Compliance with Model Audit Rule 205 (MAR) demands more than just well-documented financial reporting processes. As insurers cross premium thresholds of $300 million or $500 million, they shoulder additional governance responsibilities that increasingly intersect with cybersecurity. In a digital world, safeguarding sensitive data is vital for upholding the integrity of financial statements and maintaining stakeholder trust. Below, we explore how cybersecurity fits into the MAR framework, the emerging threats insurers face, and how proactive measures can fortify both financial controls and reputation.

Why Cybersecurity Matters Under MAR

At its core, MAR focuses on ensuring accurate financial reporting through a set of standards encompassing governance, internal controls, and independent oversight. MAR doesn’t explicitly mention “cybersecurity,” however, its requirements implicitly necessitate robust cybersecurity measures to protect confidential data and ensure the integrity of financial reporting. 

While cybersecurity measures support MAR compliance by protecting financial data, it’s critical to understand that MAR compliance alone does not equate to strong organizational governance. An organization could meet MAR standards and still face operational weaknesses or cybersecurity deficiencies. Further, cybersecurity’s role in governance extends beyond MAR to frameworks like the Insurance Data Security Model Law, which explicitly focuses on data security and is being adopted by many states.

Still, the growing volume of cyber incidents—ranging from ransomware attacks to data manipulation—poses a direct threat to reliable financial information. Unauthorized access or data breaches can undercut the very controls MAR is designed to protect, leading to unreliable reporting or the inability to meet regulatory filing deadlines.

Moreover, regulators and rating agencies have taken note of how even minor cyber events can disrupt critical financial processes. Insurers handling massive volumes of policyholder data and premium transactions face reputational and operational risks if those systems are compromised. By weaving cybersecurity considerations into MAR compliance, organizations address not only the letter of the regulation but also the broader necessity of maintaining operational resilience.

Emerging Threats Facing Insurers

Cyber threats evolve at a rapid pace, and insurers often possess the kind of high-value data—personally identifiable information, claims histories, sensitive financial information—that attracts sophisticated attackers. Ransomware remains a top concern, as it can lock down critical financial systems and delay key filings mandated by MAR. Social engineering and phishing exploit human vulnerabilities, leading employees to inadvertently provide system access to malicious actors. These risks can be even more acute when third-party vendors or outsourced services are part of the workflow, creating supply chain vulnerabilities that cascade into an insurer’s environment.

There is also a growing trend of data manipulation, where attackers quietly alter financial records or policy data to commit fraud. Such manipulation can undermine the accuracy of everything from direct written premium numbers to internal control reports, making it harder to detect anomalies and potentially skewing critical compliance documents. In each scenario, the outcome is similar: weakened assurance over financial reporting and heightened regulatory scrutiny.

Integrating Cybersecurity into MAR Compliance

A robust cybersecurity program can and should be evaluated using a similar structure to your MAR program. Many state regulations related to Insurance Data Security and cybersecurity require an independent assessment of your cybersecurity program. At the governance level, boards and audit committees are responsible for overseeing risks that could compromise financial reporting; cybersecurity is increasingly seen as a top-tier risk in this domain. Organizations integrating cyber risk assessments into their MAR-mandated enterprise risk management processes can better identify where cyber threats intersect with financial controls.

Designing and testing controls in a highly interconnected environment also requires heightened attention to IT systems. MAR emphasizes verifying the design and operating effectiveness of controls. By incorporating cybersecurity metrics—such as system access logs, vulnerability scans, and penetration testing results—into internal control reviews, insurers can add another layer of scrutiny to ensure financial data remains intact and accurate.

Best Practices for a Cyber-Resilient Control Environment

1. Align Financial and IT Security Objectives

Begin with a clear strategy that bridges the gap between financial reporting requirements and cybersecurity goals. By mapping operational and compliance needs together, insurers can better safeguard critical data and ensure robust internal controls.

2. Embed Cybersecurity Expertise within Internal Audit

As insurers cross premium thresholds, MAR necessitates a formal internal audit function. Enhance this capability by adding cybersecurity specialists or co-sourcing with external experts. This ensures thorough testing of both financial processes and IT controls—including user access reviews, data backup protocols, and incident response procedures.

3. Establish a Rigorous Incident Response Plan

Approach incident response with the same vigilance afforded to other risk-driven processes under MAR. Document clear escalation paths, roles, responsibilities, and communication channels for security breaches. A structured plan helps leadership respond efficiently to potential threats, reducing the likelihood of prolonged operational disruptions.

4. Provide Ongoing Employee Training

Educate staff on safe cyber practices, from recognizing phishing attempts to safeguarding client data. Regular training fosters a culture of security awareness, mitigating reputational and regulatory risks posed by inadvertent disclosures or breaches.

5. Maintain Continuous Monitoring

Deploy real-time monitoring tools to detect abnormal network activities or attempted intrusions. Just as real-time reviews support financial accuracy, continuous monitoring enables prompt detection and remediation of cybersecurity issues.

6. Conduct Periodic Vulnerability Assessments and Penetration Tests

Validate the effectiveness of security controls through regular scans and tests. By simulating real-world attacks, insurers can identify weak points in their systems early, reinforcing internal controls before breaches compromise financial or operational integrity.

7.  Implement Multi-Factor Authentication (MFA)

MFA requires multiple factors to verify your identity and defends against common threats related to password compromise.  

Tackle MAR Compliance and Cybersecurity With Us

Johnson Lambert helps insurers navigate this intersection of MAR requirements and cybersecurity risk by mapping critical financial systems to effective IT controls, reviewing governance structures for enhanced oversight, and identifying gaps in existing risk assessments. 

Our cybersecurity assessment services address data vulnerabilities, regulatory requirements, and best practices—including the NAIC Insurance Data Security Model Law, NYDFS Cybersecurity regulation, NIST cybersecurity framework, and Center for Internet Security Top 18 Controls. We specialize in building tailored strategies that integrate seamlessly with MAR compliance measures, ensuring financial data remains intact and secure. Whether you need a risk assessment or guidance on enhancing your incident response plan, our team stands ready with actionable strategies to help you safeguard your data, financial reporting, and reputation.

Contact us today to learn how we can help you confidently navigate escalating cyber threats and maintain the trust of policyholders and regulators alike.