A major cyber-attack could cost as much as a devastating hurricane, yet many SME and middle-market businesses do not have adequate insurance cover warns a report from the Lloyd’s insurance market.
A new report, “Counting the cost: cyber exposure decoded”, produced by Lloyd’s and cyber risk modelling company Cyence says that a cyber-attack on a cloud server could cost over $120 billion. This is more than Superstorm Sandy, the second most costly storm on record, which caused up to $70 billion in economic damage.
The report’s authors model two potential cyber disasters. In the first hackers take down a cloud service provider. The economic cost of such a scenario could range from $4.6 billion to $53 billion, but the authors are quick to point out that the costs could be much higher. “Because of the uncertainty around aggregating cyber losses, this figure could be as high as $121 billion, or as low as $15 billion,” the report said.
The second scenario considers the cost of a mass vulnerability attack against an operating system used by a huge number of businesses. “the average losses range from $9.7 billion for a large event to $28.7 billion for an extreme event,” say the authors.
The report is concerned that businesses may have too little cyber-insurance cover. “Cyber insurance has relatively low penetration rates, especially among SME and middle-market customers,” it says. “There is also a general lack of standardization around cyber insurance offerings in the marketplace, which makes it hard for risk managers to choose which product to buy.”
Inga Beale, chief executive of Lloyd’s, says that the report shows the scale of damage a cyber-attack could cause the global economy. “Just like some of the worst natural catastrophes, cyber events can cause a severe impact on businesses and economies, trigger multiple claims and dramatically increase insurers’ claims costs.”
James Burgoyne, Director – Claims & Technical, Brunel Professions says that professional firms should consider how they would cope if a cyber-attack took down their systems. “Most firms are highly reliant on technology to operate and could be crippled by a severe cyber-attack. We help our clients to select cyber insurance cover to protect them against the financial cost of an attack and get them back up and running as quickly as possible after.”