Carriers
Cyber Insurers Brace for Course Correction as Claims Climb and Pricing Cuts Continue
By Benjamin Smith, . Insurance Wire.
The US cyber insurance market is under mounting pressure from rising claims and sustained pricing cuts, with experts split on how long the current conditions can hold. Three outlets have covered the story from different angles: Insurance Business America convened a panel of market practitioners, the National Association of Insurance Commissioners published its 2026 cybersecurity insurance market report, and Insurance Journal reported on AM Best's findings for the first quarter of 2026.
What the numbers show
Insurers reported 56,323 claims in 2025, a 20% increase over 2024, according to the NAIC report. Carriers paid out more in claims relative to the premiums they collected, and the report flags artificial intelligence among the emerging risks adding to that pressure.
AM Best's data, as reported by Insurance Journal, shows the first quarter of 2026 marked the eighth straight quarter of pricing cuts in the US cyber market. Third-party claims, which cover losses suffered by people or businesses other than the policyholder, are trending up 30%. Because those claims typically take longer to resolve, they add uncertainty to future loss projections. Surplus lines carriers, which write coverage outside the standard admitted market, are also part of the picture, though the Insurance Journal report does not detail their specific exposure.
What practitioners are saying
Jennifer Wilson, senior director of cyber at WTW, told the Insurance Business America panel she does not expect a sharp market reversal. "I don't think we're at risk of an over correction by the market, but I do believe that we are going to start seeing a course correction, a slight course correction over the next 12 months," she said. She added that carriers are already beginning to hold rate and pull back from large accounts where they would otherwise have to offer significant discounts.
Joe Erle, who leads the cyber practice group at C3 Risk and Insurance Services, took a more skeptical view on whether market conditions would tighten. He attributed the market's stability to better underwriting discipline and improvements in corporate cybersecurity, particularly backup systems, which have reduced ransomware payouts. His expectation is that pricing stays low, with limited exceptions.
Keith Savino, chief executive of Emergence Insurance's US operation, flagged a different kind of risk: the possibility that AI tools used in underwriting could produce errors if both the insurer's systems and the applicant's systems are generating unreliable outputs simultaneously. "If you're using the same AI to answer those questions and both sets of AI are hallucinating with each other, that might be called an E&O exposure," he said, referring to errors and omissions liability, the coverage that protects professionals against mistakes in their work.
Erle offered a broader caution about the industry's direction: "We're trying too much to be cyber security companies instead of just staying in our lane as cyber insurers."
The Illuminate decision
The panel also discussed a recent court ruling known as the Illuminate decision, which Insurance Business America describes as reshaping how breach litigation proceeds. The report does not provide the full details of the ruling or its specific legal effect, so its practical implications for carriers and policyholders remain unclear from what has been published so far.
What to watch
The gap between the claims trajectory and the pricing trajectory is the central tension here. Claims are up 20% year over year, third-party claims are rising faster still, and yet pricing has been cut for eight consecutive quarters. Wilson's prediction of a gradual course correction over the next 12 months is plausible given that carriers are already pulling back from the largest deals, but Erle's point about excess capital and new market entrants suggests the correction could be slower and shallower than loss trends alone would justify. Brokers placing large cyber accounts and underwriters reviewing their loss ratios should watch whether the holdrate behavior Wilson describes becomes industry-wide or stays confined to a handful of carriers.
Sources
1. Cyber market pressure points: Losses, litigation and pricing sustainability, insurancebusinessmag.com
2. 2026 Report on the Cybersecurity Insurance Market, content.naic.org
3. US Cyber Insurance Market Sees Flat Premium, More Third-Party Claims Hit Loss Ratio, insurancejournal.com
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