Modeling and pricing cyber insurance: Idiosyncratic, systematic, and systemic risks

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

Cyber Insurance

This volume covers a wide spectrum of issues relating to economic and political development enabled by information and communication technology (ICT)

Does Cyber Insurance promote Cyber Security Best Practice? An Analysis based on Insurance Application Forms

The significant rise in digital threats and attacks has led to an increase in the use of cyber insurance as a risk treatment method intended to support organisations in the event of a breach. Insurance providers are set up to assume such residual risk, but they often require organisations to implement certain security controls a priori to reduce their exposure. We examine the assertion that cyber insurance promotes cyber security best practice by conducting a critical examination of cyber insurance application forms to determine how well they align with ISO 27001, the NIST Cybersecurity Framework and the UK’s Cyber Essentials security standards. We achieve this by mapping questions and requirements expressed in insurance forms to the security controls covered in each of the standards. This allows us to identify security controls and standards that are considered – and likely most valued – by insurers and those that are neglected. We find that while there is some reasonable coverage across forms, there is an underrepresentation of best practice standards and controls generally, and particularly in some control areas (e.g., procedural/governance controls, incident response and recovery)