Pricing Cyber Security Insurance

Cybersecurity breaches may be correlated due to geography, similar infrastructure, or use of a third-party contractor. We show how logistic regression used estimate the probability an attack where among firms up and down supply chain. also Poisson number records breached. Losses arising from cybersecurity have unknown distribution. propose stock price reaction breach as objective measure loss in wealth sustained by firm breach. This reflects immediate long-term effects breach, including reputational other intangible impacts that are otherwise more difficult quantify. examine returns for 258 announcements over 2011-2016 order obtain empirical find five-day abnormal return -1.44%. Seventy-one percent these result negative return, gamma distribution provides excellent fit losses. In addition introducing predictive model losses, our study shows insurers can either losses per record cost pricing cyberinsurance.