Annual Penetration Tests – A Requirement for Cyber Insurance
- May 11, 2023
- Canary Trap
With the rise of cyberattacks in recent years, it’s no surprise that insurance companies have started to become more cautious. Cybercriminals have been relentless in their efforts of finding new ways to impact businesses and organizations for financial gain, which have caused major companies around the world to incur million dollar losses and damaged reputations.
That’s the main reason why cyber insurers have begun to demand annual penetration testing as a condition of coverage. This means that businesses that want cyber insurance coverage must conduct annual penetration testing to assess their cybersecurity measures and ensure that they are up to par.
What Is Penetration Testing?
Penetration testing, also known as pen testing, is a simulated cyberattack that aims to identify weaknesses in a system’s security defenses. This test is typically carried out by ethical hackers who use the same tools and techniques as malicious hackers to penetrate a system’s defenses with the goal to identify vulnerabilities and assess the potential impact of a real cyberattack.
Experts at Imperva add that “pen testing can involve the attempted breaching of any number of application systems, (e.g.: application protocol interfaces (APIs), frontend/backend servers) to uncover vulnerabilities, such as unsanitized inputs that are susceptible to code injection attacks.”
What Makes Penetration Testing Important?
Penetration testing is an essential part of any comprehensive cybersecurity program, as it helps organizations identify and mitigate potential security risks before they can be exploited by malicious actors.
According to an article published on Tech Target, “pen testing is considered a proactive cybersecurity measure because it involves consistent, self-initiated improvements based on the reports the test generates.”
In the article it is also mentioned that “this differs from non proactive approaches, which don’t fix weaknesses as they arise. […] The goal of proactive measures, such as pen testing, is to minimize the number of retroactive upgrades and maximize an organization’s security.”
How Often Should Pen Tests Be Performed?
Determining how frequently should pen tests be conducted depends on many factors. According to Core Security, “it will depend on the size of your organization, the scale at which you want to run your tests, and the type of resources you want to use.”
In Core Security’s 2023 Pen Testing Report it is mentioned that “the majority of cybersecurity professionals (38%) run a penetration test once or twice a year.”
The Importance of Cyber Insurance
Cyber insurance provides financial protection and support for businesses and organizations in the event of data breach by cybercriminals. It can cover some of the costs associated with lost revenue due to business interruption, and it’s becoming not only important, but essential to mitigate risks and safeguard against further losses.
In a 2022 article by Packet Labs, it was noted that “cyber insurance provides financial protection in the event that an organization is hit by a cyberattack. In the event of a successful attack, cyber insurance can help to cover the costs of data recovery, business interruption, legal expenses, and damage to reputation. While the decision to purchase cyber insurance is ultimately up to the business, it is essential to note that many companies are now starting to require it as a condition of doing business.”
Why Do Insurers Require Annual Penetration Testing?
In an article published by CDW, experienced security engineers noted that “in recent years, insurers have paid out significant money in the wake of security incidents, so their requirements have grown stricter, and their policies have become more expensive. In some cases, insurers have dropped coverage for organizations that lack certain security protections.”
This means that there are more than a few reasons insurers require annual penetration as a condition of coverage:
- First, it allows insurers to assess the cybersecurity posture of a business before providing coverage. If a business has vulnerabilities that could be easily exploited by hackers, the insurer may decide that it is too risky to provide coverage. On the other hand, if a business has a strong cybersecurity posture and has taken steps to mitigate potential risks, the insurer may be more willing to provide coverage.
- Second, annual penetration testing can help reduce the risk of a successful cyberattack. By identifying vulnerabilities and weaknesses in a system’s security defenses, businesses can take steps to mitigate these risks before they can be exploited by malicious actors. This reduces the likelihood of a successful cyberattack, which in turn reduces the likelihood of a claim being made against the insurer.
