Cyber premiums fall but claims may fuel 2027 rebound

Cyber insurance premiums are falling across Lockton's portfolio despite a rise in cyber incidents and larger losses. The broker expects the market to remain favourable to buyers through 2026.

Lockton reported an average premium reduction of 11% across its cyber book. Pricing is now near what it considers the lower end of sustainability for insurers, as claims from prior underwriting years weigh on profitability.

Competitive conditions are expected to persist in the near term. However, Lockton flagged a higher risk of renewed price volatility in 2027 if insurer results weaken further as historic claims mature, particularly in the US.

Buyer-friendly market

Cyber insurance rates surged earlier in the decade after a series of high-profile ransomware incidents and large losses, leaving many buyers facing steep increases and tighter coverage. Since then, additional insurer capacity and evolving underwriting practices have made the market more competitive.

Competition and wider choice have kept premiums "historically competitive" even as cyber events become more frequent and severe. Coverage options have also expanded, reflecting changing buyer requirements and insurer product design.

Carlo Ramadoro, Head of Cyber and Technology at Lockton, said: "Cyber insurance continues to favour buyers in 2025 and 2026, unlike at the turn of the decade when sharp price increases saw rates double overnight. Choice and competition mean premiums remain historically competitive, even as incidents rise, coverage diversifies, and large cyber events become increasingly frequent and severe."

These conditions affect both organisations new to cyber cover and those renewing existing policies. Buyers often use a soft pricing environment to review deductibles, assess limits, and reconsider policy features in light of their incident history and business exposure.

Claims pressure

Insurers typically price cyber cover based on expectations of incident frequency, loss severity, and how claims develop over time. Underwriting results can shift as claims from earlier years emerge or deteriorate, especially when litigation, regulatory action, or business interruption is involved.

Loss development from prior underwriting years remains a key factor shaping insurer profitability. Lockton highlighted the US as a particular area of concern, where claim dynamics can be influenced by the scale of incidents and the legal environment.

Ramadoro said: "But this stability may not last. Historic claims, especially in the US, could challenge the market as losses from earlier years in 2023 and 2024 accumulate. This could put pressure on insurer profitability and raise the risk of renewed pricing swings in 2027. However, any correction is unlikely to be as severe as in 2020."

Lockton's comments point to a market balancing two opposing forces: insurer competition keeping pricing low, and claims experience creating uncertainty over whether current rates will cover future losses once older claims settle.

Buying and renewal

Cyber insurance purchasing has become more closely tied to cybersecurity controls in recent years. Insurers often assess areas such as multi-factor authentication, backups, privileged access management, and incident response planning. The strength of these controls can influence both price and coverage terms.

Conditions remain attractive for buyers assessing cover. Ramadoro said: "Now remains an opportune time to purchase Cyber Insurance. First-time buyers should be able to negotiate strong terms and conditions, and for existing buyers, it is a sensible moment to review and stress-test limits of liability."

Market participants will watch insurer results over the next renewal cycles for signs of a turning point. Another key indicator will be whether insurers maintain appetite for cyber risk at current pricing levels if loss trends rise and older claims continue to develop.