Extreme cyberattack could cost $53 billion: Lloyd's

Insurance companies 'must adapt to threat of cyberattacks'

Insurance companies 'must adapt to threat of cyberattacks'

The company outlined a second-most likely threat involving a mass hack of business' computer operating systems leading to losses of $9.7bn to $28.7bn, the majority of which - $26bn - would not be covrered by insurance.

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

Just like some of the worst natural catastrophes, cyber events can cause a severe impact on businesses and economies, triggering multiple claims and dramatically increasing insurers' claims costs, said Beale.

A major worldwide cyber-attack could mean economic losses of $53 billion (£40bn) on average and up to $121bn, comparable with natural disasters such as Hurricanes Katrina or Sandy, according to Lloyds of London.

"It is estimated that by 2016, cyber attacks have cost some $ 450 billion business, on a global scale", details the study, citing recent work on the issue.

"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, speaking to Reuters.

Average economic losses caused by such a disruption could range from $4.6 billion to $53 billion for large to extreme events.

The analysis reveals that under the mass software vulnerability attack scenario, the cyber protection gap is between $8.9 billion for a large event and $26.6 billion for an extreme event, which means that just 7% of the economic losses are covered by insurance protection. And the average insured losses range from Dollars 762 million to USD 2.1 billion.

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 official cost of Hurricane Sandy in 2012 was $50bn. "Insurers could benefit from thinking about cyber cover in these terms and make explicit allowance for aggregating cyber-related catastrophes".

Arvind Parthasarathi, CEO of Cyence, added that Cyence is excited to be working with Lloyds on empowering the insurance industry to understand and model cyber risk. "Leveraging Cyence's unique cyber risk platform, we're excited to see insurers providing more capacity, bringing innovative products to market with greater confidence and creating a more robust and sustainable insurance market".

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