Finance

Physics

Business

Actuarial science

Critical infrastructure

Risk management

Income protection insurance

Risk analysis (engineering)

General insurance

Power (physics)

Business interruption insurance

Casualty insurance

Computer science

Auto insurance risk selection

Quantum mechanics

Electric power system

Computer security

Insurance policy

Vulnerability (computing)

IEEE Transactions on Power Systems

Due to the development of cyber-physical systems for modernizing power grids, vulnerability assessment has become an emerging focus in power system security studies. With the increasing deployment of cyber-enabled technologies in power systems, modern power system is prevalently exposed to a wide gamut of cybersecurity threats. Thus, there is an urgent need to develop effective cyber risk management mechanisms to mitigate the growing cyberthreats. Recently cyber insurance is emerging as a promising financial instrument for cyber risk management of critical infrastructures such as power grids. In this paper, a new cyber-insurance design framework is proposed to hedge against the risk of massive monetary losses due to potential cyberthreats. Traditionally, insurance companies serve as third-party risk-bearers offering aggregate design of the insurance policy which may stipulate high premiums. However, unusual loss patterns may still lead to excess financial risk for insurance companies. In this paper, coalitional insurance is introduced as a promising alternative or supplement to the traditional insurance plans provided by insurance companies. Under the proposed cyber-insurance model, several transmission operators form an insurance coalition, where the coalitional premiums are derived considering system vulnerabilities and loss distributions. The indemnity which covers the loss of TOs complies with the budget sufficiency. Overall, this study proposes a novel coalitional platform based cyber-insurance design that estimates the insurance premiums via cybersecurity modeling and reliability implication analysis.

A Coalitional Cyber-Insurance Design Considering Power System Reliability and Cyber Vulnerability