A major cyberattack can cost just as much as a natural disaster like Hurricane Sandy, which struck in 2012. Damage which runs into the billions of dollars. That’s according to a study carried out by the British insurance market Lloyd’s, in conjunction with Cyence, a specialist in modeling the financial impact of cyber risk.
As the cyber threat grows, so too does the demand for cyber insurance, the report’s authors note. Lloyd’s deems the global cyber insurance market to be worth between US$3 billion and $3.5 billion. “By 2020, some analysts estimate it could be worth $7.5 billion. Property and casualty insurers wrote $1.35 billion in direct written premiums for cyber insurance in 2016, a 35% jump from 2015, according to reports by Fitch Ratings and A.M. Best.”
Realistic and plausible scenarios
According to Lloyd’s CEO Inga Beale, cyber events – just like some of the worst natural catastrophes – can cause a severe impact on businesses and economies, trigger multiple claims, and dramatically increase insurers’ claims costs. The study published in early July 2017 aimed to provide “realistic and plausible scenarios” to help determine the risk of cyberattacks.
The report presented two scenarios intended to quantify the damage resulting from two types of cyberattacks: a hack that takes down cloud services provided to clients, and an attack exploiting a software vulnerability that causes a widespread failure. For the cloud service disruption scenario, the
losses range from $4.6 billion for a large event to $53.1 billion for an extreme event. In the software vulnerability scenario, the losses range from $9.7 billion for a large event to $28.7 billion for an extreme event. By comparison, Hurricane Sandy – the second most destructive in history – caused damage of between $50 billion and $70 billion.
A massive insurance gap
The two scenarios show there is an insurance gap of between $4 billion and $45 billion in terms of the cloud services scenario – covering between 13% and 17% of the economic losses, respectively. For the software vulnerability scenario, the gap is between $8.9 billion and $26.6 billion – covering a mere 7% of economic losses.
“When assessing current estimated market premiums against the forecasted cyber scenario insurance loss estimates set out in the report, it is apparent that a single cyber event has the potential to increase industry loss ratios by 19% and 250% for large and extreme loss events, respectively. This illustrates the catastrophe potential of the cyber-risk class,” the report states.
However, the study does explain that economic losses could be much lower or higher than the average calculated for both scenarios. In fact, it is difficult to determine the global amount accurately. “They could be as high as $121.4 billion or as low as $15.6 billion, depending on factors such as the different organizations involved and how long the cloud-service disruption lasts for.”
Confronting a growing threat
Cyber threats are a rapidly growing global problem. While digital technology has revolutionized business models and transformed day-to-day operations for businesses, it can still make global economies more vulnerable to cyberattacks. Businesses now need to be aware of the threat and put a solid security policy in place. Protecting your systems and data – which is like gold to hackers – is vital.
Should an attack occur, your company can lose everything if it has failed to take the necessary measures to protect its data at the earliest opportunity. And the best way to protect your business is by installing an online backup solution. So, if an attack happens to your business, you can recover your data and get back to normal again quickly. Outsourcing your automatic online backup is the only way to guarantee that data can be fully restored immediately, so you can be up and running again in no time after any incident – not to mention the benefits of total security and confidentiality. Unlike local backup, online backup stores data away from your company’s systems, making it more difficult, if not impossible, for a virus to access. Thanks to restricted mode in the AdBackup Pro solution, you can protect your backup sets by preventing hackers from modifying or deleting your data – providing better security for your data.
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