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Insurability of Cyber Risk: An Empirical Analysis

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  • Biener, Christian
  • Eling, Martin
  • Wirfs, Jan Hendrik

Abstract

This paper discusses the adequacy of insurance for managing cyber risk. To this end, we extract 994 cases of cyber losses from an operational risk database and analyze their statistical properties. Based on the empirical results and recent literature, we investigate the insurability of cyber risk by systematically reviewing the set of criteria introduced by Berliner (1982). Our findings emphasize the distinct characteristics of cyber risks compared to other operational risks and bring to light significant problems resulting from highly interrelated losses, lack of data, and severe information asymmetries. These problems hinder the development of a sustainable cyber insurance market. We finish by discussing how cyber risk exposure may be better managed and make several suggestions for future research.

Suggested Citation

  • Biener, Christian & Eling, Martin & Wirfs, Jan Hendrik, 2015. "Insurability of Cyber Risk: An Empirical Analysis," Working Papers on Finance 1503, University of St. Gallen, School of Finance.
    • Handle: RePEc:usg:sfwpfi:2015:03
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    References listed on IDEAS

    as
    1. Shackelford, Scott J., 2012. "Should your firm invest in cyber risk insurance?," Business Horizons, Elsevier, vol. 55(4), pages 349-356.
    2. Haas, Andreas & Hofmann, Annette, 2013. "Risiken aus Cloud-Computing-Services: Fragen des Risikomanagements und Aspekte der Versicherbarkeit," FZID Discussion Papers 74-2013 [rev.], University of Hohenheim, Center for Research on Innovation and Services (FZID).
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    6. Christian Biener & Martin Eling, 2012. "Insurability in Microinsurance Markets: An Analysis of Problems and Potential Solutions," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 37(1), pages 77-107, January.
    7. Josef Janssen, 2000. "Implementing the Kyoto Mechanisms: Potential Contributions by Banks and Insurance Companies," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 25(4), pages 602-618, October.
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    9. Haas, Andreas & Hofmann, Annette, 2013. "Risiken aus Cloud-Computing-Services: Fragen des Risikomanagements und Aspekte der Versicherbarkeit," FZID Discussion Papers 74-2013, University of Hohenheim, Center for Research on Innovation and Services (FZID).
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Cyber Risk; Cyber Insurance; Operational Risk; Insurability;
    All these keywords.

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