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Actuarial Science and Financial Mathematics Seminar: Cyber risk management on power grids

Event Type
345 Altgeld
Apr 15, 2022   3:00 pm  
Wei Wei, University of Wisconsin Milwaukee

Abstract: Cyber risks have been posing increasing concerns to the public and thus stimulate high demands on cyber insurance products. However, the development of the cyber insurance market has not been matching the demands, due to two main obstacles. First, the nature of cyber risks is still unknown to insurers because of the lack of data. Second, the potential dependence among cyber risks causes the concern of insolvency risk and calls for new pricing models. In this talk, we focus on cyber risks on power grids. Through simulations from physical models, we are able to generate loss data and uncover some basic characteristics of cyber risks. In particular, the simulation study confirms that dependence generally exists among cyber risks. In order to address insurer’s concern of insolvency raised by dependence, we propose three approaches: global pricing, issuing catastrophe bonds, and developing mutual insurance schemes. According to preliminary investigations, each approach exhibits its own advantages and disadvantages. In the long term, we hope to integrate the advantages of these approaches into a unified actuarial framework to advance the management of cyber risks on power grids as well as other general cyber risks.

About: Wei Wei is an Associate Professor in Actuarial Science at the University of Wisconsin-Milwaukee. He is an associate member of the Society of Actuaries. Before joining the University of Wisconsin-Milwaukee, he obtained his PhD degree in Actuarial Science from the University of Waterloo. His research interest lies in cyber risks management, dependence modeling, stochastic compassion, and decision making under risk aversion and ambiguity. His researches have been supported by the National Science Foundation and the Society of Actuaries.

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