Analysis Shows Stable Cyber-Insurance Market, Continued Premium Growth

Cyber-insurance premiums will likely increase 15 percent to 20 percent per year to a total of approximately $23 billion by the end of 2026, according to a new report from S&P Global Ratings.

Total cyber-insurance premiums stood at about $14 billion at the end of 2023, S&P said.

Both the primary cyber-insurance market and cyber-reinsurance markets currently have solid margins, supporting the rating agency's stable view for the global cyber-insurance industry, S&P said in its report "Cyber Insurance Market Outlook 2025: Cycle Management Will Be Key To Sustaining Profits."

S&P noted that the cyber-insurance market remains stable, despite growing competition and the increased sophistication, severity, and frequency of cyber incidents. Its stable view of the global cyber-insurance and reinsurance industry is supported by the industry's solid underwriting profitability in 2023 and 2024, the rating agency said, adding that it expects that profitability to continue in 2025.

"The industry is still benefiting from substantial increases in rates on cyber-insurance and a tightening of the terms and conditions on cyber policies, which was mainly implemented in 2021 and 2022," S&P said.

Still, it's critical that the cyber-insurance industry encourages policyholders to strengthen their cyber- security efforts, focuses on clear policy wording, selectively adjusts rates, and exercises caution in managing retentions and insurance limits, S&P said. "The combination of those actions should help safeguard sustainable profitability for the global cyber-insurance market and serve to build-up capital in line with exposure growth," the report said.

Growing adoption of artificial intelligence (AI) will increase the frequency of cyber attacks, with AI accelerating the automation of hacking, S&P said. "That is particularly the case with regards to personalized and tailored phishing and email extortion, which can be efficiently and convincingly translated into multiple languages, enabling scaling across numerous regions," the report said.

In addition, Ransomware-as-a-Service (RaaS), which sees cyber criminals using predeveloped ransomware tools, is also expected to increase as a result of AI, S&P said.

While acknowledging that the insurance industry's understanding and pricing of routine cyber losses has improved, S&P said the modeling of systemic cyber risks and the potential for catastrophic cyber events remains a major challenge for the industry.