Pricing of Cyber Insurance Contracts in a Network Model

Matthias Albrecht Fahrenwaldt, Stefan Weber, Kerstin Weske

Research output: Contribution to journalArticle

4 Citations (Scopus)
84 Downloads (Pure)

Abstract

We develop a novel approach for pricing cyber insurance contracts. The considered cyber threats, such as viruses and worms, diffuse in a structured data network. The spread of the cyber infection is modeled by an interacting Markov chain. Conditional on the underlying infection, the occurrence and size of claims are described by a marked point process. We introduce and analyze a new polynomial approximation of claims together with a mean-field approach that allows to compute aggregate expected losses and prices of cyber insurance. Numerical case studies demonstrate the impact of the network topology and indicate that higher order approximations are indispensable for the analysis of non-linear claims.
Original languageEnglish
Pages (from-to)1175-1218
Number of pages44
JournalASTIN Bulletin: The Journal of the IAA
Volume48
Issue number3
Early online date25 Jul 2018
DOIs
Publication statusPublished - Sep 2018
Event31st International Congress of Actuaries 2018 - Berlin, Germany
Duration: 4 Jun 20188 Jun 2018

Keywords

  • cyber insurance
  • emerging risks
  • mean-field approximation
  • polynomial approximation

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