US Cyber Insurance Premiums Fall for First Time Since 2018, Signaling Market Shift
New York, NY – August 29, 2025 – For the first time since the National Association of Insurance Commissioners (NAIC) began tracking cyber insurance in 2015, U.S. cyber insurance premiums have declined, marking a pivotal moment for the industry. According to multiple reports, including the 2025 US Cyber Insurance Monitor (UCIM) by QualRisk Cyber Insurance Center (QCC) and AM Best’s Market Segment Report, direct premiums written (DPW) for cyber insurance dropped by 2.3% in 2024, falling from $7.244 billion to $7.075 billion. This decline, driven primarily by pricing corrections rather than reduced demand, reflects a maturing market navigating softer pricing, increased claims, and shifting risk management strategies. Below, we explore the reasons behind this drop, its implications, and what it means for policyholders and insurers.
Why Are Premiums Falling?
1. Pricing Corrections in a Soft Market
The primary driver of the premium decline is a reduction in pricing, with the Council of Insurance Agents and Brokers (CIAB) reporting an average 1.6% decrease in cyber insurance pricing during the last three quarters of 2024. This follows a period of significant rate hikes during the 2020–2022 hard market, when premiums surged due to rising ransomware attacks and insufficient underwriting data. “When premium grew during the hard market cycle, the growth significantly outpaced the pricing increases, indicating that demand for cyber insurance was increasing as well,” said Christopher Graham, senior industry analyst at AM Best. “Considering that the premium decrease is close to the pricing decrease, that would indicate that the demand for cyber insurance is steady.”
The soft pricing environment reflects improved underwriting discipline and competition among insurers. After years of refining risk models, carriers are now better equipped to price policies accurately, reducing the need for inflated premiums. However, the pricing advantage once held by surplus lines carriers during the hard market has diminished, aligning their loss ratios with those of admitted carriers.
2. Slowdown in New Policy Uptake
Daniel Kasper, CEO of QCC, noted that the premium drop also stems from a slowdown in new policy uptake, as insurers prioritize sustainable underwriting over rapid expansion. This shift indicates a market recalibration, with carriers focusing on profitability amid a still-competitive landscape. Despite the slowdown, demand for cyber coverage remains steady, as the similarity between the premium and pricing declines suggests no significant change in risk exposure.
3. Rise of Captive Insurers
A notable trend contributing to the reported premium decline is the increasing use of single-parent captive insurers by large organizations with strong cyber hygiene. These captives, which do not report to the NAIC, allow companies to retain premiums in-house, potentially understating the true size of the market. “Organizations that have strong cyber hygiene and historically good loss experience are finding it more beneficial to pay their own captive, keeping the money under the same parent,” AM Best noted. This trend may suppress official premium totals while reflecting a strategic shift in risk management.
4. Improved Cybersecurity Practices
Enhanced cybersecurity measures, such as multifactor authentication (MFA) and robust backup systems, have reduced claims frequency for some organizations, contributing to lower premiums. A 2024 Howden report noted that global cyber insurance premiums fell 15% since their 2022 peak, driven by businesses’ improved ability to curb losses from cybercrime. “MFA is the most basic thing you can do, it’s like locking the door when you leave the house,” said Sarah Neild, head of UK cyber retail at Howden. While ransomware incidents rose 18% in the first five months of 2024, better backup systems have mitigated business interruption costs, a major driver of claims.
Market Dynamics and Profitability
Despite the premium decline, the U.S. cyber insurance market remains profitable, with a combined loss ratio of 41.8% for the top five carriers in 2024, indicating strong underwriting performance. The broader market, including non-admitted and alien insurers, is estimated at $10.5 billion, encompassing related lines like technology errors and omissions (E&O). Market concentration remains high, with the top 30 carrier groups holding over 90% of admitted DPW and the top five controlling over 30%.
