Cyber loss potential parallels hurricane risk

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"Because of the difficulty to precisely quantify the loss it, this figure could reach $ 121 billion or be limited to $ 15 billion", however, indicated the Lloyd's and the Cyence business.

A massive global cyber-attack could bring around $53 billion in economic losses, making it on par with natural disasters like Hurricane Sandy and Katrina, according to a recent report.

"This report gives a real sense of the scale of damage a cyber-attack could cause the global economy", said Lloyds chief executive Inga Beale in a statement.

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.

In the hypothetical cloud-service attack in the Lloyd's-Cyence scenario, hackers insert malicious code into a cloud provider's software, created to trigger system crashes among users a year later.

The report's authors said businesses need to be aware of the "slow burn" costs of a cyber security incident, which can "dramatically increase" the final bill over time. In particular, it modeled a hypothetical hack of a cloud services provider.

By understanding cyber-risk exposure, insurers can improve their portfolio exposure management, set appropriate limits and gain the confidence to expand into this fast-growing insurance class. And, in the most extreme cases, losses could rise to as much as $121bn.

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As much as US$45 billion of that sum may not be covered by cyber policies due to companies underinsuring, the report said, according to Reuters.

Insurers are struggling to estimate their potential exposure to cyber-related losses amid mounting cyber risks and interest in cyber insurance.

In the mass software vulnerability scenario, the average losses range from US$9.7 billion for a large event to US$28.7 billion for an extreme event.

According to Lloyd's, cyber insurance cover is more hard to model and understand than natural catastrophe cover.

Lloyd's research has shown that an extreme cyber attack could cause losses equivalent to a catastrophic natural disaster. The uninsured shortfall could be as high as $45bn for the cloud services scenario, and $26 billion in the event of a "mass software vulnerability scenario".

These findings were published by Lloyd's of London, and was co-written by Cyence, a risk-modeling firm.

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