Cyber Insurance Premium Setting for Multi-Site Companies under Risk Correlation

Loretta Mastroeni, Alessandro Mazzoccoli () and Maurizio Naldi
Additional contact information
Loretta Mastroeni: Department of Economics, Roma Tre University, Via Silvio D’Amico 77, 00145 Rome, Italy
Alessandro Mazzoccoli: Department of Economics, Roma Tre University, Via Silvio D’Amico 77, 00145 Rome, Italy
Maurizio Naldi: Department of Law, Economics, Politics and Modern Languages, LUMSA University, Via Marcantonio Colonna 19, 00192 Rome, Italy

Risks, 2023, vol. 11, issue 10, 1-18

Abstract: Correlation in cyber risk represents an additional source of concern for utility and industrial infrastructures, where risks may be introduced by connected systems. A major means of reducing risk is to transfer it through insurance. In this paper, we consider a company which has peripheral branches in addition to its headquarters, where risk correlation is present between all of its sites and insurance is adopted to hedge against economic losses. We employ the expected utility principle (which leads to the well-known mean variance premium formula) to derive the insurance premium under risk correlation under several risk scenarios. Under a first-order approximation, a quasi-linear relationship between the premium and the two major risk factors (the number of branches and the risk correlation coefficient) is determined.

Keywords: cyber insurance; premium; risk management; risk correlation (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/2227-9091/11/10/167/pdf (application/pdf)
https://www.mdpi.com/2227-9091/11/10/167/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jrisks:v:11:y:2023:i:10:p:167-:d:1245787

Access Statistics for this article

Risks is currently edited by Mr. Claude Zhang

More articles in Risks from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().