Cyber Insurance Expected Loss Estimator

1. Estimate incident frequency
Enter the average number of claim-relevant cyber incidents expected per year.

2. Enter gross loss severity
Use the total average financial impact before insurance.

3. Set the eligible share
Enter the percentage of gross loss expected to qualify as covered loss.

4. Add deductible and limit
Use per-incident values from the policy scenario being evaluated.

5. Review retained loss
Compare gross expected loss, expected insurance recovery, and the amount retained by the organization.

6. Test policy alternatives
Change deductible, limit, and eligible share to compare structures while keeping the incident scenario constant.

Insurance recovery per incident = min(max(Gross loss × Covered share − Deductible, 0), Policy limit)

Retained loss per incident equals gross loss minus insurance recovery. Annual retained loss equals incident frequency multiplied by retained loss per incident. This simplified model applies one deductible and one limit per incident and does not model exclusions, aggregate limits, sublimits, waiting periods, or claim disputes.

What the result means

The main result is an estimate based on the entered scenario and should be interpreted together with the breakdown and assumptions.

Use internal data where possible and test a range of assumptions when uncertainty is material.

Given

• 0.7 incidents per year
• $1,800,000 gross loss per incident
• 75% eligible covered share
• $250,000 deductible
• $1,200,000 per-incident limit

Calculation

Eligible loss = $1,800,000 × 0.75 = $1,350,000

After deductible = $1,350,000 − $250,000 = $1,100,000

Insurance recovery = min($1,100,000, $1,200,000) = $1,100,000

Retained loss per incident = $1,800,000 − $1,100,000 = $700,000

Annual retained loss = 0.7 × $700,000 = $490,000

Result

Estimated annual retained loss: $490,000

Interpretation

The policy offsets about $770,000 of annual expected gross loss, while the organization retains $490,000 under the simplified assumptions.