Home Business and Economy Shocking Threat to Global Economy: Cyber Attack Could Wipe Out $3.5 Trillion, Warns Lloyd’s!

Shocking Threat to Global Economy: Cyber Attack Could Wipe Out $3.5 Trillion, Warns Lloyd’s!

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Shocking Threat to Global Economy: Cyber Attack Could Wipe Out $3.5 Trillion, Warns Lloyd’s!

Lloyd’s, the London-based insurance and reinsurance marketplace, has released a risk scenario that reveals the potential global economic impact of a cyber attack on a major financial services payments system. The scenario projects that the world economy could suffer losses of $3.5 trillion over a five-year period.

To model the scenario, Lloyd’s partnered with the Cambridge Centre for Risk Studies and explored nine hypothetical systemic risk scenarios, measuring the economic impact on 107 countries at three levels of severity: major, severe, and extreme. The United States, China, and Japan are expected to experience the highest economic losses, with the US facing potential losses of $1.1 trillion, followed by China with $470 billion, and Japan with $200 billion. The recovery time for each country or region will depend on their economic structure, exposure levels, and resilience.

Using Gross Domestic Product (GDP) as the central measurement, Lloyd’s and Cambridge estimate that a global cyber attack on a major financial services payment system could result in a global economic loss of $3.5 trillion over five years. The severity of the scenario ranges from $2.2 trillion in the lowest severity case to $16 trillion in the most extreme scenario.

The study underscores the ongoing threat posed by cyber attacks to businesses and governments, with costs for prevention, maintenance, and response on the rise. The interconnected nature of cyber risk affects areas such as supply chains and geopolitics, making it a complex and far-reaching risk that can have severe repercussions for society.

Although cyber insurance is a nascent market, with gross written premiums totaling just over $9 billion in 2022, it is expected to grow to between $13-25 billion by 2025. However, this still represents only a small fraction of the potential economic losses faced by businesses and society.

Lloyd’s Chairman Bruce Carnegie-Brown emphasizes the importance of building resilience against systemic risks like cyber attacks. He highlights the critical role of insurance in protecting and supporting customers facing the threat of cyber risk. Recognizing that no single sector can tackle cyber risk alone, Carnegie-Brown stresses the need for collaboration and knowledge sharing among government, industry, and the insurance market to strengthen society’s resilience.

In conclusion, Lloyd’s risk scenario showcases the potential economic devastation that could result from a cyber attack on a major financial services payments system. Highlighting the importance of insurance in mitigating these risks, the study emphasizes the need for collective efforts to build societal resilience in the face of this ever-present risk.

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