Premium Calculation for Insurance Businesses Based on Cyber Risks in IP-Based Power Substations

Insurance is a promising risk transfer tool against switching cyberattacks on power grids that can disrupt operation and potentially lead to widespread outages. This paper emphasizes on a framework of premium calculation for cyber insurance businesses by modeling potential electronic intrusion with steady-state simulation results and its direct hypothesized impacts. The proposed actuarial framework models the operational monetary losses with the hypothesized power outages based on the cyber-reliability assessment and its expected mean time to restore power (MTTRP). The ruin probability is employed as the fundamental formula to determine the feasible insurance premium pool. Hypothesized spatial correlation studies on multiple substation contingencies associated with switching attacks have shown estimated operational losses and expected duration of power restoration, which is translated into the calculation of insurance premium. The proposed actuarial framework is validated using generalized IEEE test cases with modified parameters on substations. The potential implications of grid’s hypothetical scenarios are discussed.