0855 GMT December 03, 2022
Lloyd’s of London, in a joint research with risk-modeling firm Cyence, studied two scenarios and their potential economic impact: A malicious hack that takes down a cloud service provider, and cyberattacks on computer operating systems run by major businesses around the world.
“For the cloud service disruption scenario, average economic losses range from $4.6 billion from a large event to $53 billion for an extreme event,” the world’s oldest insurer said in its 56-page report, Arab News wrote.
“Because of the uncertainty around aggregating cyber losses this figure could be as high as $121 billion or as low as $15 billion,” depending on factors such as the different organizations involved and how long the cloud service disruption continues.
Lloyd’s said economic damage from a massive cyberattack would be higher than the $108 billion caused by hurricane Katrina in 2005, and the $70 billion in losses from hurricane Sandy in 2012.
In comparison, the WannaCry ransomware attack in May, which infected more than 230,000 computers in over 150 countries, was estimated to have cost the global economy at least $4 billion.
Inga Beale, chief executive of Lloyd’s, said: “Just like some of the worst natural catastrophes, cyber events can cause a severe impact on businesses and economies, trigger multiple claims and dramatically increase insurers’ claims costs. Underwriters need to consider cyber cover in this way and ensure that premium calculations keep pace with the cyber threat reality.”
In 2016, cyber-attacks were estimated to cost businesses as much as $450 billion a year.
Lloyd’s has estimated that the uninsured gap could be as much as $45 billion for the cloud services scenario, meaning that less than a fifth of the economic losses are actually covered by insurance.
Meanwhile, the insurance gap could be as high as $26 billion for the mass vulnerability scenario, meaning that just seven percent of economic losses are covered.
Cyber cover is a relatively new type of insurance that has emerged in the last few years, of which Lloyds’s accounts for about a quarter of global premiums, and is harder to model and understand than natural catastrophe cover.
Consulting firm PwC estimates that annual gross written premiums are to increase from around $2.5 billion today to about $7.5 billion by the end of the decade.