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SEC Asks Companies to Disclose Cyber Attacks

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Posted on 15 Oct 11

U.S. securities regulators formally asked public companies for the first time to disclose cyber attacks against them, following a rash of high-profile Internet crimes.

The Securities and Exchange Commission issued guidelines Thursday that laid out the kind of information companies should disclose, such as cyber events that could lead to financial losses.

Senator John Rockefeller had asked the SEC to issue guidelines amid concern that it was becoming hard for investors to assess security risks if companies failed to mention data breaches in their public filings.

"Intellectual property worth billions of dollars has been stolen by cyber criminals, and investors have been kept completely in the dark. This guidance changes everything," Rockefeller said in a statement.

"It will allow the market to evaluate companies in part based on their ability to keep their networks secure. We want an informed market and informed consumers, and this is how we do it," Rockefeller said in a statement.

There is a growing sense of urgency about cyber security following breaches at Google Inc, Lockheed Martin Corp, the Pentagon's No. 1 supplier, Citigroup , the International Monetary Fund and others.

Tom Kellermann, chief technology officer of security firm AirPatrol Corp, said that the SEC guidance tells companies to report cyber attacks and disclose steps to remediate problems.

"They must also incorporate cyber events into their material risk reports," said Kellermann, who has advised U.S. President Obama on cyber policy.

The SEC gets into specifics, telling companies what type of data they might need to provide investors.

"Examples of estimates that may be affected by cyber incidents include estimates of warranty liability, allowances for product returns, capitalized software costs, inventory, litigation, and deferred revenue," it says.

A report out earlier this month found that U.S. banks are losing ground in the battle to combat credit and debit card fraud because they balk at the expense of higher security. Globally, however, security is improving in the payment industry, according to data from The Nilson Report, a California trade publication.

There is some hope of U.S. legislation to address the problem, although the House of Representatives appears more interested in tackling it piecemeal while the Senate is opting for a more far-reaching approach.

Most of the concern has been focused on critical facilities like nuclear power, electricity, chemical and water treatment plants.

Conning Research: Life Insurers Struggle with Low Interest Rate Environment for the Foreseeable Future

Analysis of life insurers’ assets and investments in 2010 reveals an industry in recovery from the credit crisis but facing a new and longer-term set of challenges from the lowest interest rates seen since the 1950’s, according to a new study by Conning Research & Consulting.

“Our analysis of life insurers’ investment profile through 2010 and into 2011 indicates that their appropriate response to the credit crisis—increasing cash and sovereign debt holdings—now exposes insurers to other risks, especially in light of our current expectations about a long-term low interest rate environment,” said Mary Pat Campbell, analyst at Conning Research & Consulting. “The Federal Reserve’s August decision in favor of long-term low interest rates creates a real strategic problem for life insurers. In addition to the obvious issue of low returns on an asset portfolio composed primarily of fixed income securities, the low interest rate environment may cause other problems with regulatory requirements and hedging programs. Approaches to dealing with this challenge will require greater sophistication than ever before.”

The Conning Research study, “Life Insurance Industry Investments: Investigating Interest Rate and Sovereign Risk” analyzes life industry investments for the period 2006-2010 for the industry as a whole and for four underwriting market peer groups. Further, the study also provides detail regarding the industry’s position at the start of 2011 and analyzes how the prolonged low interest rate environment and other challenges may influence insurers’ strategic investment decisions in the future.

“Looking at the industry through 2011 and beyond, the Fed’s commitment to a long, low-rate environment is compounded by the downgrade of U.S. sovereign debt,” said Stephan Christiansen, director of research at Conning. “Insurers must attend to their risk profiles and consider their options. Looking forward, with emerging dynamic capital and risk analysis requirements, our modeling shows that lower interest rates may have particularly pernicious effects on capital charges relating to some asset classes in support of particular annuity products.”

“Life Insurance Industry Investments: Investigating Interest Rate and Sovereign Risk” is available for purchase from Conning Research & Consulting by calling (888) 707-1177 or by visiting the company’s web site at


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