Insured losses from a cyber catastrophe could reach billions
Analysis shows insured business interruption losses from a cyber catastrophe could reach an estimated $3.25 billion.
Kovrr, a predictive cyber risk modeling company, released a report that predicts the potential financial damage that could hit insurers in the event of a major email service provider in the UK suffering an outage caused by a cyber attack.
Yakir Golan, Kovrr’s CEO said “The constantly growing and evolving nature of cyber risk now affects all lines of insurance. This report illustrates how a cyber catastrophe could cause similarly sized losses to the 2007 UK property flood losses, which cost $4.8 billion. Insurance and reinsurance companies ought to act now to make sure they are properly managing their cyber exposures before a cyber catastrophe happens.”
Every day much of the world’s commerce is facilitated by the 290 billion email messages that are sent worldwide by over 3.9 billion users. A cyber-attack on an email service provider lasting hours, days or weeks would result in an outage could lead to a large number of business interruption claims and substantial losses for (re)insurance carriers.
The key characteristics of this type of cyber catastrophe are high severity and low frequency, meaning, an event that does not occur regularly but entails great damage potential, affecting numerous businesses and leading to multiple claims on a (re) insurance carrier at a single point in time.
The report, authored by Marco Lo Giudice and Shalom Bublil explains how even though overall cyber premiums are significantly lower than property premiums in the UK, the potential exists for a multi-billion dollar insured loss similar to the risk of a flood catastrophe covered by property insurance.