A cyber attack major potentially as costly as a hurricane

Isaac Cain
July 17, 2017

According to the research, for the cloud service disruption scenario in the report, average economic losses range from US$4.6bn from a large event to $53bn for an extreme event.

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 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.

The warning comes just weeks after the global ransomware cyber-attack that affected businesses around the world and the NHS in the UK.

A new study published by Lloyd's of London has revealed a multi-billion dollar cyber insurance gap.

A major global 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.

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"Because cyber is virtual, it is such a hard task to understand how it will accumulate in a big event", said Lloyd's of London Chief Executive Inga Beale in an interview with Reuters. This mostly involved business interruptions and computer repairs.

WannaCry caused about $8bn in damages worldwide, with NotPetya leading to $850m in economic costs, according to Cyence.

In the scenario of an imaginary cloud service attack in which hackers inject a malware into a cloud provider's software. The code spreads to its customers all over the world, including financial services companies, hotels, and other businesses.

The report's authors said businesses need to be aware of the "slow burn" costs of a cyber security incident, which can "dramatically increase" the final bill over time.

"The speed with which endemic cyber risk can spread across the globe means that such a cyber loss is a very worst-case scenario for insurers and can quickly become catastrophic loss", Birdsey said. More worryingly, the report states that as much as $45 billion of that sum may not be covered by cyber policies due to companies not investing enough in appropriate insurance policies.

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