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  • 2010447.1 05/22/2017

    INSURANCE CYBERSECURITY WORKSHOP SERIES

    Cybersecurity in the Insurance Marketplace Tuesday, May 23, 2017 Philadelphia, PA

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    AGENDA 8:00 a.m. Registration, Breakfast & Networking 8:30 a.m. Welcome and Overview of Selected Cyber Losses Jim Gkonos, Special Counsel, Saul Ewing LLP 9:00 a.m. CGL Coverage Issues

    Joel Hopkins, Partner, Saul Ewing LLP

    9:50 a.m. Break 10:05 a.m. Cyber Insurance Coverage Issues

    Robert Goodman, Partner, Saul Ewing LLP 10:50 a.m. Cyber Insurance Marketplace Explained

    Featured Speaker: Emily Lowe, Vice President, Willis Towers Watson

    12:00 p.m. Audience Question & Answer 12:15 p.m. Networking Lunch 1:00 p.m. Program Adjourned

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    Cybersecurity in the Marketplace

    May 23, 2017 Saul Ewing LLP – Philadelphia Office

    Philadelphia, Pennsylvania

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    Cyber Insurance – Setting the Stage

    By: James S. Gkonos

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    WELL KNOWN RECENT CYBERATTACKS

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    WELL KNOWN RECENT CYBERATTACKS (cont’d)

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    Japan Public Pension

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    2016 Cyber Attacks

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    • Cybercrime damage has been projected to reach $6 trillion annually by 2021

    • According to the FBI, ransomeware attacks occurred 4000 times a day in 2016  According to Kaspersky ransomeware attacks on businesses

    occurred every 40 seconds in 2016

    • In Q3 2016 alone, 18 million new malware samples were captured (average 200,000 per day)

    • Cybersecurity spending is expected to exceed $1 trillion for the next five years (2017-2021). Current cybersecurity spending is estimated to be over 35 times the level of spending 13 years ago.

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    • 1 in 4 Chief Legal Officers (CLO) experienced a data breach in the last 2 years.

    • Only 1 in 3 reporting companies carries data breach protection insurance.

    • 2015 Association of Corporate Counsel Study

    Cyber Insurance Coverage – still primarily manuscripted ● Recent Cambridge Business School report found coverage can come

    from ▪ Stand alone Cyber cover ▪ Affirmative Cyber endorsements ▪ Gaps in explicit Cyber exclusions ▪ Silent Cyber exposure

    ● Cambridge report found 35 insurers offering 26 different insurance products offering collectively coverage for 19 types of losses, but… ▪ Only 81% covered incident response costs ▪ Only 69% covered business interruption ▪ Only 62% offered regulatory and defense coverage ▪ Only 13% offered officer and director liability coverage

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    Cost of Cyber Hacks

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    Home Depot • $292 Million in total cost as of 1/1/17 • $100 million in insurance coverage ($10

    million deductible • $134.5 million to credit card cos. • $25 million to banks • $19.5 million to consumers (class action) • No executive job loss

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    Target • As of 12/31/16 $291 million in cost • $100 million in insurance coverage, $10

    million deductible • CEO and STO resigned • 2014- $191 million - $46 million insurance • 2013- $61 million – $44 million insurance

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    Yahoo • No specific information on actual costs,

    but Verizon reduced purchase price of acquisition by $350 million

    • CEO lost $2 million bonus plus equity • GC resigned without severance

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    Anthem • $260 million in improvements and

    remedial action • $2.5 million – consultants • $115 million – security improvements • $31 million initial notice • $112 million credit protection • $415,000 in regulatory fines

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    Office of Personnel Mgt. • Director, CIO resigned • $130 million in identity theft protection

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    Sony – Playstation Hack • $171 million- identity theft insurance,

    improvements to network security, free content, customer support and investigation costs

    • $17.5 million settlement of consumer class action

    • $400,000 UK fine

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    Sony Films Hack • $35 million improving financial/IT system • $15 million – investigations/remedial cost

