Bootstrapping method in copula-based cyber insurance model

Abstract

As an emerging sector in general insurance, cyber-insurance has become one of the

most effective means in transferring the cyber security risk. One of the imminent

issues in this field, however, is the accuracy in determining policy premiums.

Practitioners and academics have developed various models over the years, the latest

of which has adopted the currently new and popular methodology of copula, in

attempts to price the premiums for cyber-insurance products. Even if those models are

well developed, the prevalent issue of data paucity has significantly hindered the

accuracy and validity of them. This study has addressed the specific issue of data

paucity by incorporating new features such as bootstrapping technique and multicopula

combination into the latest copula-based framework in pricing cyber-insurance

products. Furthermore, this study has also attempted to provide limelight to future

researches in developing better cyber-insurance pricing models.