Work

Incident-specific cyber insurance

Year: 2025

Type: article

Abstract: In today’s insurance market, numerous cyber insurance products provide bundled coverage for losses resulting from different cyber events, including data breaches and ransomware attacks. Every category of incident has its own specific coverage limit and deductible. Although this gives prospective cyber insurance buyers more flexibility in customizing the coverage and better manages the risk exposures of sellers, it complicates the decision-making process in determining the optimal amount of risks to retain and transfer for both parties. This article aims to build an economic foundation for these incident-specific cyber insurance products with a focus on how incident-specific indemnities should be designed for achieving Pareto optimality for both the insurance seller and the buyer. Real data on cyber incidents are used to illustrate the feasibility of this approach. Several implementation improvement methods for practicality are also discussed.

Source: Astin Bulletin

DOI: 10.1017/asb.2025.9

Authors: Wing Fung Chong, Daniël Linders, Zhiyu Quan, Linfeng Zhang

Institutions: Heriot-Watt University, Maxwell Institute for Mathematical Sciences, University of Amsterdam, University of Illinois Urbana-Champaign, The Ohio State University

Language: English

Topic: Insurance and Financial Risk Management

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: hybrid

Estimated APC paid: $3,550

Funder: Fundación Mapfre