Cyber – the new insurance battleground

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Insurance

Lloyd’s of London has warned that insurance and other financial instutions are still not taking the threat of cyberattacks seriously enough. Speaking at the recent Asian Financial Forum, Lloyd’s Chief Executive Inga Beale suggested that a single hacker deciding to attack a cloud service provider could deal a blow as costly as US$50 billion – or potentially double that, because the insurance industry still does not properly understand cyber risk. Attacks on the operating systems used by big business and governmental institutions, meanwhile, could cost as much as $30 billion. And these cost estimates, said Beale, are conservative. As a result, she warned that natural disasters no longer pose the biggest threat to insurers; that dubious honour now goes to cyber attackers.

“There are substantial insurance gaps,” warned Beale, “as most cyber risks are not covered by any form of insurance. Just like natural catastrophes, cyber events such as hacker attacks or internet failures can cause severe impact on businesses and economies.”

Much of the problem comes down to a lack of experience, the Lloyd’s CEO went on to say – while insurers have been dealing with threats such as bad weather for decades, even centuries, these technological risks are very new. Insurance gaps thusly need to be filled, and Beale said that Lloyd’s is working with the insurance industry on methods to tackle the issue.