Gallagher: Cyber Insurance Market to Expand as Risks Evolve

January 17, 2025

Intense competition among cyber insurance carriers has resulted in higher limits, enhanced cyber risk management services, flexibility in insurance applications, and increased affordability and availability, according to a new Gallagher report.

The global cyber insurance market saw premiums more than double over the past five years, reaching approximately $14 billion in 2023 with projections the market will reach $29 billion in premiums by 2027, according to Gallagher’s 2025 Cyber Insurance Market Conditions Outlook: Cyber Market Stabilization as Cyber Risks Evolve.

“While we have reached a period of relative calm, the market is juxtaposed with gathering storm clouds around a variety of current and emerging claims concerns,” wrote report author John Farley, managing director of cyber at Gallagher.

Cyber insurance providers must provide clients with cutting-edge products to stave off rapidly evolving risks while protecting their balance sheets and maintaining market share and profitability. For the coming year, cyber underwriters have their eyes on ransomware and social engineering losses, attacks against critical supply chain providers, the maturation of losses stemming from wrongful data collection claims, and potential losses related to generative artificial intelligence (AI), Gallagher said.

Growing Cyber Risks

The average cost of a data breach reached a record high of about $4.9 million – a 10% increase from the prior year and the highest increase since the pandemic, according to the July 2024 IBM-Ponemon Cost of a Data Breach study.

The FBI’s March 2024 Internet Crime Report named investment scams as the leading type of attack in 2023. Investment fraud losses rose from $3.31 billion in 2022 to $4.57 billion in 2023, a 38% increase. Investment schemes related to cryptocurrency lead the way in this category.

The ransomware threat continues to evolve with the new variants and rebranded criminal groups targeting a wide variety of industry sectors. The FBI’s report found that ransomware attacks increased in 2023 after a brief decrease in 2022. Reported losses rose 74%, from $34.3 million to $59.6 million.

However, 2024 statistics show that initial ransom demands have been declining, from $568,705 in 2023 to $381,980 in 2024. At the same time, fewer threatened organizations are paying ransoms, with one study showing only 34% of ransomware threats being paid.

Business email compromise (BEC) continues to be a top tactic of threat actors. In 2023, the FBI received 21,489 BEC complaints, with losses amounting to over $2.9 billion.

Supply chain attacks are of growing concern, with several high-profile supply chain attacks occurring last year impacting healthcare, automotive and transportation sectors. Threat actors continue to focus attacks on key supply chain providers, which will likely impact additional industry sectors.

In addition, a recent network outage of a key cybersecurity provider led to significant disruption, showing widespread and titanic cyber losses can result from the snowball effects of a system outage versus a targeted attack.

Cyber Insurance Responds to Evolving Threats

There is little sign that the frequency of cybercrime losses will slow, and the risks posed by the adoption of generative artificial intelligence will likely be serious considerations for cyber underwriters this year.

As a result, insurers are developing new language and strategies for supply chain, regulatory, wrongful data collection and AI-related risks.

Reinsurance continues to play a key role in the overall growth and sustainability of the cyber insurance market, providing new capacity with growing support from the capital markets through insurance-linked securities, proportional reinsurance transactions and catastrophe bonds.

Despite the changing cyber threat landscape, the cyber insurance market is expected to continue its expansion in 2025 and ongoing as the industry gains insight into how threats become claims and how to prevent and mitigate their effects.

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