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    TJ Maxx • 2007 – Company estimated loss at $25

    million • 2017 – loss to date - $256 million • 2007- $118 million – mostly notif. cost • 2008 - $107 million • 2009 - $21 million • Ultimately settled lawsuit with VISA for

    $41 million

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    Potential Costs • System improvements/repair • Notification costs • Credit protection • Investigation/consultants • Lawsuits – banks, consumers • Regulatory fines • Loss of acquisition value

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  • James S. Gkonos Special Counsel Philadelphia Office Centre Square West Philadelphia, Pennsylvania 19102-2186 Phone: (215) 972-8667 Fax: (215) 972-1833 Email: jgkonos@saul.com Jim Gkonos focuses his practice on insurance and reinsurance regulatory matters, contract and treaty interpretation and reinsurance disputes. He is a certified reinsurance arbitrator. As a former division general counsel of a large domestic property and casualty carrier, Jim has significant experience with and knowledge of the regulatory issues facing domestic carriers. He was responsible for the drafting and interpretation of the reinsurance treaties placed annually by the division and has been involved in the commutation of hundreds of reinsurance treaties.

    Jim assists clients on issues relating to financial guarantees, surety bonds and the intersection between insurance and the capital markets. He frequently represents clients that have problems and issues with insurance companies in runoff and liquidation. He has structured securitized international financial transactions backed by insurance guarantees and has substantial international experience in the restructure of financially impaired, insolvent or bankrupt entities. Jim also conducted, managed and supervised substantial litigation in the United Kingdom, Japan, China, Argentina, Brazil and the Virgin Islands and brings more than 25 years of domestic litigation experience to the Insurance Practice.

    Jim also previously served for nine years as senior counsel advising the Rehabilitator of one of the largest insurance insolvencies in the United States - Mutual Fire Marine and Inland Insurance Company, In Rehabilitation. In that position, Jim was responsible for interpretation of insurance insolvency laws, negotiation and commutation of reinsurance treaties, documentation of more than 13,000 claim settlements and managing reinsurance arbitrations and the litigation against the insolvent company’s MGA's and accountants.

    As complex regulations governing the insurance and re-insurance continue to evolve, Jim has become a frequent speaker and author on numerous insurance topics, including the impact of the subprime defaults on the insurance and capital markets, changes in state and federal regulatory environments and how the challenging economic climate impacts the insurance and financial markets.

    Practices Appellate

    Corporate Governance

    Business and Finance

    Commercial Litigation

    Litigation

    Insurance

    Education J.D., Penn State The Dickinson School of Law, 1979

    B.A., University of Delaware, 1976, with honors

    Bar Admissions Pennsylvania

    Clerkships Chief Justice Daniel Herrmann, Supreme Court of Delaware, 1979- 1980

  • James S. Gkonos 2

    He is admitted to practice before the U.S. Court of Appeals for the Third Circuit, the U.S. Court of Appeals for the Federal Circuit, the U.S. District Court for the Eastern District of Pennsylvania, the U.S. Court of International Trade and the Supreme Court of Pennsylvania.

    Honors and Awards

    • Named to “Who’s Who Legal” list for Insurance and Reinsurance, 2016

    Memberships and Affiliations

    • Member, Federation of Regulatory Counsel • Member, ABA Litigation Section • Member, ABA International Law Section • Member, ABA Accountants' Liability Subcommittee of the Professional Liability Committee, Litigation

    Section

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    Cyber Insurance: Coverage Under the “Standard” Policies

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     Directors & Officers / Errors & Omissions

     First Party Property

     Crime Coverage

     Commercial General Liability

     Others

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    •Director’s & Officers / Errors & Omissions

     Breach of fiduciary duties by directors & officers

     Waste of corporate assets

     Derivative actions for mismanagement

     Claims against the company where entity (“side c”) coverage exists

     Breach of professional responsibilities leading to a breach

     Don’t forget tag-on cyber liability coverage

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    Property policies

     Data loss as “direct physical loss or damage to covered property”

     Business interruption / extra expense – See NMS Services,