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Cyber-contagion model with network structure applied to insurance

Author

Listed:
  • Hillairet, Caroline
  • Lopez, Olivier
  • d'Oultremont, Louise
  • Spoorenberg, Brieuc

Abstract

In this paper, we provide a model that aims to describe the impact of a massive cyber attack on an insurance portfolio, taking into account the structure of the network. Due to the contagion, such an event can rapidly generate consequent damages, and mutualization of the losses may not hold anymore. The composition of the portfolio should therefore be diversified enough to prevent or reduce the impact of such events, with the difficulty that the relationships between actor are difficult to assess. Our approach consists of introducing a multi-group epidemiological model which, apart from its ability to describe the intensity of connections between actors, can be calibrated from a relatively small amount of data, and through fast numerical procedures. We show how this model can be used to generate reasonable scenarios of cyber events, and investigate the response to different types of attacks or behavior of the actors, allowing to quantify the benefit of an efficient prevention policy.

Suggested Citation

  • Hillairet, Caroline & Lopez, Olivier & d'Oultremont, Louise & Spoorenberg, Brieuc, 2022. "Cyber-contagion model with network structure applied to insurance," Insurance: Mathematics and Economics, Elsevier, vol. 107(C), pages 88-101.
    • Handle: RePEc:eee:insuma:v:107:y:2022:i:c:p:88-101
    DOI: 10.1016/j.insmatheco.2022.08.002
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    References listed on IDEAS

    as
    1. Kshetri, Nir, 2020. "The evolution of cyber-insurance industry and market: An institutional analysis," Telecommunications Policy, Elsevier, vol. 44(8).
    2. Caroline Hillairet & Olivier Lopez, 2021. "Propagation of cyber incidents in an insurance portfolio: counting processes combined with compartmental epidemiological models," Post-Print hal-02564462, HAL.
    3. Xiaoying Xie & Charles Lee & Martin Eling, 2020. "Cyber insurance offering and performance: an analysis of the U.S. cyber insurance market," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 45(4), pages 690-736, October.
    4. Bessy-Roland, Yannick & Boumezoued, Alexandre & Hillairet, Caroline, 2021. "Multivariate Hawkes process for cyber insurance," Annals of Actuarial Science, Cambridge University Press, vol. 15(1), pages 14-39, March.
    5. Runhuan Feng & Jose Garrido, 2011. "Actuarial Applications of Epidemiological Models," North American Actuarial Journal, Taylor & Francis Journals, vol. 15(1), pages 112-136.
    6. Fahrenwaldt, Matthias A. & Weber, Stefan & Weske, Kerstin, 2018. "Pricing Of Cyber Insurance Contracts In A Network Model," ASTIN Bulletin, Cambridge University Press, vol. 48(3), pages 1175-1218, September.
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    Citations

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    Cited by:

    1. Na Ren & Xin Zhang, 2024. "A novel k-generation propagation model for cyber risk and its application to cyber insurance," Papers 2408.14151, arXiv.org.

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    More about this item

    Keywords

    Cyber insurance; Cyber risk; Compartmental models; Multi-SIR; Network structures;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques

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