Medibank Private will face an increase of $250 million in its capital adequacy requirement from 1 July, with the Australian Prudential and Regulation Authority imposing the increase after a review of the cyber attack on the medical insurance provider last year.
In a statement on Tuesday, APRA said the additional amount reflected weaknesses identified in Medibank’s information security environment.
Medibank announced on 14 October 2022 that its systems had been breached. Thereafter, information slowly trickled out until the company finally admitted that the date of 9.7 million past and present customers could have been accessed.
The APRA statement said the capital adjustment would be applied to Medibank’s operational risk charge under the new Private Health Insurance Capital Framework.
“It will remain in place until an agreed remediation program of work is completed by Medibank to APRA’s satisfaction. APRA will also conduct a targeted technology review of Medibank, with a particular focus on governance and risk culture,” the statement added.
The regulation body said while Medibank had addressed specific control weaknesses which led to the incident, it had more work to do to further strengthen its security environment and data management.
APRA member Suzanne Smith said the Medibank cyber incident was one of the more significant data breaches in Australia.
“In taking this action, APRA seeks to ensure that Medibank expedites its remediation program,” Smith said. “This action demonstrates how seriously APRA takes entities’ obligations in relation to cyber risk and that APRA will respond strongly to identified weaknesses in cyber-security controls.
“As noted previously, APRA expects Medibank to ensure there is appropriate accountability and consequence management, including impacts to executive remuneration where appropriate. I note that Medibank has consistently dealt with APRA in an open, constructive and co-operative way, consistent with our expectation of all regulated entities.
“Since launching the 2020-2024 Cyber Security Strategy, APRA has repeatedly stressed the importance of an uplift in cyber security and continued vigilance to identify and address cyber exposures.
“Unfortunately, not all entities are heeding these messages as we continue to identify poor cyber security practices and inadequate oversight from boards and management,” Smith said.
In response, Medibank said in a note sent to the ASX that it had sufficient capital to meet the increase.
It said after application of this requirement the company would remain well capitalised with unallocated capital remaining at 30 June 2022 levels: $148 million. Given this, the company said it would not reduce its target health insurance required capital ratio.
Medibank chief executive David Koczkar said: “Safeguarding customer data is a responsibility Medibank takes very seriously.
“Medibank has continued to strengthen our systems and processes to provide our customers with the security they expect and deserve. We will continue to work to enhance our systems and processes even further. Our company remains strong and well capitalised.
“We continue to support our customers through the Medibank Cyber Response Support Program, which includes mental health and well-being support, identity protection and financial hardship measures.”
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