Computation of the insurance premium for cloud services based on fourth-order statistics

Though cloud providers claim to provide a very high reliability, outages of few hours are not uncommon and may provide significant harm to the business operations of cloud customers. In addition to improving the reliability of the cloud infrastructure through redundancy and technical means, the cloud provider can protect itself from the damaging consequences of failures through an insurance policy. In this paper we propose a scheme to compute the fair premium for an insurance policy covering accidental outages of cloud services. The computation is based on the expected utility paradigm and employs a characterization of the outage probability distribution through its moments up to the fourth order. This allows a more accurate representation of the actual distribution than what the premium computation based on just mean and variance allows. The new computation scheme is applied to a Poisson model of outages to show the difference it implies with respect to the mean-variance approach.