Understanding Cyber-Risk and Cyber-Insurance

31 Pages Posted: 20 Jun 2018

See all articles by Gareth Peters

Gareth Peters

Department of Actuarial Mathematics and Statistics, Heriot-Watt University; University College London - Department of Statistical Science; University of Oxford - Oxford-Man Institute of Quantitative Finance; London School of Economics & Political Science (LSE) - Systemic Risk Centre; University of New South Wales (UNSW) - Faculty of Science

Pavel V. Shevchenko

Macquarie University; Macquarie University, Macquarie Business School

Ruben Cohen

Independent

Multiple version iconThere are 2 versions of this paper

Date Written: January 17, 2018

Abstract

In this manuscript we explore a range of perspectives being adopted by industry and regulators in order to classify cyber crime or cyber risk loss processes. The purpose of this is to better understand and discuss the emerging perspectives on this class of risk process in order to inform management practice, data collection and ultimately loss modelling. In the second part of the manuscript we discuss the emerging market of cyber risk insurance and the challenges faced by this market resulting from the diversity of insurance coverage on o er and uncertainty relating to potential exposures and vulnerabilities associated with this risk class. Furthermore, we discuss the challenge of moral hazard that can arise in developing such insurance markets. In the third section, the manuscript discusses regulator and industry responses to cyber risk management, mitigation and insurance. We conclude with insights and perspectives on whether cyber risk is a loss process that should be primarily covered by capital management practice, or whether it is better suited to an insurance mitigation or risk transfer based approach.

Keywords: Fi nancial technology (FinTech), risk management, cyber risk, cyber crime, operational risk, cyber insurance, cyber regulation, information technology risk, business disruption

Suggested Citation

Peters, Gareth and Shevchenko, Pavel V. and Cohen, Ruben, Understanding Cyber-Risk and Cyber-Insurance (January 17, 2018). Macquarie University Faculty of Business & Economics Research Paper. Available at SSRN: https://ssrn.com/abstract=3200166 or http://dx.doi.org/10.2139/ssrn.3200166

Gareth Peters

Department of Actuarial Mathematics and Statistics, Heriot-Watt University ( email )

Edinburgh Campus
Edinburgh, EH14 4AS
United Kingdom

HOME PAGE: http://garethpeters78.wixsite.com/garethwpeters

University College London - Department of Statistical Science ( email )

1-19 Torrington Place
London, WC1 7HB
United Kingdom

University of Oxford - Oxford-Man Institute of Quantitative Finance ( email )

University of Oxford Eagle House
Walton Well Road
Oxford, OX2 6ED
United Kingdom

London School of Economics & Political Science (LSE) - Systemic Risk Centre ( email )

Houghton St
London
United Kingdom

University of New South Wales (UNSW) - Faculty of Science ( email )

Australia

Macquarie University, Macquarie Business School ( email )

New South Wales 2109
Australia

Ruben Cohen

Independent ( email )

No Address Available

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