Modeling Cyber-Insurance

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Full Title of Reference

Modeling Cyber-Insurance: Towards A Unified Framework

Full Citation

Rainer Bohme and Galina Schwartz, Modeling Cyber-Insurance, Workshop on the Economics of Information Security, Harvard University, Cambridge, MA (June 2010). Web



Issues: Economics of Cyber Security; Insurance

Key Words

Cyber-Insurance, Risk Assessment


We propose a comprehensive formal framework to classify all market models of cyber-insurance we are aware of. The framework features a common terminology and deals with the specific properties of cyber-risk in a unified way: interdependent security, correlated risk, and information asymmetries. A survey of existing models, tabulated according to our framework, reveals a discrepancy between informal arguments in favor of cyber-insurance as a tool to align incentives for better network security, and analytical results questioning the viability of a market for cyber-insurance. Using our framework, we show which parameters should be considered and endogenized in future models to close this gap.

Additional Notes and Highlights