Cyber-insurance for cybersecurity a topological take on modulating insurance premiums

A recent conjecture in cyber-insurance research states that for compulsory monopolistic insurance scenarios, charging fines and rebates on fair premiums will incentivize network users to invest in self-defense investments, thereby making cyber-space more robust. Assuming the validity of the conjecture in this paper, we adopt a topological perspective in proposing a mechanism that accounts for (i) the positive externalities posed (through self-defense investments) by network users on their peers, and (ii) network location (based on centrality measures) of users, and provides an appropriate way to proportionally allocate fines/rebates on user premiums. We mathematically justify (via a game-theoretic analysis) that optimal fine/rebates per user should be allocated in proportion to the Bonacich or eigenvector centrality value of the user. Copyright is held by author/owner(s).