The scenario, developed in collaboration with the Cambridge Centre for Risk Studies, envisions a cyber attack targeting a major financial services payments system, posing a systemic risk with far-reaching consequences.
The risk scenario, exploring nine hypothetical systemic risk situations, analyses the potential economic impact across 107 countries at three severity levels: major, severe, and extreme. According to the study, the United States, China, and Japan would bear the brunt of the economic fallout, with anticipated losses of $1.1 trillion, $470 billion, and $200 billion, respectively. Lloyd’s said that recovery times for individual countries or regions depend on their economic structure, exposure levels, and resilience.
Using Gross Domestic Product (GDP) as a key metric, Lloyd’s and Cambridge estimate the global economic loss resulting from a cyber attack on a major financial services payment system to be $3.5 trillion over a five-year span. This figure spans from $2.2 trillion in the lowest severity scenario to a staggering $16 trillion in the most extreme case.
The research underscores the persistent threat posed by cyber attacks to both businesses and governments, with year-on-year costs associated with maintenance, prevention, and response on the rise. The complexity and interconnected nature of this risk extend its impact to crucial areas such as supply chains and geopolitics.
Despite the growing awareness of cyber threats, the study reveals that cyber insurance, valued at just over $9 billion in gross written premiums in 2022, is projected to reach between $13-25 billion by 2025. However, this figure still represents a fraction of the potential economic losses that businesses and society could face in the event of a significant cyber attack. The findings serve as a stark reminder of the pressing need for increased cybersecurity measures and preparedness on a global scale.
Bruce Carnegie-Brown, Lloyd’s Chairman, commented, “We are committed to building resilience around systemic risk and the risk scenario released today highlights the important role of insurance in supporting and protecting customers against the potential threat cyber poses to businesses and society.
“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.”
Author: Joanna England
