A significant Amazon Web Services (AWS) outage, caused by a power issue at a Sydney data center on Friday, October 20th, led to widespread service disruptions for major corporations. The incident impacted some of Australia’s largest companies, including Commonwealth Bank of Australia (CBA), Westpac Banking Corp, Australia and New Zealand Banking Group (ANZ), and the telecommunications firm Telstra Group.
The outage highlights the substantial financial risks associated with dependency on third-party cloud infrastructure. The increasing reliance on cloud services means that even brief periods of downtime can have a severe economic impact on businesses.
The High Cost of Cloud Downtime
For major companies, the financial fallout from a cloud service outage is immediate and substantial. According to industry experts, businesses can lose an estimated $300,000 to $1 million per hour during such service interruptions. The Friday outage, which lasted for several hours before being largely resolved in the afternoon, underscored this vulnerability and the direct correlation between cloud uptime and revenue generation for large enterprises.
Cyber Insurance: Coverage with a Catch
While many companies hold cyber insurance policies to mitigate financial losses from events like these, a critical limitation exists. These policies can cover business interruption losses stemming from a cloud provider outage, but they often include a waiting period. This period, typically between eight to twelve hours, must pass before insurance coverage activates. Given that the AWS outage was resolved within several hours, many affected companies may find their losses fall short of the required duration to file a successful claim.
Insurers are also reportedly becoming more stringent, with rising premiums and shrinking capacity due to increased cyber risks. Policies may also contain specific sub-limits for interruptions related to cloud services, further complicating the recovery of losses for affected businesses.
Concise Cyber 