Lloyd's of London, the insurance marketplace, has issued a cautionary statement, suggesting that a major cyber attack on a systemic payments system could result in a staggering $3.5 trillion economic impact on the world.
Lloyd's has released a systemic risk scenario that simulates the potential global economic consequences of a hypothetical yet plausible cyber attack targeting a significant financial services payments system. Such an attack could lead to widespread disruptions in global business operations, with potential economic losses in the trillions.
The countries projected to experience the highest economic losses over a five-year period in this scenario are the United States, with estimated losses of $1.1 trillion, followed by China with $470 billion and Japan with $200 billion. The recovery time for individual countries or regions would depend on various factors, including their economic structure, exposure levels, and resilience.
The risk of a cyber attack has emerged as the most frequently mentioned concern in the Bank of England's Systemic Risk Survey for the latter half of 2023, with 80% of surveyed firms highlighting it. This represents the highest percentage of respondents identifying cyber risk ever recorded in the survey.
As cyber attacks continue to pose a significant threat to both businesses and governments, the insurance market in this sector is expanding. It was valued at slightly over $9 billion in Gross Written Premiums last year and is forecasted to reach a range between $13 billion and $25 billion by 2025.
Bruce Carnegie-Brown, Chairman of Lloyd's, emphasized the importance of building resilience against systemic risk and noted that the risk scenario released underscores the vital role of insurance in safeguarding customers against the potential cyber threats to businesses and society. He further emphasized the need for collaboration across government, industry, and the insurance market to enhance society's resilience in the face of the substantial risk posed by global cyber interconnectedness.
