A Comprehensive Model for Cyber Risk Based on Marked Point Processes and Its Application to Insurance

42 Pages Posted: 18 Sep 2020 Last revised: 5 Mar 2021

See all articles by Gabriela Zeller

Gabriela Zeller

Technische Universität München (TUM)

Matthias A. Scherer

Technische Universität München (TUM)

Date Written: February 12, 2021

Abstract

After scrutinizing technical, legal, financial, and actuarial aspects of cyber risk, a new approach for modelling cyber risk using marked point processes is proposed. Key co-variables, required to model frequency and severity of cyber claims, are identified. The presented framework explicitly takes into account incidents from un-targeted and targeted attacks as well as accidents and failures. The resulting model is able to include the dynamic nature of cyber risk, while capturing accumulation risk in a realistic way. The model is studied with respect to its statistical properties and applied to the pricing of cyber insurance and risk measurement. The results are illustrated in a simulation study.

Keywords: Cyber Risk, Cyber Insurance, Emerging Risks, Marked Point Processes, Accumulation Risk

JEL Classification: G22

Suggested Citation

Zeller, Gabriela and Scherer, Matthias A., A Comprehensive Model for Cyber Risk Based on Marked Point Processes and Its Application to Insurance (February 12, 2021). Available at SSRN: https://ssrn.com/abstract=3668228 or http://dx.doi.org/10.2139/ssrn.3668228

Gabriela Zeller (Contact Author)

Technische Universität München (TUM) ( email )

Arcisstrasse 21
Munich, DE 80333
Germany

Matthias A. Scherer

Technische Universität München (TUM) ( email )

Arcisstrasse 21
Munich, DE 80333
Germany

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