Copula Based Actuarial Model for Pricing Cyber-Insurance Policies

Insurance Markets and Companies: Analyses and Actuarial Computations, Forthcoming

Posted: 1 Mar 2011 Last revised: 25 Jan 2018

See all articles by Hemantha Herath

Hemantha Herath

Brock University

Tejaswini Herath

Brock University - Department of Finance, Operations and Information Systems (FOIS)

Date Written: February 27, 2011

Abstract

Cyber-insurance is often suggested as a tool to manage IT security residual risks but the accuracy of premiums is still an open question. Thus, practitioners and academics have argued for more robust and innovative cyber-insurance pricing models. We fill this important gap in the literature by developing a cyber-insurance model using the emerging copula methodology. The premiums for first party losses due to virus intrusions are estimated using three types of insurance policy models. Our approach is the first in the information security literature to integrate standard elements of insurance risk with the robust copula methodology to determine cyber insurance premiums.

Keywords: Cyber-Insurance, Copula, Correlated Risk, Information Security Risk Management

Suggested Citation

Herath, Hemantha and Herath, Tejaswini, Copula Based Actuarial Model for Pricing Cyber-Insurance Policies (February 27, 2011). Insurance Markets and Companies: Analyses and Actuarial Computations, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1771983

Hemantha Herath (Contact Author)

Brock University ( email )

St. Catharines, Ontario L2S 3A1
Canada

Tejaswini Herath

Brock University - Department of Finance, Operations and Information Systems (FOIS) ( email )

Ontario, L2S 3A1
Canada

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