Pricing of Cyber Insurance Contracts in a Network Model

Pricing of Cyber Insurance Contracts in a Network Model


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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.

[1] Fahrenwaldt, M. A., Weber, S., and Weske, K. (2018), “Pricing of cyber insurance contracts in a network model.” ASTIN Bulletin: The Journal of the IAA, vol. 48(3), pp. 1175-1218.

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