Published: Mon, July 17, 2017
Industry | By Dora Warner

Lloyds of London: Cyber Attack Could Cause £40bn In Damage Worldwide

Lloyds of London: Cyber Attack Could Cause £40bn In Damage Worldwide

Inga Beale, chief executive of Lloyd's, said: "This report gives a real sense of the scale of damage a cyber-attack could cause the global economy", and warned that premium calculations needed to "keep pace with the cyber-threat reality".

The report likened the cost of a major cyberattack to Hurricane Sandy, the second most costly storm in history, which caused damage of between $50 billion and $70 billion to the northeastern United States five years ago.

Cybersecurity and insurance expert Ian Birdsey of Pinsent Masons, the law firm behind Out-Law.com, said insurers were faced with significant challenges in modelling losses from cyber attacks due to lack of data.

The total figure could range between $4.6 billion (£3.5 billion) and $121 billion (£93 billion) depending on the severity of an attack, the report's authors calculated.

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Lloyd's and Cyence have produced a report that highlights potential economic losses of up to $121 billion from cyber attacks with less than a fifth being covered by re/insurance, revealing a cyber protection gap in the tens of billions of dollars.

Insurers are struggling to estimate their potential exposure to cyber-related losses amid mounting cyber risks and interest in cyber insurance.

However, Lloyd's said that the economic losses could be much lower or higher than the average in the scenarios because of the uncertainty around cyber-aggregation.

"NotPetya" caused $850 million in economic costs, Cyence said. These costs mostly go on business interruptions and computer repairs.

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Among those identified are a malicious hack taking down a cloud service provider - this could cost anything between $15billion and $121billion. "Because cyber is virtual, it is such a hard task to understand how it will accumulate in a big event", Lloyd's of London Chief Executive Inga Beale said.

By then, the malware would have spread among the provider's customers, from financial services companies to hotels, causing all to lose income and incur other expenses.

However, the majority of these losses are not insured, which could result in an uninsured gap of as much as $45 billion for the cloud services scenario and $26 billion for the OS hacking scenario.

Lloyds, the world's oldest insurance market, said its projections, issued on Monday, indicate the growing risk posed by the economic system's dependence on Internet-connected computer systems.

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