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Friday, October 19
Fri, Oct 19, 2:30 PM - 3:45 PM
Caprice 3-4
Speed Session 4

Modeling Cyber Risk Using Network Theory (304807)

*Vijayalakshmi Ramasamy, Miami University, Oxford 
Tatjana Miljkovic, Miami University 

Keywords: cyber risk, network theory, data breach

While research on cyber risk has been ongoing in the field of information technology, very little research exists in the actuarial science domain. However, there is a great need to develop insurance policies in this domain. For an insurance company to determine a correct premium for cyber risk coverage, it is critically important to understand the exposure associated with cyber risk. We employ the data on breach information from “Chronology of Data Breaches” provided by the Privacy Rights Clearinghouse (PRC) between January 10, 2005, and April 6, 2018. We develop network models for different types of breaches taking into consideration a variety of parameters such as the number of occurrences (incidents), locations, frequencies, probabilities of infections and the total losses. The mathematical modeling of dependencies and data analysis techniques applied to data breaches help not only to unfold hidden patterns/clusters and associated correlations but also to unravel the uncertainty of data and risk assessment. Our analysis should be useful to government agencies, policymakers, commercial business, and insurance companies having interest in understanding better cyber risk exposures.