficiency, speed and complexity. Attacks have ranged from virtual kidnapping, using deepfake voice generation to demand large ransoms, to password cracking using advanced algorithms. Moreover, AI technologies can analyse datasets to understand employee behaviours and communication patterns, which can be used to create personalised emails and messages, which include specific details about the person and make it more likely for them to fall victim to these scams.

As a result, 58% of security leaders expect a different set of cyber risks in the upcoming five years, with 46% putting AI and machine learning as the top themes in the most significant cyber risks, according to the 2023 Global Chief Information Security Officer Survey.

It is not just individuals and businesses that will be affected by AI cyber-breaches, but governments as well. The South African general election is set to take place this year, alongside major elections across Africa and the globe including the US, UK, India, Russia and South Korea. AI-driven disinformation campaigns and cyber-attacks on governments are, therefore, likely to increase in 2024, as geopolitical tensions continue to rise.

The growing cyber threat caused by AI has in fact helped boost the cyber insurance sector. Globally, the cyber insurance market is expected to increase from 145 billion ZAR to 520 billion ZAR by 2025. Furthermore, according to market research, the South African cyber insurance market is expected to see growth of 45.5% during the period 2019 to 2025.

Accurate coverage for clients

Insurance brokers will, however, need to adapt and develop new strategies in response to the growing use of AI in cyber-attacks, to ensure they continue to effectively cover clients against these risks. Given that traditional risk assessment models are less likely to sufficiently deal with these rapidly evolving attacks, collaboration with cybersecurity experts will be essential, helping brokers develop bespoke and tailored solutions. This may involve developing policies which cover not just the immediate losses but the longer-term consequences including data reconstruction, restoring the system, legal implications and reputational management.

Of course, there is good news with respect to AI as it no doubt will, and in some cases already is, being used for good in the context of cybersecurity – where it can aid in the identification and indeed prediction of threats with the enhanced ability it brings in analysing large swathes of data for distortions in patterns. AI is also expected to assist in the implementation of security measures and its use is already being explored to assist in the breach response process.

For now, though, the South African insurance sector can work with cybersecurity experts to educate their clients on preventative measures, including hosting risk management workshops and training sessions for employees, promoting sufficient cybersecurity policies and implementing threat detection and response mechanisms.

Collaboration can also extend to working with insurtech firms which focus on AI-driven risk management solutions, providing insurance brokers with access to the latest technologies, data analytics tools, real-time intelligence and insurance products specifically focused on dealing with AI-driven cyber threats.

Tony Loizides

Senior Underwriter, Financial Lines & Cyber, Specialty MGA

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