A new report highlights the potential financial damage of downtime at top cloud services providers.

Kelly Sheridan, Former Senior Editor, Dark Reading

January 24, 2018

2 Min Read

The public cloud industry is projected to continue growing revenue at a rate of 36% each year through 2026, according to a new report from AIR and Lloyd's of London. As demand for cloud services grows, so too do the potential consequences of cloud failure. Downtime at a major cloud provider could hit $19 billion in ground-up losses, researchers report.

New data from AIR and Lloyd's of London demonstrates the financial impact of downtime incidents at several top cloud service providers. Their report shows how 12.4 million businesses in the US, which it states is the most established cyber insurance market, would be affected if cloud systems were to fail for a span of several hours to eleven days.

This is intended to help insurers struggling to understand their exposure to systemic risk. Its goal is to help them prepare for an extreme event with potential to generate millions of claims.

Today's insurance industry would be little help if a cloud service provider failed. In the event a cyber incident took a US-based top-three cloud provider offline for three to six days, researchers predict it would cost $6.9 billion to $14.7 billion USD in ground-up losses and $1.5 billion to $2.8 billion USD in insured loss.

The gap is due to cyber insurers' low penetration rates, especially among small- and medium-sized businesses, in addition to limited coverage. Most policies have low limits and long waiting periods, with about eight to 24 hours of downtime before coverage starts to kick in. Researchers say this is an opportunity for insurers to provide coverage for extreme scenarios.

The cloud industry is highly concentrated, researchers say, with the top 15 cloud providers making up 70% of industry market share. More businesses are using these services: 37% of companies are expected to use infrastructure-as-a-service as their primary environment in 2018, and the number primarily relying on traditional on-prem infrastructure will drop to 43%.

As dependence on cloud continues to grow, cyber insurers should be wary of threats with the power to bring it down. The report classifies four types of "silent" threats: environmental (natural disasters, critical infrastructure failure), adversarial (actors with malicious intent), accidental (employee mistakes), and structural (equipment and software failure).

David Bradford, chief strategy officer and director of strategic partner development at Advisen, calls cloud computing "a huge risk that [insurers] haven't really come to grips with" and "one of the few things putting the breaks on the cyber marketplace."

"If a large cloud provider goes down, the insurer would be responsible for thousands of different companies using that service," he says.

Researchers report the most likely causes of interrupted cloud services include malicious attacks by external actors, employee errors, and hardware and software failures. Data indicates 50% of businesses targeted in a DDoS attack were also the victims of theft, and 36% of companies hit in these incidents were infected with malware.

About the Author(s)

Kelly Sheridan

Former Senior Editor, Dark Reading

Kelly Sheridan was formerly a Staff Editor at Dark Reading, where she focused on cybersecurity news and analysis. She is a business technology journalist who previously reported for InformationWeek, where she covered Microsoft, and Insurance & Technology, where she covered financial services. Sheridan earned her BA in English at Villanova University. You can follow her on Twitter @kellymsheridan.

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