Cyber insurance premiums may have retreated from the heights of 2020–2022, but the pressure from rising claims hasn’t gone anywhere - and market softening could soon reverse.
“We keep turning in a lot of claims - data breach claims, ransomware claims - and I don't think we're going to see a big uptick like we saw back a couple of years ago,” said Mickey Estey (pictured), executive vice president of E&O/cyber/media at RT Specialty. “But I do see where the pricing could be flattening out and then potentially heading up a little bit.”
Estey described the current cyber market as “in a pretty good place”, especially after insurers recalibrated their portfolios post-2022. A key issue during the hard market, he said, was that underwriters hadn’t been asking the right questions to assess risk appropriately. That miscalculation led to a wave of underpriced policies and a flood of claims.
“Now we've kind of seen a leveling off,” he said. “Pricing has actually been coming down quite a bit over the last couple years, so that's been very helpful.”
Falling premiums have also shifted buyer behavior. Some insureds are returning to coverage levels they previously dropped, while others are entering the market for the first time.
“People who bought 10 million, they've upped it to 20. People who had 20, they've taken it up to 40,” said Estey. “Some of those insureds were ones that have been growing and they just wanted to buy more limits all along, but they didn't want to do it because of the pricing.”
Others had cut coverage during the hard market and are now reversing course. “We used to buy 40. I'd like to get it back up to that,” Estey said, quoting a common refrain from returning buyers.
Carriers, meanwhile, have tightened underwriting, improved risk selection, and grown more confident in the quality of their books. “They feel like they've asked all the right questions for the insureds that they have. They know what their risk looks like,” he said. “When we see a risk that we like, we're willing to be aggressive going towards that risk because it ticks all the boxes.”
New capacity has also entered the space. Estey pointed to four or five entrants that joined the cyber market in the past year alone. While the influx hasn’t meaningfully driven down pricing from incumbents, it does suggest a healthy market trajectory. “That, to me, shows that there's interest in the market and we have a healthy market growing,” he said.
Despite improved market conditions, many buyers still misunderstand the breadth of their coverage. “A lot of times we get insureds who think this just responds to data breach or ransomware,” said Estey. “They don't realize that there's a lot of other coverages on these policies.”
That lack of awareness presents a clear opportunity for brokers, especially as carriers aim to add value through risk management services. But uptake has been uneven. “They’ve tried different things over the years where the uptake has not been very good,” he said. Now, some are refining their approach based on company size.
“When we talk to small companies, this is what they need. When we talk to midsize companies, this is what they need,” he said. “Large companies, mostly they just need our capacity.”
While the US market has matured, Estey pointed to global expansion as a next phase of growth. “In the United States, we've reached the place where the majority of companies have been offered cyber insurance. Many of them are buyers,” he said. “But the big growth that the carriers see is potentially in the UK, Europe, Asia... where the penetration of cyber purchase is very low compared to the United States.”
Artificial intelligence may be dominating headlines, but Estey suggested current policies already address many of the risks. “If the AI model is doing something incorrectly or is causing errors or problems, a lot of the policies are already written to respond to that,” he said.
He added that common concerns, like copyright infringement or data misuse, are typically covered under existing cyber and tech wordings. “It doesn't really matter whether it's coming from AI or from something else,” Estey said. “They're trying to wait and see: is something new around the corner that we weren't expecting? Then we might have to adjust.”
One of the bigger challenges - and opportunities - for brokers is helping insureds quantify their exposure and make informed buying decisions.
“One of the questions we get a lot from insureds is, ‘How do you help us understand how much we should buy?’” he said. “You can have very small companies that have big exposure, big companies that maybe don't have much exposure. It really varies a lot.”
