Bank body asks lenders to get cyber insurance

The Indian Banks Association (IBA) has asked member banks to buy cyber insurance covers in the wake of several incidents of digital attacks on lenders. Such a policy has turned into a basic need in a world where banking is increasingly turning digital, but it is not yet owned by all banks.
While the larger lenders have cyber insurance covers ranging from Rs 350 crore to Rs 500 crore, many of the smaller players have only the Banker’s Blanket Bond, which — despite its name — does not cover cyber heists. JLT Independent Insurance Brokers practice head Amit Agarwal said that the Bankers Blanket Bond is a 40-year-old insurance policy designed for an era before banking moved online. This policy was designed to cover risks like cash in transit, bank robberies, physical frauds and forged documents, but not losses caused by malware.

According to IBA chairman Shyam Srinivasan, following frequent cyber attacks, the association organised a meeting to create awareness of cyber security insurance among banks. “We are also adopting the practice of circulating the modus operandi of frauds shared by members among others so that banks can take necessary precautions,” he said.

The recent Rs 94-crore loss caused by a malware in a Punebased cooperative is only the latest in a series of incidents. Insurance officials said that small cooperative banks usually did not buy cyber insurance cover. As the Cosmos Cooperative incident proved, in the case of cyber attacks, even small lenders can suffer big losses. ICICI Lombard chief of underwriting, reinsurance and claims Sanjay Datta said banks have to first take all required steps to protect themselves. “This is not like a fire insurance policy where discounts are given for having extra safety features. This is more like airline insurance where you assume that the insured is following a certain level of precautions,” he said.



The safety features include having necessary firewalls in place and adopting best practices. Applying for insurance helps in identifying the best practices as this cover involves specialist global underwriters who ask the relevant questions. Agarwal said that, given the rate at which banks are going digital, one year down the line he expects every financial institution to go for a cyber security policy.