Cyber Insurance Ratemaking: A Graph Mining Approach

Yeftanus Antonio, Sapto Wahyu Indratno and Rinovia Simanjuntak
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Yeftanus Antonio: Statistics Research Division, Institut Teknologi Bandung, Bandung 40132, West Java, Indonesia
Sapto Wahyu Indratno: Statistics Research Division, Institut Teknologi Bandung, Bandung 40132, West Java, Indonesia
Rinovia Simanjuntak: Combinatorial Mathematics Research Division, Institut Teknologi Bandung, Bandung 40132, West Java, Indonesia

Risks, 2021, vol. 9, issue 12, 1-34

Abstract: Cyber insurance ratemaking (CIRM) is a procedure used to set rates (or prices) for cyber insurance products provided by insurance companies. Rate estimation is a critical issue for cyber insurance products. This problem arises because of the unavailability of actuarial data and the uncertainty of normative standards of cyber risk. Most cyber risk analyses do not consider the connection between Information Communication and Technology (ICT) sources. Recently, a cyber risk model was developed that considered the network structure. However, the analysis of this model remains limited to an unweighted network. To address this issue, we propose using a graph mining approach (GMA) to CIRM, which can be applied to obtain fair and competitive prices based on weighted network characteristics. This study differs from previous studies in that it adds the GMA to CIRM and uses communication models to explain the frequency of communications as weights in the network. We used the heterogeneous generalized susceptible-infectious-susceptible model to accommodate different infection rates. Our approach adds up to the existing method because it considers the communication frequency and GMA in CIRM. This approach results in heterogeneous premiums. Additionally, GMA can choose more active communications to reflect high communications contribution in the premiums or rates. This contribution is not found when the infection rates are the same. Based on our experimental results, it is apparent that this method can produce more reasonable and competitive prices than other methods. The prices obtained with GMA and communication factors are lower than those obtained without GMA and communication factors.

Keywords: CIRM; communication; GMA; HG-SIS; weighted network (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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