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The Economic Case for Cyberinsurance

Author

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  • Jay Kesan

    (University of Illinois College of Law)

  • Rupterto Majuca

    (Department of Economics, University of Illinois at Urbana-Champaign)

  • William Yurcik

    (National Center for Supercomputing Applications, University of Illinois at Urbana-Champaign)

Abstract

We present three economic arguments for cyberinsurance. First, cyberinsurance results in higher security investment, increasing the level of safety for information technology (IT) infrastructure. Second, cyberinsurance facilitates standards for best practices as cyberinsurers seek benchmark security levels for risk management decision-making. Third, the creation of an IT security insurance market redresses IT security market failure resulting in higher overall societal welfare. We conclude that this is a significant theoretical foundation, in addition to market-based evidence, to support the assertion that cyberinsurance is the preferred market solution to managing IT security risks.

Suggested Citation

  • Jay Kesan & Rupterto Majuca & William Yurcik, "undated". "The Economic Case for Cyberinsurance," University of Illinois Legal Working Paper Series uiuclwps-1001, University of Illinois College of Law.
  • Handle: RePEc:bep:illlwp:uiuclwps-1001
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    File URL: http://law.bepress.com/cgi/viewcontent.cgi?article=1001&context=uiuclwps
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    Cited by:

    1. Alessandro Mazzoccoli & Maurizio Naldi, 2020. "Robustness of Optimal Investment Decisions in Mixed Insurance/Investment Cyber Risk Management," Risk Analysis, John Wiley & Sons, vol. 40(3), pages 550-564, March.
    2. Alessandro Mazzoccoli & Maurizio Naldi, 2021. "Optimal Investment in Cyber-Security under Cyber Insurance for a Multi-Branch Firm," Risks, MDPI, vol. 9(1), pages 1-28, January.
    3. Derrick Huang, C. & Hu, Qing & Behara, Ravi S., 2008. "An economic analysis of the optimal information security investment in the case of a risk-averse firm," International Journal of Production Economics, Elsevier, vol. 114(2), pages 793-804, August.
    4. Sachin Shetty & Michael McShane & Linfeng Zhang & Jay P. Kesan & Charles A. Kamhoua & Kevin Kwiat & Laurent L. Njilla, 2018. "Reducing Informational Disadvantages to Improve Cyber Risk Management†," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 43(2), pages 224-238, April.
    5. Junseok Hwang & Jihyoun Park & Jorn Altmann, 2010. "Two Risk-aware Resource Brokering Strategies in Grid Computing:Broker-driven vs. User-driven Methods," TEMEP Discussion Papers 201063, Seoul National University; Technology Management, Economics, and Policy Program (TEMEP), revised Mar 2010.

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