The law and economics of cyber risk pooling

TY - JOUR

T1 - The law and economics of cyber risk pooling

AU - Faure, Michael

AU - Nieuwesteeg, B.F.H.

PY - 2018

Y1 - 2018

N2 - In this paper, we study the law and economics of cyber risk pooling arrangements: risk sharing without an insurer. We start our discussion with the current theoretical foundations for risk shifting in cyber security. We subsequently discuss cyber risk pooling in relation to individual risk management and cyber insurance. This leads to the formulation of conditions for effective risk pooling in cyber security. We show that pooling, under some circumstances, may be more effective than cyber insurance. The main question for future research is whether risk pools in cyber security are capable of compartmentalization of risks and whether transaction costs of monitoring can be kept sufficiently low.

AB - In this paper, we study the law and economics of cyber risk pooling arrangements: risk sharing without an insurer. We start our discussion with the current theoretical foundations for risk shifting in cyber security. We subsequently discuss cyber risk pooling in relation to individual risk management and cyber insurance. This leads to the formulation of conditions for effective risk pooling in cyber security. We show that pooling, under some circumstances, may be more effective than cyber insurance. The main question for future research is whether risk pools in cyber security are capable of compartmentalization of risks and whether transaction costs of monitoring can be kept sufficiently low.

KW - risk pools

KW - risk sharing

KW - cyber security

KW - mutual insurance

M3 - Article

VL - 14

SP - 923

EP - 963

JO - NYU Journal of Law & Business

T2 - NYU Journal of Law & Business

JF - NYU Journal of Law & Business

SN - 1558-5778

IS - 3

ER -