A global ransomware cyber-attack could cost $193 billion 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,” found that a ransomware attack on this scale would cause substantial economic damage to a wide range of business sectors through reduced productivity and consumption, information technology clean-up costs, ransom payments, and supply chain disruption.

The scenario estimated that:

- Retail and healthcare would be the most affected ($25 billion each), followed by manufacturing ($24 billion); and

- Regionally, the United States would be the hardest hit with $89 billion at risk. Europe could lose $76 billion, with Asia losing $19 billion. The rest of the world could lose $9 billion.

Despite the high costs to business, the report showed that the global economy was underprepared for such an attack, with 86 percent of the total economic costs uninsured, leaving an insurance gap of $166 billion.

The report also:

- Challenged assumptions of global preparedness for a cyber-attack of this nature and scale;

- Highlighted lessons for the insurance sector in terms of policy, legal, and aggregation issues in cyber insurance offerings; and

- Identified opportunities for insurers to expand their business in insurance classes associated with ransomware attacks.

Dr. Trevor Maynard, head of innovation at Lloyd's, said, “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.”

Professor Shaun Wang, director of the Insurance Risk and Finance Research Centre at Nanyang Technological University, added, “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 organizations. It sheds light on potential losses to insurers through both affirmative and non-affirmative covers.”

Dr. Andrew Coburn, chief scientist at the Cambridge Centre for Risk Studies, said, “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.”

Elizabeth Geary, global head of cyber at TransRe, said, “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 defenses against challenges such as malware, and effective cyber insurance is a critical component of that defense. 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.”

Andrew Mahony, regional director for Aon, added, “The global WannaCry and NotPetya events of 2017 alerted organizations 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 organizations should aspire to when assessing their own cyber exposure.”

Sébastien Heon, deputy chief underwriter officer for cyber solutions at SCOR, said, “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 reinsurance industry experts from across the world, thereby providing a global view of cyber risk.”