- Market Leaders: Chubb leads in primary coverage with an 8% market share and $560.6 million in DPW, followed by Travelers ($535.4 million, up 39.1%) and Fairfax ($360.6 million, down 22.1%). The Hartford dominates endorsement coverage with a 26% share, while Starr leads surplus lines at 26%.
- Emerging Players: Cyber-focused managing general agents (MGAs) like At-Bay, which surged to a 4% market share with $280 million in DPW (a 344.9% increase), are gaining ground through digital platforms.
However, rising claims frequency, particularly first-party claims (75% of total claims, driven by ransomware), has increased loss ratios for some carriers. Litigation and extended claims tails due to inflation and legal expenses add further pressure, necessitating cautious underwriting.
Implications for Policyholders and Insurers
For Policyholders
- Lower Costs, but Stricter Standards: The premium drop offers cost relief, with U.S. rates falling 5% in Q2 2024, per Marsh. However, stricter underwriting requirements, such as detailed security audits, mean organizations must demonstrate robust cybersecurity to qualify. In 2023, 28% of small businesses (under 250 employees) were denied coverage due to insufficient controls.
- Coverage Gaps: Policyholders face challenges with exclusions for acts of war, insider threats, or unpatched vulnerabilities, which are increasingly common. Third-party vendor risks also complicate claims, as subrogation against vendors with limited assets can be uneconomical.
- Action Steps: Businesses should conduct thorough vendor due diligence, invest in cybersecurity (e.g., MFA, backups), and carefully review policy terms to avoid surprises. Consulting with brokers to align coverage with risk profiles is critical.
For Insurers
- Market Maturation: The premium decline signals a transition to a more cyclical, mature market. Insurers must balance competitive pricing with profitability, especially as claims rise. AM Best maintains a stable outlook for the global cyber insurance segment, citing measured underwriting practices.
- Reinsurance Dependency: Approximately 50% of cyber premiums are ceded to reinsurers, making the market vulnerable to reinsurance market shifts. Limited insurance-linked securities (ILS) capacity, at $1 billion, underscores this reliance.
- Innovation Opportunities: The NAIC’s 2024 revision to split reporting into primary, excess, and endorsement coverage provides clearer data, enabling better risk assessment. Insurers like At-Bay demonstrate how digital platforms can drive growth.
Broader Context and Future Outlook
The premium decline coincides with a complex risk landscape. Ransomware attacks, up 18% in early 2024, and sophisticated threats like nation-state attacks and supply chain breaches continue to challenge insurers. Munich Re estimates the global cyber insurance market at $15.3 billion in 2024, with the U.S. holding a 69% share ($10.6 billion). Despite the U.S. decline, global premiums are projected to double by 2030, driven by growth in Europe and Asia.
However, the vast majority of cyber risks remain uninsured, with global cybercrime costs estimated at $1–9.5 trillion in 2024. This protection gap, combined with the premium drop, highlights the need for insurers to innovate and educate businesses, particularly small and medium-sized enterprises (SMEs), which often lack awareness of cyber risks.
Social media sentiment on X reflects cautious optimism, with some users noting that lower premiums could encourage more businesses to purchase coverage, though others warn that exclusions and rising claims may temper benefits. The industry’s ability to adapt to evolving threats, refine underwriting, and expand capacity will determine whether this decline is a temporary correction or the start of a new phase.
Conclusion
The 2.3% drop in U.S. cyber insurance premiums in 2024 marks a turning point, driven by pricing corrections, slower policy growth, and the rise of captive insurers. While demand remains steady and profitability holds, insurers face challenges from rising claims and complex risks. For policyholders, lower premiums offer opportunities, but stricter standards and coverage gaps require proactive risk management. As the market matures, insurers and businesses must collaborate to close the protection gap and navigate the dynamic cyber threat landscape.
Sources: Insurance Business America, AM Best, Captive.com, Beinsure Media, Risk & Insurance, Reinsurance News, Cybersecurity Dive, and posts on X.