Unnatural disaster: Lloyd’s says big cyber-attack could cost world economy US$120b, as much as Hurricane Katrina

Lloyd’s of London has warned that a serious cyber-attack could cost the global economy more than US$120billion – as much as catastrophic natural disasters such as Hurricanes Katrina and Sandy.

Published two months after a ransomware cyber-attack that hobbled NHS hospitals in Britain and hit nearly 100 countries, a 56-page report from the world’s oldest insurance market says the threat posed by such global attacks has spiralled and poses a huge risk to business 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 US$53billion, according to Lloyd’s. This is the average estimate, but because of the uncertainty around calculating cyber losses it estimates the figure could be as high as US$121billion or as low as US$15billion.

At the upper end, the cost would outstrip the damage wreaked by Hurricane Katrina in 2005, estimated at US$108billion (including US$80billion of insured losses). Hurricane Sandy in 2012 is estimated to have caused economic losses of US$50billion-US$70billion.

Inga Beale, chief executive of Lloyd’s, 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,” she said.