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Cyber Risk and Insurance Coverage: An Actuarial Multistate Approach

Author

Listed:
  • Carla Barracchini

    (Department of Industrial and Information Engineering and Economics, University of L'Aquila, Italy)

  • M. Elena Addessi

    (UniNettuno - Corso V.,Italy)

Abstract

This paper suggests a possible alternative, original and supplementary (that is, it does not replace nor keep out those standard procedures which have become legal obligations) solution to the issue of network security, whatever the connection tool may be. The procedures regulating activities of prevention, analysis and management of any cyber-attack (known as cyber risk as well as, in more serious cases when individual is involved, cyber-crime) are increasingly numerous, both in privately-owned concerns and in public administration as well. Hereinafter, a terminal is referred to as any device that can be connected to the web via the Internet and/or Intranet. Therefore, this paper does not aim at suggesting a technological solution ¨C a specific task for antivirus programmer ¨C but at formulating the actuarial premises for coverage in case of cyber damage, also known as cyber-insurance. On the analogy of the coverage regarding health insurance and following an actuarial multistate approach, three levels of damage will be identified with regard to the functionality of the terminal. Two typologies of computer policies are hypothesized: ADC (Activities of Daily Cyber) and GCU (Good Cyber Use).

Suggested Citation

  • Carla Barracchini & M. Elena Addessi, 2014. "Cyber Risk and Insurance Coverage: An Actuarial Multistate Approach," Review of Economics & Finance, Better Advances Press, Canada, vol. 4, pages 57-69, Feburary.
    • Handle: RePEc:bap:journl:140105
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    File URL: http://www.bapress.ca/ref/v4-1/1923-7529-2014-04-57-13.pdf
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    References listed on IDEAS

    as
    1. Bacinello, Anna Rita & Millossovich, Pietro & Olivieri, Annamaria & Pitacco, Ermanno, 2011. "Variable annuities: A unifying valuation approach," Insurance: Mathematics and Economics, Elsevier, vol. 49(3), pages 285-297.
    2. Radcliff, Benjamin, 2001. "Politics, Markets, and Life Satisfaction: The Political Economy of Human Happiness," American Political Science Review, Cambridge University Press, vol. 95(4), pages 939-952, December.
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    Cited by:

    1. Aleksandrina Aleksandrova & Valentina Ninova & Zhelyo Zhelev, 2023. "A Survey on AI Implementation in Finance, (Cyber) Insurance and Financial Controlling," Risks, MDPI, vol. 11(5), pages 1-16, May.

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    More about this item

    Keywords

    Insurance; Cyber risk; Actuarial multistate models; Chapmann-Kolmogorov¡¯s Equations;
    All these keywords.

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions

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