Cy­ber-at­tack ‘could cost as much as Ka­t­rina’

The Guardian - - FINANCIAL - Ju­lia Kollewe

Lloyd’s of Lon­don has warned that a ma­jor global cy­ber-at­tack could cost the world econ­omy more than $120bn (£92bn) – as much as nat­u­ral dis­as­ters such as Hur­ri­cane Ka­t­rina and Su­per­storm Sandy.

Pub­lished two months af­ter a ran­somware cy­ber-at­tack hob­bled NHS hos­pi­tals and hit nearly 100 coun­tries, a re­port from the world’s oldest in­sur­ance mar­ket says the threat posed by such at­tacks has spi­ralled and poses a huge risk to busi­nesses and gov­ern­ments over the next decade.

The most likely sce­nario is a ma­li­cious hack that takes down a cloud ser­vice provider, with es­ti­mated losses of $53bn, ac­cord­ing to Lloyd’s. Be­cause of the un­cer­tainty around cal­cu­lat­ing cy­ber losses, the fig­ure could be as high as $121bn or as low as $15bn. At the up­per end, the cost would out­strip the dam­age wreaked by Ka­t­rina in 2005, es­ti­mated at $108bn. Sandy in 2012 is es­ti­mated to have caused eco­nomic losses of $50bn to 70bn.

Lloyd’s chief ex­ec­u­tive, Inga Beale, said: “This re­port gives a real sense of 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. Un­der­writ­ers need to con­sider cy­ber cover in this way and en­sure that pre­mium cal­cu­la­tions keep pace with the cy­ber threat re­al­ity.” The sec­ond most likely threat stems from at­tacks on com­puter oper­at­ing sys­tems run by a large num­ber of busi­nesses around the world, which could cause losses of up to $28.7bn. (The “mass soft­ware vul­ner­a­bil­ity sce­nario”.) The ma­jor­ity of th­ese losses are not in­sured, leav­ing gov­ern­ments and busi­nesses vul­ner­a­ble. The unin­sured gap could be as high as $45bn for the cloud ser­vices sce­nario, and $26bn for the mass vul­ner­a­bil­ity sce­nario.

Trevor May­nard, Lloyd’s head of in­no­va­tion and co-au­thor of the 56-page re­port with a cy­ber­se­cu­rity firm, Cyence, said the global cy­ber-at­tack in May “showed us that th­ese sorts of at­tacks are ab­so­lutely pos­si­ble”. Fi­nan­cial ser­vices is most at risk, fol­lowed by soft­ware and tech­nol­ogy, hos­pi­tal­ity and re­tail, and health­care. Cy­ber cover is a rel­a­tively new type of in­sur­ance – Lloyd’s ac­counts for about a quar­ter of global pre­mi­ums – and harder to model than nat­u­ral catas­tro­phe cover.

Where peo­ple were in­volved, risk changed quite rapidly, May­nard said, from cy­ber-at­tacks to ter­ror­ism and po­lit­i­cal risk. How­ever, he said cli­mate change re­mained the big­gest chal­lenge in the long run.

“From year to year, risk varies rel­a­tively lit­tle, but cli­mate change in the end will be far larger as a risk,” he said.

“It af­fects the global eco­nomic struc­ture, food, wa­ter. [It’s like] try­ing to turn a su­pertanker around – we can’t start in 30 years when things are go­ing bad, we have to start now.”

Pho­to­graph: Mario Tama/ Getty Im­ages

Flood­ing in New Or­leans af­ter Hur­ri­cane Ka­t­rina dev­as­tated the area in 2005

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