A global ransomware cyber-attack could cost $193bn and affect more than 600,000 businesses worldwide, according to a new report from the Cyber Risk Management (CyRiM) project, the Singapore-based public-private initiative that assesses cyber risks, of which Lloyd’s is one of the founding members.
In the report’s scenario, the attack is launched through an infected email, which once opened is forwarded to all contacts and within 24 hours encrypts all data on 30 million devices worldwide. Companies of all sizes would be forced to pay a ransom to decrypt their data or to replace their infected devices.
The report, ‘Bashe Attack: Global infection by contagious malware’, shows a ransomware attack on this scale would cause substantial economic damage to a wide range of business sectors through reduced productivity and consumption, IT clean-up costs, ransom payments and supply chain disruption.
The scenario estimates that retail and healthcare would be the most affected ($25bn each), followed by manufacturing ($24bn).
Regionally, the US would be the hardest hit with $89bn at risk. Europe could lose $76bn, with Asia losing $19bn.The rest of the world could lose $9bn. Despite the high costs to business, the report shows the global economy is underprepared for such an attack with 86% of the total economic costs uninsured, leaving an insurance gap of $166bn.
Among the key findings the report challenges assumptions of global preparedness for a cyber-attack of this nature and scale. It highlights lessons for the insurance sector in terms of policy, legal and aggregation issues in cyber insurance offerings. It also identifies opportunities for insurers to expand their business in insurance classes associated with ransomware attacks.
“This report shows the increasing risk to businesses from cyber-attacks as the global economy becomes more interconnected and reliant on technology. Companies must ensure they are better prepared for ransomware attacks, and that includes working with insurers to reduce the risks before they are attacked and ensure they have the right insurance cover in place to respond after the event. The reality for business is it’s not if you get attacked but when” - said Dr Trevor Maynard, Head of Innovation at Lloyd’s.
“We are pleased to collaborate with Cambridge University and CyRiM founding members on this groundbreaking research. Quantifying potential harm caused by cyber threats to corporations and their insurers has been a challenge due to lack of data. The “Bashe attack” report exemplifies a sound methodology of applying expert knowledge in estimating economic losses caused by contagious malware to sweep through many organisations. It sheds light on potential losses to insurers through both affirmative and non-affirmative covers” - Professor Shaun Wang, Director of the Insurance Risk and Finance Research Centre at Nanyang Technological University added.
“The scenario we have prepared with Lloyd’s, CyRiM and other contributors highlights the potential for loss that can occur from contagious malware attacks. It challenges assumptions about cyber preparedness and the adequacy of security measures that companies have in place. This report is intended to deepen the understanding of cyber risk liability and aggregation risk in the portfolios of insurers. We hope that this contribution will help improve the understanding of cyber risk and lead to better resilience to attacks like these in the future"- said Dr Andrew Coburn, Chief Scientist at the Cambridge Centre for Risk Studies.
“Asia is more connected than ever before but information on corporate cyber-attacks is not yet so widely available. This report illustrates the potential reach and impact of cyber-attacks which can serve as a useful guide for organisations and governments. MSIG is proud to play a part in this report as we believe that education on cyber risk should be an on-going effort in collaboration with academia, technology, insurers and governments, for us to build a more resilient society in the future" - told Dr Andrew Coburn, Chief Scientist at the Cambridge Centre for Risk Studies.
“This research highlights the need to pay close attention to systemic risk across all lines of business, not just within the cyber tower. Malware respects no boundaries, whether geographic, industrial or legal. As companies increase their reliance on technology, it is essential they increase their defences against challenges such as malware, and effective cyber insurance is a critical component of that defence. Similarly, the insurance industry must also acknowledge and appreciate the potential for systemic risk, in addition to monitoring loss frequency and severity. This report seeks to quantify that systemic economic and insured impact. It represents an important step forward in our understanding, and provides a benchmark for business interruption and its associated costs” - Dr Andrew Coburn, Chief Scientist at the Cambridge Centre for Risk Studies said .
“The global WannaCry and NotPetya events of 2017 alerted organisations to their potential susceptibility to widespread cyberattacks. There remains, however, a reluctance to move forward with the necessary risk prevention and transfer measures without a clear picture of the financial impact such an attack might cause. The Bashe report addresses this issue, demonstrating with precision how an attack unfolds and how it affects insureds and insurers. The report sets the standard that organisations should aspire to when assessing their own cyber exposure”- added Andrew Mahony, Regional Director for Aon.
“We are delighted to contribute to the Bashe report, which expands the knowledge and understanding of widespread Cyber events – particularly exposure to Business Interruption as experienced during real-life incidents such as NotPetya and WannaCry. This report has brought together a multidisciplinary team of academic and (re)insurance industry experts from across the world, thereby providing a global view of cyber risk” - said Sébastien Heon, Deputy Chief Underwriter Officer, Cyber Solutions at SCOR.