There is no shortage of cyber risk.

Across all industry verticals, as business becomes more interconnected and reliant upon technology, insurers will continue to contend with an advancing cyber risk environment. The rapid evolution of technology along with macro trends — inflationary pressures, the rise of litigation and geopolitical uncertainty — have led to an increase in both emerging and systemic cyber risk.

Given the perpetual change in the cyber environment, underwriting and pricing can have trouble keeping pace with shifts in the market, and insureds may face unpredictable fluctuating premiums. For carriers, the ever-evolving threat landscape has become a primary focus for underwriting, in order to create a more sustainable cyber insurance market.

Key Challenges Facing the Cyber Insurance Market

James Brogan Vice President, Regional Underwriting Manager, Munich Re Specialty Insurance

Emerging technologies such as artificial intelligence present a series of new risks due to their many use cases and applications. “We have seen insureds go all-in on artificial intelligence in every business capacity imaginable,” said James Brogan, vice president, regional underwriting manager, Munich Re Specialty Insurance. “Underwriting has to become more dynamic to appropriately assess the exposures associated with the use of artificial intelligence. The business risks created by artificial intelligence are omnipresent. It’s an area that cyber underwriters are still discovering and establishing proper underwriting methods for,” Brogan shared.

A litany of lawsuits have plagued artificial intelligence companies, alleging copyright infringement, misuse of AI and unfair competitive advantages. Many of these suits are still filtering through the legal system. “We have to stay abreast of the regulatory landscape surrounding artificial intelligence — case law is still being established, and there is still so much to be determined on how we appropriately price with regulatory uncertainties,” said Brogan.

Despite the proliferation of emerging technologies, a sustainable cyber market environment is possible — but it has to start with the market leaders in the space. According to Brogan, the key to fostering a sustainable cyber insurance market lies in maintaining stable pricing structures and conducting rigorous risk assessments based on widely accepted metrics. The collective goal of the market is to reduce loss exposure for the product and create a cost-effective and valuable risk transfer solution for insureds.

Complicating matters, the cyber market is in the midst of a soft price cycle, driven in part by the price swings of the past four years and new capacity players entering in the market. “The new capacity markets have not been tested from a loss or claim perspective — or even financially — but they’ve got the investment and the backing to, in the short run, aggressively go after market share,” said Brogan.

Ironically, losses have not receded but have progressively gotten worse. Amid the current sociopolitical landscape, ransomware attacks no longer dominate the headlines, but Munich Re research has estimated the annual cost of cybercrime in 2023 to be approximately $8.5 trillion and projects that amount to increase to $13.8 trillion in the next five years.

According to Brogan, the correlation between loss activity and price — where increased losses coincide with price reductions — stands in stark contrast to typical underwriting expectations and represents a distinct rarity within the insurance market.

“Typically, as loss severity and frequency increase, prices follow a similar trajectory — so this is highly abnormal,” Brogan said. He believes this will have an impact on the long-term viability of and interest in the cyber liability product on the part of both insurers and insureds. “These low prices in a high-loss environment are not sustainable and could lead to premium fluctuations. Anytime you introduce price uncertainty, buyers will become more resistant to purchasing cyber insurance, especially since we operate in the commercial sector, where there are fixed budgets for insurance costs.”

Overcoming Cyber Market Challenges with Responsible Underwriting and Cyber Maturity

Established insurers such as Munich Re are actively engaged in safeguarding the cyber market and fostering its sustainability through robust underwriting practices. Central to this effort is a focus on underwriting discipline, verifying that insureds have a clear understanding of their cyber insurance coverage and its associated costs over time. Moreover, prioritizing loss control is crucial for insureds, insurers and the market overall.

The significance of responsible underwriting and dependable pricing in cyber insurance cannot be overstated. Seasoned carriers with skilled cyber underwriters play a pivotal role in this regard. Implementing comprehensive, meticulously crafted underwriting controls based on thorough risk assessments guarantees that insureds receive appropriate coverage at viable rates. As the industry refines its understanding of loss metrics and shares this data with underwriters, market stability becomes increasingly tangible.

Underwriters who possess the requisite expertise to assess risks comprehensively and tailor coverage and premiums accordingly are instrumental in shaping a sustainable market. Many insurers are proactively developing loss control platforms for their insureds, exemplified by initiatives like Munich Re Specialty’s Reflex™ risk management program, which offers primary insureds complimentary pre-breach loss control tools.

The cyber insurance market is at an inflection point. The rapid evolution of technology, the rise of artificial intelligence and the increasing interconnectivity of businesses have created a complex and dynamic risk environment. This — coupled with the current soft price cycle and the paradox of declining prices amid increasing losses — has led to a market that may prove unsustainable in its current form. The path to sustainability requires stable pricing structures, rigorous risk assessments and insureds who have the assistance they need in managing their cyber risk. The cyber insurance market can adapt to the changing landscape and establish a sustainable future.

To learn more about Munich Re’s cyber product, visit:

Disclaimer: This article is provided for informational purposes only and does not constitute legal advice. It should not be construed as an offer to represent you, nor is it intended to create, nor shall the receipt of such information constitute, an attorney-client relationship. Readers are urged to seek professional or legal advice from appropriate parties on all matters mentioned herein.


This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Munich Re Specialty Insurance. The editorial staff of Risk & Insurance had no role in its preparation.

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