Insurability of Cyber Risk: An Empirical Analysis

Geneva Papers on Risk and Insurance, Vol. 40, No. 1, 2015

University of St. Gallen, School of Finance Research Paper No. 2015/03

32 Pages Posted: 12 Mar 2015 Last revised: 19 Jan 2016

See all articles by Christian Biener

Christian Biener

Institute of Insurance Economics, University of St. Gallen; University of St. Gallen - School of Finance

Martin Eling

University of St. Gallen - Institute of Insurance Economics; University of Saint Gallen - School of Finance (SoF)

Jan Hendrik Wirfs

University of St. Gallen - School of Finance

Date Written: January 7, 2015

Abstract

This paper discusses the adequacy of insurance for managing cyber risk. To this end, we extract 994 cases of cyber losses from an operational risk database and analyze their statistical properties. Based on the empirical results and recent literature, we investigate the insurability of cyber risk by systematically reviewing the set of criteria introduced by Berliner (1982). Our findings emphasize the distinct characteristics of cyber risks compared to other operational risks and bring to light significant problems resulting from highly interrelated losses, lack of data, and severe information asymmetries. These problems hinder the development of a sustainable cyber insurance market. We finish by discussing how cyber risk exposure may be better managed and make several suggestions for future research.

Keywords: Cyber risk, cyber insurance, operational risk, insurability

Suggested Citation

Biener, Christian and Eling, Martin and Wirfs, Jan Hendrik, Insurability of Cyber Risk: An Empirical Analysis (January 7, 2015). Geneva Papers on Risk and Insurance, Vol. 40, No. 1, 2015; University of St. Gallen, School of Finance Research Paper No. 2015/03. Available at SSRN: https://ssrn.com/abstract=2577286 or http://dx.doi.org/10.2139/ssrn.2577286

Christian Biener

Institute of Insurance Economics, University of St. Gallen ( email )

Girtannerstrasse 6
St. Gallen, St. Gallen 9010
Switzerland

HOME PAGE: http://sites.google.com/site/bienerresearchprofile/

University of St. Gallen - School of Finance ( email )

Unterer Graben 21
St.Gallen, CH-9000
Switzerland

Martin Eling (Contact Author)

University of St. Gallen - Institute of Insurance Economics ( email )

Kirchlistrasse 2
St. Gallen, 9010
Switzerland

University of Saint Gallen - School of Finance (SoF) ( email )

Unterer Graben 21
St.Gallen, CH-9000
Switzerland

Jan Hendrik Wirfs

University of St. Gallen - School of Finance ( email )

Unterer Graben 21
St.Gallen, CH-9000
Switzerland

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