Cyber Insurance

TL;DR

This paper develops a game-theoretic model of cyber insurance involving an insurer and a user, incorporating attacker behaviors and threat types to optimize coverage and incentives.

Contribution

It introduces a novel principal-agent framework that accounts for adversarial behaviors and threat distinctions in cyber insurance design.

Findings

Incentive-compatible insurance mechanisms are formulated.

Threat type influences coverage policies and loss estimation.

Adversarial behaviors impact insurance design and risk assessment.

Abstract

This chapter will first present a principal-agent game-theoretic model to capture the interactions between one insurer and one user. The insurer is deemed as the principal who does not have incomplete information about user's security policies. The user, which refers to the infrastructure operator or the customer, implements his local protection and pays a premium to the insurer. The insurer designs an incentive compatible insurance mechanism that includes the premium and the coverage policy, while the user determines whether to participate in the insurance and his effort to defend against attacks. The chapter will also focus on an attack-aware cyber insurance model by introducing the adversarial behaviors into the framework. The behavior of an attacker determines the type of cyber threats, e.g. denial of service (DoS) attacks, data breaches, phishing and spoofing. The distinction of threat types plays a role in determining the type of losses and the coverage policies. The data breaches can lead to not only financial losses but also damage of the reputations. The coverage may only cover certain agreed percentage of the financial losses.