’Cyber insurance is unlike other lines, such as household, where insurers would limit the number of insured properties in high-risk areas,’ says senior insurance analyst
The rapid expansion of the cyber insurance market is creating significant challenges for insurers, particularly in assessing risk and managing claims.
That was according to research from data and analytics company GlobalData, which said that insurers were struggling to keep pace with the evolving risk landscape.
Data published by the firm today (24 February 2025) showed that risk assessment was the primary concern among industry insiders. This was closely followed by issues linked to it, including a lack of historical data.
”The product has grown so quickly due to the rapid rise of digitalisation that it is very difficult for insurers to fully understand the level of risk they are exposing themselves to,” GlobalData said.
Ben Carey-Evans, senior insurance analyst at GlobalData, added: “Cyber insurance is unlike other lines, such as household, where insurers would limit the number of insured properties in high-risk areas.
“This creates a difficult balance between trying to increase penetration rates and grow the product and trying to keep premiums down to attract customers as the level of risk continues to rise.”
Premium hikes
The difficulty of assessing risk, managing claims and the limited availability of reinsurance, combined with the escalating threat of cyber attacks, has led to substantial premium hikes in the sector.
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The firm cited ABI data, which showed premiums increasing by around 20% year-on-year in recent times.
GlobalData also projects that the UK cyber insurance market will maintain double-digit growth until at least 2028, with a peak growth rate of 44.7% expected in 2024.
Carey-Evans added: “This high level of growth, despite some uncertainty from insurers around managing and assessing risk, emphasises the scale of demand within the market.
“It is continuing to grow despite some hesitancy from insurers and soaring premiums. It should get easier for insurers as they have more historical data to work with, but the level of risk will only rise as hackers become more sophisticated and businesses continue to operate primarily online.
“Insurers will struggle to reduce premiums due to the level of price, but as inflationary pressures ease, more businesses should be able to afford it.
“The challenge for insurers is to convince businesses of its value and potentially to tailor policies to perfectly fit businesses’ needs.”
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