SUNDAY, APRIL 21, 2019
Cyber Incident: Marriott Data Breach
12/18/2018 12:00:00 PM
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First Posting 12/18/2018 12:00:00 PM  
Summary
Posting Date: 12/18/2018 12:00:00 PM

AIR estimates that the direct cyber incident losses for the Marriott breach will be between USD 200 million and USD 600 million.

AIR’s loss estimates are based on the assumption that 500 million records were stolen, as Marriott has reported. The range of loss estimates reflects the uncertainty about the data that was stolen, e.g., while credit card data was stolen, it was encrypted; however, the encryption key itself may have been stolen as well. There is additional uncertainty, as some of these records may be duplicates. The loss estimates in this report are based on an analysis performed using the AIR Cyber Model. These estimates are subject to uncertainty and are not based on actual policy or loss data reported by Marriott. The net financial impact to Marriott will be partially mitigated by the cyber insurance and other liability insurance coverage they reportedly have, which are not accounted for in these estimated losses.

AIR’s modeled loss estimates for the Marriott breach include:

  • First- and third-party losses directly related to the security breach, including notification costs, forensics, credit monitoring, replacement of credit cards, setting up a call center, and any liability covered under an affirmative cyber policy

AIR’s modeled loss estimates for the Marriott breach do not include: 

  • Any fines that may be levied upon Marriott, including potential fines for violation of the GDPR
  • D&O and other non-cyber policy related claims, reputational loss, business interruption, decrease of stock price
  • The impact of any insurance coverages that Marriott may use to recover their losses 

AIR's new probabilistic security breach model shows that this type of event is not unprecedented, even though an event of this magnitude has never previously happened to a hotel chain. In fact, the largest recorded breach for a U.S.-based hotel chain prior to this event was less than 1/50 the size in terms of the number of records stolen. There are more than 300 simulated events in the AIR model that cause higher losses for U.S.-based hotels. 

Event Recap

As of December 8, 2018, Marriott has shared the following information on its website: On September 8, 2018, Marriott received an alert from an internal security tool regarding an attempt to access the Starwood guest reservation database. Marriott quickly engaged leading security experts to help determine what occurred. Marriott learned during the investigation that there had been unauthorized access to the Starwood network since 2014. Marriott recently discovered that an unauthorized party had copied and encrypted information and took steps toward removing it. On November 19, 2018, Marriott was able to decrypt the information and determined that the contents were from the Starwood guest reservation database.

Marriott has not finished identifying duplicate information in the database, but believes it contains information on up to approximately 500 million guests who made a reservation at a Starwood property. For approximately 327 million of these guests, the information includes some combination of name, mailing address, phone number, email address, passport number, Starwood Preferred Guest (“SPG”) account information, date of birth, gender, arrival and departure information, reservation date, and communication preferences. For some, the information also includes payment card numbers and payment card expiration dates, but the payment card numbers were encrypted using Advanced Encryption Standard encryption (AES-128). There are two components needed to decrypt the payment card numbers, and at this point, Marriott has not been able to rule out the possibility that both were taken. For the remaining guests, the information was limited to name and sometimes other data such as mailing address, email address, or other information.

Marriott reported this incident to law enforcement and continues to support their investigation. Marriott has already begun notifying regulatory authorities.

 

Cyber Incident: Marriott Data Breach
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