Detra Note 2023-4 : Cyber incident reports: extrapolating severity using neural networks

We are pleased to share with you our new DetraNote on Cyber incident reports: extrapolating severity using neural networks published by our Actuarial Consultants, Justin Kher and Hugo Rapior, and our Scientific Advisor, Olivier Lopez.

Due to its emerging nature, cyber risk is a field in which very few data exist when it comes to calibrating models for the severity of such events. This makes the task of actuaries particularly challenging regarding pricing or claim management. In the present note, we present a general methodology to process text data using neural networks, and how it can be used to determine the severity of a cyber incident when this information is missing. This methodology is illustrated on a public benchmark database. It can be used either to augment database, by adding some claim incidents to historical databases, from reported incident whose cost is unknown. It can also be used to quickly evaluate the severity of a cyber claim just after its occurrence.