Global cyber-attack could be as costly as Hurricane Sandy

Xavier Trudeau
Juillet 17, 2017

According to the report, average insurance industry losses from the cloud service provider hack scenario range from as low as $620 million for a large loss to as high as $8.1 billion for an extreme event.

Just like some of the worst natural catastrophes, cyber events can cause a severe impact on businesses and economies, triggering multiple claims and dramatically increasing insurers' claims costs, said Beale. The study, conducted together with Cyence, also found that while demand for cyber insurance is increasing, most of these losses (17%) are not now insured, leaving an insurance gap of tens of billions of dollars.

Inga Beale, chief executive officer of Lloyd's, said: "This report gives a real sense..."

The report estimated the hit on the economy from such an event could land between $15 billion (£11 billion) and $121 billion (£93 billion) - a wide range that the authors blamed on a lack of historical precedence and quantifiable data, leaving the insurers with a challenge as they tried to accurately forecast the potential fallout of a widespread cyber attack.

Average economic losses caused by such a disruption could range from $4.6 billion to $53 billion for large to extreme events. In the mass software vulnerability scenario, the average losses range from United States dollars 9.7 billion for a large event to USD 28.7 billion for an extreme event. And the average insured losses range from $762m to $2.1bn.

Analysis in the report shows that for this scenario the protection gap could be as high as $45 billion, meaning that roughly $20.6 billion, or less than 17% of the economic loss would be covered by re/insurance protection.

The figures are comparable to the $108bn of damage caused by Hurricane Katrina in 2005, including $80bn of uninsured losses, or the $50bn to $70bn in damage estimated to have been caused by Hurricane Sandy in 2012.

Lloyd's worked with Cyence to collect data at internet scale to model cyberrisk and evaluate the financial, economic and insurance impact of these scenarios.

That's according to noted banking group Lloyd's of London, which teamed up with risk-modelling firm Cyence to look at several potential cyber-attack disaster scenarios. "Leveraging Cyence's unique cyber risk platform, we're excited to see insurers providing more capacity, bringing innovative products to market with greater confidence and creating a more robust and sustainable insurance market".

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