As the cyber insurance market enters 2025, signs of stabilization mark the industry landscape. Following the softening conditions in 2024, the market offers buyers improved options, including higher coverage limits, competitive pricing, and enhanced risk management services. The insights in this article are drawn from the “2025 Cyber Insurance Market Conditions Outlook,” from Gallagher. Despite these positive trends, emerging cyber risks and claims challenges require ongoing vigilance.
Ransomware Trends and Costs
Ransomware remains a significant threat but shows promising trends for victims. Data from 2024 reveals a notable decline in initial ransom demands and average payments, dropping from $568,705 in 2023 to $381,980 in 2024. Furthermore, only 34% of organizations attacked in 2024 opted to pay ransoms, underscoring improved resilience against extortion schemes. However, the cost of data breaches soared to an all-time high of $4.88 million, highlighting the persistent financial burden on affected companies.
Supply Chain and Privacy Risks
Supply chain vulnerabilities have become a key target for cybercriminals, with attacks causing significant disruptions in critical sectors like healthcare, automotive, and transportation. Non-breach privacy claims also rose sharply in 2024, driven by allegations of wrongful data collection and violations of privacy laws. These claims, rooted in state-level regulations and biometric data tracking disputes, are maturing into a major concern for insurers.
Regulatory Landscape
Heightened regulatory demands are reshaping cyber insurance policies. The Cybersecurity and Infrastructure Security Agency (CISA) introduced proposed rules under the Cyber Incident Reporting for Critical Infrastructure Act (CIRCIA), mandating stricter incident reporting for critical infrastructure sectors. Publicly traded companies also face new obligations to disclose material cyber incidents within four business days. As regulatory requirements expand globally, insurers are tightening policy terms to mitigate potential claims from fines and investigations.
Artificial Intelligence Risks
The rapid adoption of generative artificial intelligence (AI) tools introduces complex risks for insurers. Preliminary evidence from 2024 shows over 200 active legal cases related to AI, spanning issues like intellectual property infringement, data bias, and privacy violations. Insurers are beginning to offer tailored AI policies, with some covering novel risks such as “data poisoning” that compromises AI learning models. This trend is expected to grow significantly in 2025 as underwriters adapt to the evolving technological landscape.
Reinsurance and Growth Drivers
Reinsurance continues to drive growth in the cyber insurance market by providing additional capacity and risk transfer mechanisms. Innovations such as insurance-linked securities (ILS) and catastrophic bonds enable insurers to spread risks across capital markets. Enhanced data-sharing platforms between primary insurers and reinsurers improve loss modeling accuracy, further bolstering the cyber insurance market’s stability and growth in 2025.
Future Outlook
The global cyber insurance market is projected to grow from $14 billion in 2023 to $29 billion by 2027. Despite current softening conditions, the market’s long-term prospects remain strong, fueled by advancements in security controls and analytics. As the industry matures, it must address challenges like evolving cyber threats, AI-driven risks, and an increasingly complex regulatory environment.
The 2025 cyber insurance market reflects a delicate balance between stabilization and emerging challenges. While competitive pricing and expanded offerings benefit buyers, the industry must remain agile to navigate risks posed by ransomware, supply chain attacks, AI, and regulatory changes. Collaboration among insurers, reinsurers, and cybersecurity experts will be pivotal in sustaining growth and resilience.
Other News: The Outlook For Global And US Cyber Insurance Markets – AM Best Report(Opens in a new browser tab)
