Lloyd's warns of the high cost of global cyberattacks

Lloyd's warns of the high cost of global cyberattacks

A major, cyber attack has the potential to cost global economies and businesses billions. Some critics attribute those high costs to the US government's slow response to the natural disaster.

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.

The threat of cyber attacks continues to rise, and in response so to is demand for cyber coverage and the desire among insurers and reinsurers to develop adequate, affordable and effective cyber risk solutions. "While digitization is revolutionizing business models and transforming daily lives, it is also making the global economy more vulnerable to cyberattacks".

The report examined losses that could be brought upon by the potential hacking of a cloud service provider and businesses' computer operating systems.

The findings also reveal that, while demand for cyber insurance is increasing, the majority of these losses are not now insured, leaving an insurance gap of tens of billions of dollars.

"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.

Lloyds said underwriters should ensure their premium calculations keep pace with the reality of such costly threats.

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These figures represent the average amount of estimated losses on a one-year period and take into account the direct expenses expected related to these events.

Cybersecurity has made headlines over the last three months since two major attacks were made - the WannaCry ransomware crippled more than 200,000 computers in 100 countries while the NotPetya virus, from Ukraine, spread a malicious piece of malware that rendered various factories, law firms and ports inoperable.

For example, if a cloud service were hacked, insured losses could range from $620m (£474m) for a large loss to $8.1bn (£6.2bn) for an extreme loss.

Financial services are most at risk, followed by software and technology, hospitality, retail and healthcare.

For the uninsured gap, losses could be as much as $45bn for the cloud services scenario - meaning less than a fifth (17 per cent) of the economic losses are actually covered by insurance.

Where people are involved, risk changes quite rapidly, Maynard said, from cyberattacks to terrorism and political risk.

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