Ted van der Aalst, a cum laude graduate of the Actuarial Science and Mathematical Finance MSc programme was awarded the Johan de Witt thesis award on 22 November. He won the award for his thesis 'A network approach to interrelated insurance risk', where he investigates the interrelated nature of cyber risk using network models, with a focus on the applicability by the pricing actuary in an insurer’s firm.
Van der Aalst received the prize, a cheque of €5,000 and a statuette of Johan de Witt, during the autumn conference of the Royal Actuarial Society (Koninklijk Actuarieel Genootschap). His thesis supervisor was assistant professor Umut Can (Quantitative Economics, ASE).
Van der Aalst’s research focused on issues that arise due to rapid developments in risk, the lack of secure data, and the correlation between different causes and consequences for policyholders. He also discussed the existing coverage conditions, the asymmetric information about the security measures taken and compared model performance, robustness and the opportunities for premium differentiation. Van der Aalst drew the conclusion that network models are usable for the pricing of cyber insurances and contribute the understanding of underlying processes. He also stated that the risk for catastrophe in the Solvency II standard formula is an insufficient fit for insuring cyber risks.
The jury consisted of scientists and actuaries. The jury viewed Van der Aalst’s thesis as original and relevant. They also felt that the applied methodologies were fully explored and the applied premium propositions and the risk for catastrophe were also usable. The network theory of cyber risk appears to be a useful addition to the actuarial toolkit.