- Finally, annual penetration testing can help insurers assess the potential impact of a cyberattack. By simulating a cyberattack, businesses can get a better understanding of the potential damage that could be caused by a real cyberattack. This information can be used by insurers to better understand the potential risk associated with providing coverage to a particular business.
Experts at Bit Sentinel also mentioned that “in addition to regularly scheduled analysis and assessments required by regulations, […] tests should also be run whenever:
- New network infrastructure or applications are added.
- Significant upgrades or modifications are applied to infrastructure or applications.
- New office locations are established.
- Security patches are applied.
- End user policies are modified.”
What Are the Benefits of Annual Penetration Testing?
There are several benefits to conducting annual penetration testing.
- First, it allows businesses to identify vulnerabilities and weaknesses in their cybersecurity defenses before they can be exploited by malicious actors. This helps businesses take proactive steps to mitigate potential risks and reduce the likelihood of a successful cyberattack.
- Second, annual penetration testing can help businesses meet compliance requirements. Many regulatory frameworks require businesses to conduct regular security assessments, including penetration testing. By conducting annual penetration testing, businesses can ensure that they are meeting these requirements and avoid potential fines or penalties.
- Finally, annual penetration testing can help businesses build trust with their customers. By demonstrating a commitment to cybersecurity and taking steps to mitigate potential risks, businesses can build trust with their customers and differentiate themselves from competitors who may not be taking cybersecurity as seriously.
Additionally, according to Core Security, “one of the most critical reasons to pen test more frequently is the need for retesting. Retesting involves running the same exact tests as the previous pen testing session in order to verify that remediation efforts were successful. Sometimes changes are made to resolve security weaknesses found in penetration tests, but it’s just assumed that these measures sufficiently fix these issues.”
What Are the Challenges of Conducting Annual Penetration Testing?
While there are many benefits to conducting annual penetration testing, there are also some challenges that businesses may face.
- First, conducting penetration testing can be expensive and time-consuming. Businesses may need to hire external experts to conduct the test, which can be costly.
- Second, businesses may be hesitant to conduct penetration testing out of fear that it will uncover vulnerabilities that they are unable to fix. This fear is understandable, but it is important to remember that identifying vulnerabilities is the first step in mitigating potential risks. By identifying vulnerabilities, businesses can take proactive steps to address them and reduce the likelihood of a successful cyberattack.
- Finally, businesses may be hesitant to conduct penetration testing out of fear that it will negatively impact their relationship with their insurer. While it is true that identifying vulnerabilities may make it more difficult to obtain coverage, it is important to remember that the goal of annual penetration testing is to improve a business’s cybersecurity posture and reduce the risk of a successful cyberattack. By taking proactive steps to identify and mitigate potential risks, businesses can demonstrate a commitment to cybersecurity and build trust with their insurers and customers alike.
What Needs to Be Taken Into Account When Performing Pen Tests?
As it was suggested by experts in Tech Target: “organizations should consider the following factors when scheduling pen testing:
- Company Size. Larger organizations can suffer greater monetary and reputational losses if they fall prey to cyber attacks. Therefore, they should invest in regular security testing to prevent these attacks.
- Budget. Pen testing should be based on a company’s budget and how flexible it is. For example, a larger organization might be able to conduct annual pen tests, whereas a smaller business might only be abñe to afford it once every two years.
- Regulations. Depending on the industry type and regulations, certain organizations within banking and healthcare industries are required to conduct mandatory penetration testing.”
The demand for annual penetration testing by cyber insurers is a positive step towards improving cybersecurity practices and reducing the risk of successful cyberattacks. While there may be challenges associated with conducting penetration testing, the benefits far outweigh the costs.
By conducting annual penetration testing, businesses can identify and mitigate potential risks, meet compliance requirements, build trust with their customers, and ultimately reduce the likelihood of a successful cyberattack. As cyber threats continue to evolve, it is essential for businesses to take cybersecurity seriously and invest in regular security assessments like annual penetration testing to stay ahead of potential threats.