BOSTON—The most significant threat we face is that to our cyber security, according to former Secretary of Homeland Security Michael Chertoff.

As a guest speaker here at the PCI Annual Meeting, Chertoff said the issue of cyber risk “affects virtually every kind of enterprise.” Considering different motivations—from terror plots to “hackivists,” or just a disgruntled employee or customer—accidental leaks, and the continuation of the creation of access points to information, the “loss is potentially staggering,” he adds.

Countries are additionally tapping into online intellectual property to gain competitive, economic advantages, he warned. And the thing that appears to scare him most is the “very indiscriminate” manner in which probes search for information, looking for anything from business plans to embarrassing emails.

The insurance industry is “critically important” to the country's mitigation of cyber-related risk, Chertoff said.

“Properly done, the insurance industry can play a pivotal role,” in education, sharing information and collective collaborations, establishing best practices and risk management initiatives, he said. Oftentimes the mistake in risk management is to overweigh experience and under-weigh the unknown.

It is better to come up with cyber standards now rather than wait for them to be determined in a “much less thoughtful and deliberate manner” in the courts when a large event, possibly one that results in loss of life, occurs.

The big mistake, he said, is to “think what hasn't happened, won't happen. This one we can see coming.”

He also advised insurers to “look at their own houses.” Another mistake is to view cyber risk coming from the outside-in rather than the opposite.

It will be interesting to note, as the industry continues to push for the reauthorization of the Terrorism Risk Insurance Act, whether cyber terrorism will be included. Again, Chertoff said, it is something to watch because he'd “hate to find out in post-event litigation.”

Special Reports /

Chertoff: Our Biggest Threat is Cyber Security; Insurance Industry Can 'Play a Pivotal Role'

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