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Lloyd’s systemic risk scenario reveals global economy exposed to $3.5trn from major cyber attack

18 Oct 2023

Lloyd’s, the world’s leading marketplace for insurance and reinsurance, today published a systemic risk scenario that models the global economic impact of a hypothetical but plausible cyber attack on a major financial services payments system, resulting in widespread disruption to global business and potential global economic losses of $3.5trn.

The three countries that experience the highest 5-year economic loss from the scenario are the United States $1.1trn, followed by China $470bn and Japan $200bn. The recovery time for individual countries or regions depends on the structure of their economy, exposure levels and resilience.

Cyber attacks continue to threaten businesses and governments, with year-on-year costs around maintenance, prevention, and response to attacks increasing. Cyber remains a risk that has the potential to affect all areas of society, as it is both a complex and connected risk impacting areas such as supply chains and geopolitics.

Cyber insurance is a growing market, estimated at just over $9bn in Gross Written Premiums last year, and forecast to hit between $13bn and $25bn by 2025. However this still represents a small portion of the potential economic losses that businesses and society face.  

“We are committed to building resilience around systemic risk and the risk scenario released today highlights the important role of insurance in supporting and protecting customers against the potential threat cyber poses to businesses and society.

“The global interconnectedness of cyber means it is too substantial a risk for one sector to face alone and therefore we must continue to share knowledge, expertise and innovative ideas across government, industry and the insurance market to ensure we build society’s resilience against the potential scale of this risk.”
Bruce Carnegie-Brown, Lloyd’s Chairman

With over a fifth of the world’s cyber premium being placed in the Lloyd’s market, Lloyd’s is seeking to support the growth of the class thoughtfully and sustainably – while also enabling innovation for new products, for example through the Lloyd’s Lab. In September, Lloyd’s Futureset held its first Cyber Innovation Forum, connecting customers with representatives from technology, government, and insurance sectors to discuss global cyber risk and the collective steps needed to respond.

Notes to Editors

1. Systemic Risk: Lloyd’s define systemic risk as a low likelihood, high impact risk which affects either a systemically important global enterprise or multiple sectors, societies, or national economies. They can be global in impact, often hitting billions of people simultaneously. Among the other systemic risk scenarios modelled in the research are geopolitical conflict, and extreme weather events leading to food and water shock and economic stagnation. You can find out more about the threat from cyber risk here.

2. Produced in partnership with the Cambridge Centre for Risk Studies, the research explores nine hypothetical (but plausible) systemic risk scenarios and is complimented by an interactive data tool that allows users to reveal the potential economic impact of each scenario across 107 countries and at three levels of severity (major, severe and extreme).

3. Using global Gross Domestic Product (GDP) as its central measurement, Lloyd’s and Cambridge model calculates the global economic loss of a global cyber-attack on a major financial services payment system as:

  • $3.5trn is the global economic loss over a five-year period (the weighted average across the three severities we have modelled)
  • The global economic loss ranges from $2.2trn in the lowest severity scenario up to $16trn in the most extreme scenario
  • $140bn is the expected global economic loss (the sum-product of the five-year economic loss and the probability of the event occurring)

4. The scenario severities have been given a probability of occurring in the next five years, based on several risk factors. In the cyber scenario, the probabilities for each severity are: Major 3.32% (1 in 30-year), Severe 0.50% (1 in 200-year), Extreme 0.12% (1 in 1,000 year).

5. The Lloyd’s market has access as access to write onshore insurance and reinsurance in over 100 countries and the systemic risk tool has been created to be reflective of the market’s global access. Regional economic loss figures can be found in the data tool and are summarised in the following table. Contact the media team below for further information on regional losses.

Region5 Year Economic Loss ($bn) 
Asia Pacific$537.1
Greater China$509.7
Latin America$134.4
Middle East$119.3
North America$1127.5

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About Lloyd's Futureset

By bringing together diverse perspectives, and through cutting-edge risk insight, intelligence, and cross-industry dialogue on the most complex and fast-changing risks faced by communities, businesses and countries, Lloyd’s Futureset aims to build greater societal understanding and collaboration to find solutions and support greater preparedness, protection, and resilience to the growing and interconnected risks that customers face today, and into the future.

About Lloyd’s

Lloyd’s is the world’s leading marketplace for insurance and reinsurance. Through the collective intelligence and expertise of the market’s underwriters and brokers, we’re sharing risk to create a braver world.

The Lloyd’s market offers the resources, capability, and insight to develop new and innovative products for customers in any industry, on any scale, in more than 200 territories.

We’re made up of more than 50 leading insurance companies, over 200 registered Lloyd’s brokers and a global network of over 4,000 local coverholders. Behind the Lloyd’s market is the Corporation: an independent organisation and regulator working to maintain the market's successful reputation and operation.

We’re working to build solutions for the most current and prevalent threats. As Chair of the Insurance Task Force for HM King Charles III’s Sustainable Markets Initiative, Lloyd’s is bringing the industry together to insure the transition to net zero. Our research community is pooling expertise from across the industry to provide cutting edge insight on systemic risks from climate change to cyber security.

And through our digital-led strategy, The Future at Lloyd’s, we’re making it easier and cheaper to place, price and process cover in the Lloyd’s market.