Lloyd’s warns cyberattacks pose $3.5tr global risk
In a hypothetical yet realistic scenario, a major cyberattack on a financial services payments system could result in widespread global business disruptions and potential economic losses of $3.5 trillion, according to a systemic risk scenario outlined by Lloyd’s. Chairman Bruce Carnegie-Brown says that cyber risks are now “too substantial” to be addressed by a single sector, and requires collaboration among government, industry, and the insurance market to bolster resilience.
Cyberattacks continue to threaten businesses and governments, with year-on-year costs around maintenance, prevention, and response to attacks increasing. Cyber remains a risk that has the potential to affect all areas of society, as it is both a complex and connected risk impacting areas such as supply chains and geopolitics.
With over a fifth of the world’s cyber premium being placed in the Lloyd’s market, according to the marketplace, Lloyd’s is seeking to support the growth of the class “thoughtfully and sustainably” – while also enabling innovation for new products through the Lloyd’s Lab.
In September, Lloyd’s Futureset held its first Cyber Innovation Forum, connecting customers with representatives from technology, government, and insurance sectors to discuss global cyber risk and the collective steps needed to respond.
According to a new systemic risk scenario published by Lloyd’s, the three countries that experience the highest five-year economic loss are the US $1.1 trillion, followed by China $470 billion and Japan $200 billion. The recovery time for individual countries or regions depends on the structure of their economy, exposure levels and resilience.
Cyber insurance is a growing market, estimated at just over $9 billion in gross written premiums last year, and forecast to hit between $13 billion and $25 billion by 2025. However, this still represents a small portion of the potential economic losses that businesses and society face, Lloyd’s said.
Bruce Carnegie-Brown, Lloyd’s chairman 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.
“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.”
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