Lloyd's Systemic Risk Scenario: Global Economy Exposed to $3.5trn from Major Cyber Attack
webThis Lloyd's press release models systemic cyber risk from a major financial payments system attack, estimating $3.5trn in global losses. Relevant to AI safety as AI systems increasingly manage critical infrastructure, amplifying potential cascading failures from cyber attacks.
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Importance: 38/100press releaseanalysis
Summary
Lloyd's of London, in partnership with the Cambridge Centre for Risk Studies, published a systemic risk scenario modeling the global economic impact of a hypothetical cyber attack on a major financial services payments system. The scenario estimates $3.5trn in global economic losses over five years, with the US, China, and Japan most affected. The report highlights the gap between cyber insurance coverage (~$9bn in premiums) and potential economic losses.
Key Points
- •A major cyber attack on global financial payments systems could cause $3.5trn in global economic losses over five years (weighted average across severity levels).
- •Losses range from $2.2trn in the lowest severity scenario to $16trn in the most extreme scenario.
- •The US faces the highest exposure at $1.1trn, followed by China ($470bn) and Japan ($200bn).
- •Cyber insurance market (~$9bn in premiums) covers only a small fraction of potential economic losses from systemic cyber events.
- •The research covers nine systemic risk scenarios across 107 countries, emphasizing the need for cross-sector coordination between government, industry, and insurance.
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Lloyd’s systemic risk scenario reveals global economy exposed to $3.5trn from major cyber attack
18 Oct 2023
Lloyd’s, the world’s leading marketplace for insurance and reinsurance, today published a systemic risk scenario that models the global economic impact of a hypothetical but plausible cyber attack on a major financial services payments system, resulting in widespread disruption to global business and potential global economic losses of $3.5trn.
The three countries that experience the highest 5-year economic loss from the scenario are the United States $1.1trn, followed by China $470bn and Japan $200bn. The recovery time for individual countries or regions depends on the structure of their economy, exposure levels and resilience.
Cyber attacks continue to threaten businesses and governments, with year-on-year costs around maintenance, prevention, and response to attacks increasing. Cyber remains a risk that has the potential to affect all areas of society, as it is both a complex and connected risk impacting areas such as supply chains and geopolitics.
Cyber insurance is a growing market, estimated at just over $9bn in Gross Written Premiums last year, and forecast to hit between $13bn and $25bn by 2025. However this still represents a small portion of the potential economic losses that businesses and society face.
“We are committed to building resilience around systemic risk and the risk scenario released today highlights the important role of insurance in supporting and protecting customers against the potential threat cyber poses to businesses and society.
“The global interconnectedness of cyber means it is too substantial a risk for one sector to face alone and therefore we must continue to share knowledge, expertise and innovative ideas across government, industry and the insurance market to ensure we build society’s resilience against the potential scale of this risk.”
Bruce Carnegie-Brown, Lloyd’s Chairman
With over a fifth of the world’s cyber premium being placed in the Lloyd’s market, Lloyd’s is seeking to support the growth of the class thoughtfully and sustainably – while also enabling innovation for new products, for example through the Lloyd’s Lab. In September, Lloyd’s Futureset held its first Cyber Innovation Forum, connecting customers with representatives from technology, government, and insurance sectors to discuss global cyber risk and the collective steps needed to respond.
Notes to Editors
1. Systemic Risk : Lloyd’s define systemic risk as a low likelihood, high impact risk which affects either a systemically important global enterprise or multiple sectors, societies, or national economies. They can be global in impact, often hitting billions of people simultaneously. Among the other systemic risk scenarios modelled in the research are geopolitical conflict, and extreme weather events
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