Lloyd’s models potential $3.5trn exposure from major cyber attack

Published on Tue, 31/10/2023 - 16:11

The London insurance market has undertaken a scenario analysis of a major cyber catastrophe event thcat could impact world economy.

Lloyd’s has said that the global economy has an exposure of $3.5trn from a major cyber-attack.

The figure came out in a systemic risk scenario the marketplace released that models the global economic impact of a hypothetical but plausible cyber attack.

This attack, it posited, could be on a major financial services payments system, resulting in widespread disruption to global business.

The three countries that would experience the highest five-year economic loss from the scenario are the United States $1.1trn, followed by China $470bn and Japan $200bn. The recovery time for individual countries or regions depends on the structure of their economy, exposure levels, and resilience.

Chairman of Lloyd’s, Bruce Carnegie-Brown, said: “We are committed to building resilience around systemic risk and the risk scenario released today highlights the important role of insurance in supporting and protecting customers against the potential threat cyber poses to businesses and society.”

Using global Gross Domestic Product (GDP) as its central measurement, the Lloyd’s and Cambridge model calculated the global economic loss of a global cyber-attack on a major financial services payment system as $3.5trn. This would be the global economic loss over a five-year period (the weighted average across the three severities it modelled).

According to Lloyd’s, the global economic loss ranges from $2.2trn in the lowest severity scenario up to $16trn in the most extreme scenario. $140bn is the expected global economic loss (the sum-product of the five-year economic loss and the probability of the event occurring).

Lloyd’s said in a statement that cyber insurance is a growing market, estimated at just over $9bn in gross written premiums last year, and forecast to hit between $13bn and $25bn by 2025. However, it said that this still represents a small portion of the potential economic losses that businesses and society face.

Carnegie-Brown added: “The global interconnectedness of cyber means it is too substantial a risk for one sector to face alone and therefore we must continue to share knowledge, expertise, and innovative ideas across government, industry, and the insurance market to ensure we build society’s resilience against the potential scale of this risk.”