Modeling and pricing cyber insurance

Idiosyncratic, systematic, and systemic risks

authored by: Kerstin Awiszus, Thomas Knispel, Irina Penner, Gregor Svindland, Alexander Voß, Stefan Weber
Abstract: The paper provides a comprehensive overview of modeling and pricing cyber insurance and includes clear and easily understandable explanations of the underlying mathematical concepts. We distinguish three main types of cyber risks: idiosyncratic, systematic, and systemic cyber risks. While for idiosyncratic and systematic cyber risks, classical actuarial and financial mathematics appear to be well-suited, systemic cyber risks require more sophisticated approaches that capture both network and strategic interactions. In the context of pricing cyber insurance policies, issues of interdependence arise for both systematic and systemic cyber risks; classical actuarial valuation needs to be extended to include more complex methods, such as concepts of risk-neutral valuation and (set-valued) monetary risk measures.
Organisation(s): House of Insurance
Institute of Actuarial and Financial Mathematics
External Organisation(s): University of Applied Sciences and Arts Hannover (HsH)
Berlin School of Economics and Law
Berlin International University of Applied Sciences
Type: Article
Journal: European Actuarial Journal
Volume: 13
Pages: 1-53
No. of pages: 53
ISSN: 2190-9733
Publication date: 06.2023
Publication status: Published
Peer reviewed: Yes
ASJC Scopus subject areas: Statistics and Probability, Economics and Econometrics, Statistics, Probability and Uncertainty
Electronic version(s): https://doi.org/10.1007/s13385-023-00341-9 (Access: Open)

BibTeX

@article{b415290b47aa445f84edc3250ee8f764,
title = "Modeling and pricing cyber insurance: Idiosyncratic, systematic, and systemic risks",
abstract = "The paper provides a comprehensive overview of modeling and pricing cyber insurance and includes clear and easily understandable explanations of the underlying mathematical concepts. We distinguish three main types of cyber risks: idiosyncratic, systematic, and systemic cyber risks. While for idiosyncratic and systematic cyber risks, classical actuarial and financial mathematics appear to be well-suited, systemic cyber risks require more sophisticated approaches that capture both network and strategic interactions. In the context of pricing cyber insurance policies, issues of interdependence arise for both systematic and systemic cyber risks; classical actuarial valuation needs to be extended to include more complex methods, such as concepts of risk-neutral valuation and (set-valued) monetary risk measures.",
keywords = "Cyber Insurance, Cyber Risks, Idiosyncratic Risk, Systematic Risk, Systemic Risk",
author = "Kerstin Awiszus and Thomas Knispel and Irina Penner and Gregor Svindland and Alexander Vo{\ss} and Stefan Weber",
note = "Funding information: We are grateful for useful comments of the reviewers and the editor.",
year = "2023",
month = jun,
doi = "10.1007/s13385-023-00341-9",
language = "English",
volume = "13",
pages = "1--53",
journal = "European Actuarial Journal",
issn = "2190-9733",
publisher = "Springer International Publishing AG",
number = "1",
}