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The Economic Case for Cyberinsurance

  • 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)

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    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.

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    File URL: http://law.bepress.com/cgi/viewcontent.cgi?article=1001&context=uiuclwps
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    Paper provided by University of Illinois College of Law in its series University of Illinois Legal Working Paper Series with number uiuclwps-1001.

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    Handle: RePEc:bep:illlwp:uiuclwps-1001
    Contact details of provider: Web page: http://www.law.uiuc.edu/

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