An Actuarial Framework for Power System Reliability Considering Cybersecurity Threats

Zhaoxi Liu, Wei Wei, Lingfeng Wang, Chee Wooi Ten, Yeonwoo Rho

Research output: Contribution to journalArticlepeer-review


Cybersecurity has become an emerging issue for the secure operation of power systems. Besides hardening the power system to improve its cybersecurity, cyber insurance is emerging as a promising tool in cyber risk management. In this paper, an actuarial framework is established to capture and reduce the riskiness raised by interdependence among cyber risks, with the aim to enhance cyber insurance market for power systems. Absorbing semi-Markov process (SMP) is proposed to model the cyberattacks on the power grid. Also a stochastic model is developed to reflect the correlation of cyber risks across the power system. A sequential Monte Carlo simulations (MCS) framework is developed to evaluate the interruptions of the power system considering both the physical failures of the components and malicious cyberattacks. Then, the detailed insurance schemes are designed to manage the risks of the power system considering the financial consequences of cybersecurity threats. Case studies are conducted on a test system based on the IEEE Reliability Test System (RTS-79) to illustrate the application of the proposed insurance pricing schemes.

Original languageEnglish (US)
Article number9174921
Pages (from-to)851-864
Number of pages14
JournalIEEE Transactions on Power Systems
Issue number2
StatePublished - Mar 2021
Externally publishedYes


  • Actuarial theory
  • cyber-insurance
  • cybersecurity
  • interdependent risks
  • power system reliability
  • premium principle

ASJC Scopus subject areas

  • Energy Engineering and Power Technology
  • Electrical and Electronic Engineering


Dive into the research topics of 'An Actuarial Framework for Power System Reliability Considering Cybersecurity Threats'. Together they form a unique fingerprint.

Cite this