Can Competitive Insurers Improve Network Security?

The interdependent nature of security on the Internet causes a negative externality that results in under-investment in technology-based defences.  Previous research suggests that, in such an environment, cyber-insurers affect network security and user welfare.  We utilize a general setting, where the network is populated by identical users with arbitrary risk-aversion and network security is costly for the users.  In our model, a user's probability to incur damage (from being attacked) depends on both his security and the network security.