Lloyds has published its latest Emerging Risks Report 2017, which looks at the growing threat of cyber attacks. The report says that while digitization is ‘revolutionising business models and transforming daily lives, it is also making the global economy more vulnerable to cyber attacks’. As a result, the economic and insurance consequences of cyber crime are increasing.
‘Counting the cost: Cyber exposure decoded’ concludes that cyber threat is increasing and is expected to continue to do so as the world economy continues to digitize operations, supply chains and businesses transactions, as well as employee and customer services.
Key findings from the report include:
- The direct economic impacts of cyber events lead to a wide range of potential economic losses. For a cloud service disruption scenario these losses range from US $4.6 billion for a large event to US $53.1 billion for an extreme event.
- Cyber attacks have the potential to trigger billions of dollars of insured losses.
- There is an insurance gap with less than 20 percent of potential cyber attack losses covered.
- When assessing current estimated market premiums against the forecasted cyber scenario insurance loss estimates set out in the report, it is apparent that a single cyber event has the potential to increase industry loss ratios by 19 percent and 250 percent for large and extreme loss events, respectively. This illustrates the catastrophe potential of the cyber risk class.