Major cyber attack could cost global economies £40 billion

Lloyd's of London believes the global cyber market is worth between $3 billion and $3.5 billion in terms of premiums

Lloyd's of London believes the global cyber market is worth between $3 billion and $3.5 billion in terms of premiums

As reported by The Guardian, Lloyds Chief Executive Inga Beale said: "This report gives a real sense of the scale of damage a cyber-attack could cause the global economy".

A report co-written by Lloyds of London and risk-modeling firm Cyence has sought to identify just how vulnerable the global economy is to cyber-attacks.

It comes as insurance firms attempt to grasp the potential damages of a cyber-related attack.

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After a "cloud" attack, the second most likely threat stemmed from attacks on computer operating systems of the type run by a large number of businesses around the world, known as a "mass software vulnerability scenario", which could cause losses of up to $28.7 billion.

"Underwriters need to consider cyber cover in this way and ensure that premium calculations keep pace with the cyber threat reality", she added. The WEF has called for building resilience as these risks become increasingly tangible.

A major worldwide cyber-attack could mean economic losses of $53 billion (£40bn) on average and up to $121bn, comparable with natural disasters such as Hurricanes Katrina or Sandy, according to Lloyds of London. This is the average in the scenario, because of the uncertainty around aggregating cyber losses. For instance, the business impact on a leading cloud platform lasts for 24 hours and causes cascaded impacts on other businesses dependent upon its services.

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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.

The losses caused by such an attack range from as little as $15bn to as much as $121bn, with a $53bn average estimate, Lloyds said, with as much as $45bn of uninsured losses.

The company, which published the 56-page report in cooperation with computer security firm Cyence, said its findings also reflect how hard it is to model and understand an area in which there is so little historical data upon which to base assumptions.

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It said a single cyber event had the potential to increase industry loss ratios by 19% and 250% for large and extreme loss events, respectively. The actual figure could in fact be as much as £40.5 billion, accroding to a new report by Lloyd's of London. This compares with the economic losses of Sandy that amount to between $50bn and $70bn. "To achieve this, data collection and quality is important, especially as cyberrisks are constantly changing", said Trevor Maynard, Head of Innovation, Lloyd's.

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