In an extreme event of cloud service disruption, Lloyd’s of London warned economic losses could be as high as $121.4bn (£92.5bn) depending on factors such as the different organisations involved and how long the cyber attack lasts for.
The report found that a major outage at several cloud service providers could trigger an average of $53bn of economic losses and as much as $8.1bn of insured losses, highlighting a major gap in insurance coverage.
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.
The report likened the cost of a major cyberattack to Hurricane Sandy, the second most costly storm in history, which caused damage of between $50 billion and $70 billion to the northeastern United States five years ago.
In its report, which it has co-written with Cyence, a cybersecurity analytics platform provider, the insurer suggested that the direct economic impacts of cyber events lead to a wide range of potential economic losses. Reuters notes most companies lack information frameworks they can rely on to assess their clients’ risk profiles and make base assumptions, a significant problem for an industry which thrives on data. These costs mostly go on business interruptions and computer repairs.
In the hypothetical cloud service attack in the Lloyd’s-Cyence scenario, hackers inserted malicious code into a cloud provider’s software that was created to trigger system crashes among users a year later. NotPetya was significantly less costly – globally, it cost organizations US$850 million.
“Because cyber is virtual, it is such a hard task to understand how it will accumulate in a big event”, Lloyd’s of London chief executive Inga Beale told Reuters.
By then, the malware would have spread among the provider’s customers, from financial services companies to hotels, causing all to lose income and incur other expenses.
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.
As digital technology innovations, such as the sharing economy, blockchain or the Internet of Things, are multiplying at an unprecedented pace and connecting more deeply with the physical world, cyber risks are likely to rise, according to the World Economic Forum.