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The University of Southampton
Centre for Risk Research

Pricing Cyber Insurance Products Using a Hybrid Methodology: An Integration of Scenario Analysis and the Loss Distribution Approach Event

Dr Madhusudan Acharyya
1 December 2017
Building 4, Room 4055, Highfield Campus

Event details

Businesses and insurers are increasingly concerned by the losses incurred by cyber-crime. Difficulties are encountered in relation to the complexity of the nature of cyber-crime and the estimation of its impact. In order to offset the scarcity of data, quoted as one of the main issues for insurers in pricing cyber policies, this study will present a VBA in Excel program to allow for the generation of 320 000 hypothetical cyber-attacks along with an estimation of their impact. The Loss Distribution Approach (LDA) combined to Scenario Analysis (SA) is carried out using both this hypothetical data and historical data obtained from four case studies (i.e., Central Bank of Bangladesh, Sony, Talk-Talk and Anthem). This methodology creates a series of scenarios of aggregate loss distributions and Capitals at Risk and therefore assists insurers to identify their exposure and risk appetite to cyber risk. The model can be used by practitioners as a tool to revise the current pricing mechanism and allow for a better pricing of cyber insurance products.

Speaker information

Dr Madhusudan Acharyya,Glasgow Caledonian University (London Campus),is a Senior Lecturer in Risk and Finance at Glasgow Caledonian University (London Campus). He completed PhD in ‘Enterprise Risk Management in the European Insurance Industry’ at the University of Southampton under the supervision of Professor Johnnie Johnson. He is the recipient of the 2006 SHIN Research Excellence Award for Insurance Scholarship awarded jointly by the Geneva Association and the International Insurance Society. He is also a fellow of the Institute of Risk Management (IRM) and Associate of the Chartered Insurance Institute (CII). He joined the academic profession with 10 years industry experience in insurance. Acharyya’s research interest includes cyber risk, enterprise risk management, risk financing using CatBonds, climate change risk, political risk, and operational risk in banking and insurance.

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