Joint pricing and security investment for cloud-insurance : a security interdependency perspective

Abstract

Cyber insurance has been introduced as the mean to transfer cyber risks to an insurance company, namely, insurer. The users are thus covered by the insurance to alleviate the damage from cyber threats. In this paper, we investigate the joint pricing and security investment in a cloud-insurance market. The market is composed of users, cloud providers, and cloud-insurers. The users subscribes to use the cloud service (platform) from the cloud providers. To protect from the damage, the users can buy a cloud-insurance product from the cloud-insurers which will pay a claim to the users if an attack happens to the cloud service. The users are interdependent in which they can take advantage of the positive security effects generated by other users' investments in security. We assume that the cloud provider and cloud-insurer are the business partners. Therefore, the cloud-insurers can invest in the cloud platform to improve the security level, i.e., quality, of the cloud service and hence reduce the probability of paying claim. Our proposed model consists of two stages, i.e., the Stackelberg game. In the first stage, cloud-insurers set the price charging to the users and decide on the investment for improving the cloud security quality. In the second stage, the users decide on the amount of these cloud-insurances to purchase based on the observed prices and qualities. The existence and uniqueness for the equilibrium of the Stackelberg game are proved analytically. The performance evaluation shows some interesting results. For example, when the users have strong interdependency, the price of the cloud-insurance becomes lower. This is from the fact that the users can be influenced more easily by their peers, when one cloud-insurer decreases the price, it can attract more users easily.