A “once in 200 years” catastrophic cyber event could cost the cyber insurance industry $33 billion, according to a new report by Guy Carpenter.
reinsurance company’s through the mirror In the report, we used three modeling platforms: CyberCube, Cyence, and Moody’s RMS to calculate our estimates. We populated them with our own data related to about 2 million cyber policies.
Losses ranged from $15.6 billion to $33.4 billion and covered three potential scenarios: cloud outages, data theft, and ransomware/malware.
Models from all three vendors agree that ransomware may be the most expensive source of major cyber incidents, with CyberCube estimating it at over $30 billion . Cloud events resulted in relatively low loss levels due to a model that considers cloud providers’ “robust contingency plans”.
“Data theft incidents are the most divergent incidents among vendors, with CyberCube being the most severe of the three vendors,” the report states. “Science and Moody’s RMS interpret this event as the least significant of this subset of his 200-year return period, although Cybercube’s interpretation appears to be greater than the Cloud event. Proven.”
The industry loss potential does not reflect total losses from a 1-in-200-year event, only those organizations that the insured business is required to pay. That is why, in part, it reflects the industry’s recent growth.
Guy Carpenter argued that global insurance premiums are now worth $14 billion, including $9 billion in the US. This is a sharp jump from 2019, when the US market valued just $2.6 billion.
Increased concerns include increased reliance on the cloud, increased interconnectivity of systems and devices, more sophisticated cyberattacks, and stricter regulatory requirements, the report notes.
However, reinsurers were fairly confident that the industry could absorb the costs of even a significant global cyber event.
“There is no question that hypothetical losses from major cyber events will impact the market as this report shows,” it concludes.
“However, given the industry’s resilience to significant losses from other classes, in most cases these are not insurmountable. We are looking for opportunities for continued growth and performance.”
