A cyber attack on the U.S. power grid could cost more than $1 trillion because of property damage, higher death rates and crippled infrastructure, according to Lloyd’s of London.
“The scenario predicts 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,” according to a report from the insurance market and Cambridge University.
Attacks linked to foreign hackers have compromised data from millions of customers at companies including JPMorgan Chase & Co., the largest U.S. bank, and health insurer Anthem Inc. Michael Daniel, the White House cybersecurity coordinator, has said that threats are becoming more sophisticated and easier to generate and could “systematically put the whole country at risk.”
Insurers are looking to create cyber policies that cover attacks on infrastructure. Companies including American International Group Inc. and Beazley Plc have offered coverage for expenses resulting from a breach. Lloyd’s said costs for insurers could be $21.4 billion, or $71.1 billion in an extreme event.
“The modern, digital, and interconnected world creates the conditions for significant damage,” Tom Bolt, director of performance management at Lloyd’s, said in a statement. “We know there are hostile actors with the skills and desire to cause harm.”
The insurance market modeled a hypothetical attack in which 15 states including New York lose power in a shutdown affecting 93 million people, leaving some regions blacked out for weeks. Economic costs, including business interruption and damaged assets, were projected to be $243 billion and could exceed $1 trillion in a worst case, according to the report.
“The scenario, while improbable, is technologically possible and is assessed to be within the benchmark return period of 1:200 against which insurers must be resilient,” according to the report.