A serious cyber-attack could cost the global economy billions

Insurance companies 'must adapt to threat of cyberattacks'

Insurance companies 'must adapt to threat of cyberattacks'

Actual losses are predicted to be as high as $121 billion.

A major global cyber attack could trigger an average of US$53 billion (S$72.6 billion) of economic losses, a figure on a par with losses caused by a catastrophic natural disaster such as US Superstorm Sandy in 2012.

The costs factored in included money spent repairing the affected computers as well as money lost due to the disruption a cyber attack causes to business processes, Reuters reported.

In this first scenario, average economic losses ranging between $ 4.6 billion for an important event and $ 53 billion for a major event.

Lloyd's estimated that the uninsured gap could be as high as $45bn for the cloud services scenario and $26bn for the vulnerability scenario, with the vast majority of economic losses not covered by insurance. Co-written with risk-modelling firm Cyence, the report examines the hypothetical losses from hacking of a cloud service provider combined with an attack on computer operating systems used by businesses across the world.

And the average insured losses range from US$762 million to US$2.1 billion.

"Underwriters need to consider cyber cover in this way and ensure that premium calculations keep pace with the cyber threat reality", she said.

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.

They said that up to $45 billion (£34 billion) of the damage caused by a severe attack may not be covered by firms' cyber insurance policies as they are under-insured.

The outcome - though there is largely a general lack of information on exactly how vulnerable insurers are - could be disastrous, easily dwarfing the US$8 billion total global cost companies all over the world incurred as a result of the recent WannaCry ransomware attacks. "To achieve this, data collection and quality is important, especially as cyber risks are constantly changing".

Arvind Parthasarathi, CEO of Cyence, added: "Cyence is excited to be working with Lloyds on empowering the insurance industry to understand and model cyber risk".

Lloyds has about one-quarter of the emerging area of cyber insurance and says risks are more hard to model than natural disasters due to the human element, which means underlying assumptions can change quickly.

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