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PRICING OF CYBER INSURANCE CONTRACTS IN A NETWORK MODEL

Published online by Cambridge University Press:  25 July 2018

Matthias A. Fahrenwaldt ,
Stefan Weber  and
Kerstin Weske
Matthias A. Fahrenwaldt
Affiliation:
Department of Actuarial Mathematics & Statistics, Maxwell Institute for Mathematical Sciences, Heriot-Watt University, Edinburgh EH14 4AS, UK E-Mail: [email protected]
Stefan Weber*
Affiliation:
Institut für Mathematische Stochastik, Leibniz Universität Hannover, Welfengarten 1, 30167 Hannover, Germany
Kerstin Weske
Affiliation:
Institut für Mathematische Stochastik, Leibniz Universität Hannover, Welfengarten 1, 30167 Hannover, Germany E-Mail: [email protected]
*
E-Mail: [email protected]
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Abstract

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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.

Keywords

Cyber insuranceemerging riskspolynomial approximationmean-field approximation
Type
Research Article
Information
ASTIN Bulletin: The Journal of the IAA , Volume 48 , Issue 3 , September 2018 , pp. 1175 - 1218
Copyright
Copyright © Astin Bulletin 2018 

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