Lloyd’s of London, a renowned insurance marketplace, is sounding the alarm about the potential catastrophic consequences of a major cyber attack on a critical payments system, warning that it could extract a staggering toll of $3.5 trillion from the world economy.
Lloyd’s has unveiled a systemic risk scenario that simulates the global economic fallout resulting from a hypothetical yet plausible cyber attack targeting a pivotal financial services payments system. Such an assault could lead to widespread disruptions across the global business landscape, causing potential economic losses in the trillions.
The countries projected to endure the most substantial economic losses over a five-year period in this scenario are led by the United States, facing a staggering $1.1 trillion hit, followed by China with $470 billion, and Japan with $200 billion. The time required for individual countries or regions to recover hinges on various factors, including their economic structure, exposure levels, and resilience.
The risk of a cyber attack has reached unprecedented levels of prominence, becoming the most frequently mentioned risk in the Bank of England’s Systemic Risk Survey for the second half of 2023, with 80% of participating firms identifying it as a significant concern. This record-breaking proportion underscores the growing magnitude of cyber risk as a pressing issue.
In light of the persistent threat posed by cyber attacks to businesses and governments, the insurance sector is witnessing substantial growth, with Gross Written Premiums surpassing $9 billion last year. Projections indicate that this market could reach between $13 billion and $25 billion by 2025.
Bruce Carnegie-Brown, Chairman of Lloyd’s, emphasizes the importance of building resilience against systemic risks. He underscores the crucial role of insurance in protecting and supporting customers against the potential threats that cyber risks pose to businesses and society. Carnegie-Brown also highlights the imperative need for collaboration across government, industry, and the insurance market to bolster society’s resilience against the immense scale of this risk, given the global interconnected nature of cyber threats.