Cloud service failure could cost $15bn
An extreme cyber incident that takes a top cloud provider offline in the US for 3 to 6 days would result in economic losses of $15 billion and up to $3 billion in insured losses, according to a Lloyd’s Jan. 23 press release.
A report launched by Lloyd’s in partnership with risk modeller AIR Worldwide analysed losses for 12.4 million US organizations and proposes an alternative approach to help insurers model these risks, which are typically harder to assess than other perils like natural disasters due to the complex and highly interconnected nature of the digital world.
The report “Cloud Down - The impacts on the US economy” found that companies outside of the Fortune 1000 – which are more likely to use cloud provider services – would carry a larger share of the economic and insurance losses than Fortune 1000 companies.
Businesses outside the Fortune 1000 would carry 63 percent share of economic losses and 57 percent of insured losses – indicating that they are at the highest risk.
However, Fortune 1000 companies would still carry 37 percent of economic losses and 43 percent of insured losses.
If a top cloud provider went down, manufacturing would see direct economic losses of $8.6 billion, according to the report. Wholesale and retail trade sectors would see economic losses of $3.6 billion. Information sectors would see economic losses of $847 million, while finance and insurance sectors would see economic losses of $447 million. Transportation and warehousing sectors would see economic losses of $439 million.
“This report provides a detailed picture of the costs to the US economy as a result of a cloud service provider failure,” said Trevor Maynard, head of Innovation at Lloyd’s. “Clouds can fail or be brought down in many ways – ranging from malicious attacks by terrorists to lighting strikes, flooding or simply a mundane error by an employee. Whatever the cause, it is important for businesses to quantify the risks they are exposed to as failure to do so will not only lead to financial losses but also potentially loss of customers and reputation.
“Lloyd’s previous research with KPMG and DAC Beachcroft has shown that services firms are particularly vulnerable to the reputational impacts of a cyber attack where service disruption can have an immediate effect on clients, leading to customer churn, loss of competitive advantage and loss of revenue.”
Scott Stransky, assistant vice president and principal scientist at AIR Worldwide, added: “A major cloud failure would significantly impact the insurance industry, and our research has shown that such an event is plausible. The findings from this report show that while the cyber insurance industry is growing, there’s still a significant gap in cyber coverage.
Join us at Intelligent Automation in Insurance - London 2018. Book by Jan 31st and you could save £400.
More of today's news
Travelers underwriting income plummets
XL Catlin unveils new insurance offering in France
Ryan Specialty appoints CEO of ThinkRisk, CorPro
