In a startling revelation, Lloyd’s, the world’s premier insurance and reinsurance marketplace, has unveiled a systemic risk scenario that paints a grim picture of the global economy’s susceptibility to a major cyber attack. This hypothetical envisions a cyber strike on a major financial services payments system, leading to widespread disruption in global operations. The potential economic losses amount to a staggering $3.5 trillion.
The United States, with an estimated economic loss of $1.1 trillion, tops the list of countries most affected by this nightmarish scenario. Following the US, China at $470 billion and Japan at $200 billion. The recovery time for individual nations and regions will be contingent on their economic structure, exposure levels, and resilience.
Cyber attacks have continued to loom ominously over businesses and governments. Annual expenditures on maintenance, prevention, and response have been steadily climbing. This ever-present risk holds the potential to impact all facets of society, permeating areas like supply chains and geopolitics.
“The global interconnectedness of cyber means it is too substantial a risk for one sector to face alone.”
Bruce Carnegie-Brown, Lloyd’s.
Despite the growing cyber insurance market, which saw Gross Written Premiums reach just over $9 billion last year, projections indicate it could swell to anywhere between $13 billion and $25 billion by 2025. Nevertheless, this remains a small fraction of the possible economic losses confronting businesses and societies.
“A fifth of the world’s cyber premium”
Bruce Carnegie-Brown, Lloyd’s Chairman, emphasized the importance of insurance in shoring up resilience against the cyber threat. He stated, “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.”
Over a fifth of the world’s cyber premium is placed within the Lloyd’s market. The institution is keen on promoting the thoughtful and sustainable growth of this insurance sector. Lloyd’s is also fostering innovation, as exemplified by the Lloyd’s Lab, an initiative exploring new products. Recently, Lloyd’s Futureset organized its inaugural Cyber Innovation Forum. It connected stakeholders from the technology, government, and insurance sectors to deliberate on global cyber risk and the measures necessary to confront it.
The Lloyd’s scenario is a stark reminder of the impact a large-scale cyber attack could have on the global economy. It underscores the urgent need for robust cybersecurity measures and comprehensive insurance coverage in an increasingly interconnected world.
Source: Lloyd’s systemic risk scenario reveals global economy exposed to $3.5trn from major cyber attack
Other News: Roll Out of Lloyd’s Cyber War Exclusion Dazes and Confuses Market (Opens in a new browser tab)