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This report should be read. The Lloyds of London report on the effect of cyber got allot of attention. What is important is not the figures, but that Lloyds of London has published a report on the effects of a cyber attack scenarios globally.
Lloyds evaluated 9 hypothetical, plausible, systemic risk scenarios, using GDP as a central measure to evaluate the financial impact of cyber attacks and probabilities of severity from 1:30 to 1:1000 years. The research identified a spread of between $2.2trn and $16trn and a 5 year worst case loss of $140trn for the scenarios chosen. One must remember that while the report highlights a possible loss of $3.5trn due to a payment system failure there is a broad spread of scenarios and financial impacts.
The report raises the question of ‘what next for insurance’ and ‘what about the insured’. One has commented for many times that there is not enough capacity within the insurance market to manage cyber risk (www.augustagrp.com) as the Lloyds figures demonstrate. Cyber is not a risk that traditional insurance alone can manage, there has to be a broader, dare I say ‘whole of society’, approach to managing cyber risk.
The failure of market forces to manage cyber has made the ‘stick’ the only solution on the table to managing public and private sector cyber. With U.S and EU regulators transferring cyber risk onto the financial statements of covered entities through regulation and self insuring cyber risk. The insurance industry cannot solely manage cyber risk, the industry needs to develop products that better suit their clients and encourage them to address the cyber coverage gap. The insured needs to focus on managing cybersecurity.
What next, one has ideas?
#paravasecuritysolutions #cybersecurity #cyberriskmanagement #insurance
Ted Dziekanowski Brian D. McCarthy Bob Dix Rachel V. Rose, JD, MBA
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