Data Breaches: Goodness of Fit, Pricing and Risk Measurement
Journal
Insurance : mathematics and economics
ISSN
0167-6687
ISSN-Digital
1873-5959
Type
journal article
Date Issued
2017
Author(s)
Abstract
Some research on cyber risk has been conducted in the field of information technology, but virtually no research exists in the actuarial domain. As a first step toward a more profound actuarial discussion, we use multidimensional scaling and goodness-of-fit tests to analyze the distribution of data breach information. Our results show that different types of data breaches need to be modeled as distinct risk categories. For severity modeling, the log-skew-normal distribution provides promising results. The findings add to the recent discussion on the use of skewed distributions in actuarial modeling (Vernic, 2006; Bolancé et al., 2008; Eling, 2012). Moreover, they provide useful insights for actuaries working on the implementation of cyber insurance policies. We illustrate the usefulness of our results in two applications on risk measurement and pricing.
Language
English
HSG Classification
contribution to scientific community
Refereed
Yes
Publisher
North Holland Publ. Co.
Publisher place
Amsterdam
Volume
75
Start page
126
End page
136
Subject(s)
Division(s)
Eprints ID
254636