Computation of Exact Premium for Cloud Insurance under CARARaj Kumari Bahl

Abstract:

 As the human civilization becomes more and more dependent on the internet, cloud and artificial intelligence, it is the need of the hour to build systems that are full-proof and secure as disruptions in internet access, cloud outages, security breaching and hacking can be threats that have the capacity to bring down organizations, operations and cause mayhem. As a result, the importance of insurance for the cloud service provider becomes many folds as he has to protect his financial integrity in the advent of unforeseen cloud outages. In this paper, we introduce a methodology by which the cloud service provider can intelligently decide his premium based on the ‘Expected Utility Criterion’ and ‘Constant Absolute Risk Aversion (CARA)’. We
obtain a more accurate and precise scheme that is based on the moment generating function of the loss arising due to outages in comparison to the earlier approaches based on the moments of the loss. We then apply this newly developed methodology to a Poisson model of outages and obtain results that outperform the earlier ones that exist in the literature.