A new report from Lloyd’s and AIRWorldwide, analyzing the financial impact of the failure of aleading cloud provider in the United States for three to six days,concluded that it would result in economic losses of $15 billionand up to $3 billion in insured losses.

The report found that companies outside of the Fortune1000 — which are more likely to use cloud providerservices — would carry a larger share of the economic andinsurance losses than Fortune 1000 companies. However, the biggest1,000 companies in the United States still would carry 38% ofeconomic losses.

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Among other things, the report also found:

— Businesses outside the Fortune 1000would carry 63% of economic losses and 57% of insured losses —indicating that they are at the highest risk.

— Fortune 1000 companies would carry 37%of economic losses and 43% of insured losses.

If a top cloud provider went down:

— Manufacturing would see direct economiclosses of $8.6 billion;

— Wholesale and retail trade sectors wouldsee economic losses of $3.6 billion;

— Information sectors would see economiclosses of $847 million;

— Finance and insurance sectors would seeeconomic losses of $447 million; and

— Transportation and warehousing sectors wouldsee economic losses of $439 million.

Detailed picture of costs

“This report provides a detailed picture of the costs to the U.S.economy as a result of a cloud service provider failure, saidTrevor Maynard, head of innovation at Lloyd’s. "Clouds can fail orbe brought down in many ways — ranging from malicious attacksby terrorists to lighting strikes, flooding, or simply a mundaneerror by an employee. Whatever the cause, it is important forbusinesses to quantify the risks they are exposed to as failure todo so will not only lead to financial losses but also potentiallyloss of customers and reputation,” Maynard noted.

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“A major cloud failure would significantly impact the insuranceindustry, and our research has shown that such an event isplausible," according to Scott Stransky, assistant vice presidentand principal scientist at AIR Worldwide. "The findings from thisreport show that while the cyber insurance industry is growing,there’s still a significant gap in cyber coverage. We hope thereport will help raise awareness across the industry as to howsignificant losses could be, how likely they are, and provide anopportunity for insurers to better understand and manage cyberrisk. With proper models such as AIR’s, the industry will be ableto grow the market by confidently writing more cyber policies. Thegoal is to make insurers and all organizations that rely upon cyberinsurance more resilient if the cloud does go down,” Stranskyremarked.

Related: Global cyber attack could cost $121.4 billion,Lloyd's estimates

Victoria Prussen Spears, Esq., ([email protected]) is associate directorof FC&S Legal, editor of the InsuranceCoverage Law Report, and senior vice presidentat Meyerowitz Communications Inc.