A Novel Mutual Insurance Model for Hedging Against Cyber Risks in Power Systems Deploying Smart Technologies

Pikkin Lau, Lingfeng Wang, Wei Wei, Zhaoxi Liu, Chee Wooi Ten

Research output: Contribution to journalArticlepeer-review


In this paper, a novel cyber-insurance model design is proposed based on system risk evaluation with smart technology applications. The cyber insurance policy for power systems is tailored via cyber risk modeling, reliability impact analysis, and insurance premium calculation. A stochastic Epidemic Network Model is developed to evaluate the cyber risk by propagating cyberattacks among graphical vulnerabilities. Smart technologies deployed in risk modeling include smart monitoring and job thread assignment. Smart monitoring boosts the substation availability against cyberattacks with preventive and corrective measures. The job thread assignment solution is deployed to distribute the control and monitoring tasks to multiple threads to reduce the execution failures Reliability assessment is performed to generate load losses, which are then converted to monetary losses. These losses are to be shared through a mutual insurance plan. In order to ensure a fair distribution of indemnity according to individual premium contributions, a new mutual insurance principle based on Shapley values is devised and the Shapley premium is calculated. The Shapley premium is then compared with existent premium designs. Effectiveness of the proposed mutual insurance design is validated via case studies.

Original languageEnglish (US)
Pages (from-to)630-642
Number of pages13
JournalIEEE Transactions on Power Systems
Issue number1
StateAccepted/In press - 2022
Externally publishedYes


  • actuarial design
  • Computer crime
  • cyber risk modeling
  • cyber-insurance
  • cyber-physical systems
  • Epidemics
  • Insurance
  • Load modeling
  • Power system reliability
  • power system security
  • Reliability
  • Substations
  • tail risk

ASJC Scopus subject areas

  • Energy Engineering and Power Technology
  • Electrical and Electronic Engineering


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