Cyber-insurance As A Market-Based Solution To The Problem Of Cybersecurity

We conduct a case study of the cyberinsurance industry. We examine the developing cyberliability legislation and the emerging cyberinsurance market. We conclude that cyberinsurers are able to find ways to deal with several problems that could result in the failure of market solution. Although some issues still need to be worked out, we suggest that the direction to be taken should be towards resolving these issues, rather than giving up the market solution. When these obstacles are fully worked out, the full market solution can result in the following benefits. First, cyberinsurance would result in higher security investment, increasing the level of safety for information technology (IT) infrastructure. Second, cyberinsurance can facilitate standards for best practices as cyberinsurers seek benchmark security levels for risk management decision-making. Third, the creation of an IT security insurance market will result in higher overall societal welfare.