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Service Level Agreement Violations in Cloud Storage: Insurance and Compensation Sustainability

Author

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  • Loretta Mastroeni

    (Department of Economics, University of Roma Tre, 00145 Rome, Italy
    These authors contributed equally to this work.)

  • Alessandro Mazzoccoli

    (Department of Civil Engineering and Computer Science, University of Roma Tor Vergata, 00133 Rome, Italy
    These authors contributed equally to this work.)

  • Maurizio Naldi

    (Department of Civil Engineering and Computer Science, University of Roma Tor Vergata, 00133 Rome, Italy
    Department of Law, Economics, Politics and Modern languages, LUMSA University, 00192 Rome, Italy
    These authors contributed equally to this work.)

Abstract

Service Level Agreements are employed to set availability commitments in cloud services. When a violation occurs as in an outage, cloud providers may be called to compensate customers for the losses incurred. Such compensation may be so large as to erode cloud providers’ profit margins. Insurance may be used to protect cloud providers against such a danger. In this paper, closed formulas are provided through the expected utility paradigm to set the insurance premium under different outage models and QoS metrics (no. of outages, no. of long outages, and unavailability). When the cloud service is paid through a fixed fee, we also provide the maximum unit compensation that a cloud provider can offer so as to meet constraints on its profit loss. The unit compensation is shown to vary approximately as the inverse square of the service fee.

Suggested Citation

  • Loretta Mastroeni & Alessandro Mazzoccoli & Maurizio Naldi, 2019. "Service Level Agreement Violations in Cloud Storage: Insurance and Compensation Sustainability," Future Internet, MDPI, vol. 11(7), pages 1-26, June.
    • Handle: RePEc:gam:jftint:v:11:y:2019:i:7:p:142-:d:244450
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    References listed on IDEAS

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    1. Babcock, Bruce A. & Choi, E. Kwan & Feinerman, Eli, 1993. "Risk And Probability Premiums For Cara Utility Functions," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 18(1), pages 1-8, July.
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    Cited by:

    1. Alessandro Mazzoccoli, 2023. "Optimal Cyber Security Investment in a Mixed Risk Management Framework: Examining the Role of Cyber Insurance and Expenditure Analysis," Risks, MDPI, vol. 11(9), pages 1-14, August.
    2. Alessandro Mazzoccoli & Maurizio Naldi, 2022. "An Overview of Security Breach Probability Models," Risks, MDPI, vol. 10(11), pages 1-29, November.
    3. Loretta Mastroeni & Alessandro Mazzoccoli & Maurizio Naldi, 2022. "Pricing Cat Bonds for Cloud Service Failures," JRFM, MDPI, vol. 15(10), pages 1-18, October.

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