Exact Insurance Premiums for Cyber Risk of Small and Medium-Sized Enterprises

In this talk, we present a dynamic structural model of aggregate loss distribution for cyber risk of small and medium-sized enterprises. Here, we define a tree-based local-area network topology that consists of the combination of a Poisson process, homogeneous random trees, bidirectional bond percolation processes, and a cost topology. As a result, this leads us to obtain exact expressions for both the mean and variance of the aggregate loss. To highlight the utility of the model, we present an interesting application of network security and cyber insurance pricing.