Indian Banks Association asks bank to buy cyber insurance

The Indian Banks Association has asked member banks to buy cyber insurance covers in the wake of several incidents of digital attacks on lenders.

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 Pune-based cooperative is only the latest in a series of incidents. Insurance officials said that small cooperative banks usually did not buy cyber insurance cover. However, as the Cosmos Cooperative incident proved, in the case of cyber attacks, even small lenders can suffer big losses.

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.