As Cyber Heists Surge, Banks Left Without Insurance

Dec 20 , 2025
By Aminu Nuru

---

The banking industry is confronting a new era of risk as the push for a digital financial ecosystem gains speed. Mobile banking, digital payments, and online financial services have brought greater convenience and broader access to millions, but they have also opened the door to a wave of cyberattacks and electronic fraud that is testing the banks and regulators.

The National Bank of Ethiopia (NBE) recently reported digital fraud losses totalling 1.3 billion Br in 2024. The scale of the problem is growing rapidly. In the first six months of the year, 4,623 cyberattacks were recorded, a spike of 115pc from the same period last year. However, the actual toll could be even greater, with many banks reluctant to report all incidents for fear of damaging their reputations.

Cyberattacks and electronic fraud are not unique to Ethiopia, but they present a particular challenge for regulators and banks working to catch up with international best practices. The current situation raises pressing questions about whether the existing regulatory and risk-management framework is robust enough to protect consumers, banks, and the broader financial system in the digital age.

Strengthening the internal controls of financial institutions is crucial, but it is only part of the solution. Insurance mechanisms play an important complementary role. While insurance cannot prevent fraud or cybercrime, it can offer financial compensation to victims and motivate banks to tighten their defences and improve governance. It can also help reinforce the culture of vigilance and rapid response needed in an environment where attacks are growing more frequent and sophisticated.

The current regulatory regime is anchored by a directive that protects financial consumers and safeguards their rights, including protection against fraud, unfair practices, misleading information, and transaction failures. However, this directive stops short of requiring banks to insure themselves specifically against fraud or cyber risks, instead emphasising the need for strong internal controls.

The only mandatory insurance available in the financial sector is deposit insurance, provided by the Ethiopian Deposit Insurance Fund (EDIF). This system, created by government regulation, is meant to protect depositors if a bank or microfinance institution fails. But the coverage limit of 100,000 Br per depositor per bank is relatively low, especially given rising inflation and larger deposit sizes. The approach is mainly “pay-box." It is designed to reimburse depositors after a failure, unlike more active schemes in countries such as Kenya, where deposit insurers also play a part in resolving failed banks.

The scheme primarily benefits small retail depositors, offering limited protection for investors and corporate clients.

Other countries take a broader approach. Their regulators require banks to hold various types of insurance, such as the Bankers’ Blanket Bond (BBB) or Fidelity/Crime insurance, Cyber insurance covering both first-party and third-party risks, Professional Indemnity or Errors & Omissions (E&O) insurance, and Directors’ and Officers’ (D&O) liability insurance. These covers provide a safety net for different risks.

Under a standard BBB policy, insurers compensate banks for direct losses from employee dishonesty, third-party fraud, fraudulent instructions, scams involving compromised credentials, and theft or misappropriation of funds. Cyber insurance, meanwhile, generally covers losses from unauthorised access to bank systems that result in client fund losses or fraudulent transactions, as well as legal and regulatory costs linked to such events. Professional Indemnity (E&O) and D&O insurance protect against operational errors and leadership negligence.

With the rapid pace of digital adoption and mounting losses from cybercrime and electronic fraud, regulators are under pressure to consider requiring one or more of these insurance policies. This would offer better protection for consumers, push banks to invest more in adequate internal controls, and promote the growth and resilience of the insurance industry. The higher the risk and the more frequent the incidents, the higher the insurance premiums, giving banks a financial incentive to invest in robust defences.

---

PUBLISHED ON Dec 20,2025 [ VOL 26 , NO 1338]

---

[ssba-buttons]