Lloyd's and the University of Cambridge's Centre for Risk Studies have issued a new report, “Business Blackout,” that examines the insurance implications of a major cyber attack, using the U.S. power grid as an example.
The report depicts a scenario where hackers shut down parts of the U.S. power grid, plunging 15 U.S. states and Washington, D.C., into darkness and leaving 93 million people without power. Experts predict it would result in a rise in mortality rates as health and safety systems fail; a decline in trade as ports shut down; disruption to water supplies as electric pumps fail; and chaos to transport networks as infrastructure collapses.
The total impact to the U.S. economy is estimated at $243 billion, rising to more than $1 trillion in the most extreme version of the scenario. The cyber attack scenario shows the broad range of claims that could be triggered by disruption to the U.S. power grid, with total amount of claims paid by the insurance industry estimated at $21.4 billion, rising to $71.1 billion in the most extreme version of the scenario.
Speaking about the new report, Tom Bolt, the director of performance management at Lloyd's, said, “This scenario shows the huge impact and havoc that could result from a major cyber attack on the U.S. The reality is that the modern, digital, and interconnected world creates the conditions for significant damage, and we know there are hostile actors with the skills and desire to cause harm.
“As insurers, we need to think about these sorts of complex and interconnected risks and ensure that we provide innovative and comprehensive cyber insurance to protect businesses and governments. This type of insurance has the potential to be a valuable tool for enhancing the management of, and resilience to, cyber risk.
“Governments also have a role to play. We need them to help share data, so we are able to accurately assess risk and protect businesses.”
Learn more: www.lloyds.com/businessblackout.
Victoria Spears
Victoria Prussen Spears is senior vice president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. A graduate of Sarah Lawrence College and Brooklyn Law School, Ms. Spears was an attorney at a leading New York City law firm before joining Meyerowitz Communications. She may be contacted at [email protected].