Cyber insurers warn AI-powered threats outpacing market pricing
The cyber insurance market's soft pricing cycle is increasingly misaligned with the rapid escalation of digital threats, as artificial intelligence accelerates both the sophistication and scale of attacks. Major insurers and reinsurers say the market has yet to fully account for systemic risks posed by AI-enabled attacks, despite a growing series of near-misses involving cloud outages, ransomware, and third-party vendor disruptions.
Adrien Robinson, head of global specialty at The Hartford, said cyber rates appeared "a little disconnected" from the underlying trajectory of risk. He compared the current environment to the gap between climate science and insurance pricing in natural catastrophe markets.
"Cyber is probably the quintessential example of risk changing in real time," Robinson said. "These technologies create new risks, and they evolve at a pace that's difficult to fully understand."
Competitive pressures keep rates subdued despite rising threats
Cyber insurers face an unusual paradox: a competitive market with declining or stabilizing premiums, even as executives acknowledge the threat environment is becoming more volatile and interconnected.
The sector has avoided the kind of systemic catastrophe long feared by underwriters. Events such as the CrowdStrike outage, the CDK software disruption, and cloud-service interruptions at major technology providers caused significant operational disruption but did not trigger industry-wide insured losses. Executives repeatedly referred to such incidents as "near misses" rather than full-scale cyber catastrophes.
Bob Parisi, head of cyber solutions - North America at Munich Re, said the industry has not yet experienced its defining catastrophe event. "We haven't had our Hurricane Katrina event," Parisi said.
Cyber experts have pointed to emerging artificial intelligence systems such as Mythos, which could allow threat actors to propagate attacks at unprecedented speed and scale. Parisi noted that AI-driven tools do not currently face coverage exclusions across the marketplace.
Interconnectivity creates systemic accumulation risk
The growing concern extends beyond attack frequency to the accumulation risk created by interconnected digital infrastructure. As companies become more reliant on cloud providers, outsourced software, and third-party vendors, a single failure can cascade rapidly across industries.
Tim Nunziata, vice president of cyber risk for excess and surplus/specialty at Nationwide, said insurers were increasingly focused on the "web of interconnectivity" linking businesses and technology providers. "As more buyers come online and smaller companies become more reliant on third-party providers, we look to underwrite that web of interconnectivity as best we can," Nunziata said.
Pricing has remained under pressure after several years of intense competition. Nunziata said the market experienced a "negative rate environment" for roughly three years, though conditions were beginning to stabilize following sequential improvement over the past 11 quarters.
Claims trends remain mixed
Insurers report higher frequencies of cyber incidents but lower average severities, partly because many attacks are being contained more quickly and companies have improved baseline cyber hygiene.
Ransomware illustrates that dynamic. Available industry data suggests the number of attacks has declined while the severity of successful incidents has increased. "There aren't as many attacks, but the ones that hit, hit hard," Parisi said.
Business interruption emerges as primary concern
The larger long-term concern regarding accelerating cyber threat activity remains the risk of business interruption. Businesses are increasingly vulnerable not because of stolen data, but because digital infrastructure now underpins core operations.
A cyber incident affecting industrial control systems, logistics software, or cloud computing platforms could inflict losses comparable to - or even greater than - traditional physical catastrophes such as fires or floods.
Modelling cyber catastrophe risk remains exceptionally difficult because the threat landscape evolves far faster than traditional insurance risks. Robinson said underwriting increasingly depends on forward-looking scenario testing, cybersecurity expertise, and collaboration with technology firms and law enforcement agencies.
"With cyber especially, you can't just rely on historical data because the risk evolves in real time," Robinson said. "You need forward-looking expertise in addition to the data."
AI's defensive capabilities offer counterbalance
Some market participants emphasize that AI also offers defensive benefits. Nunziata said organizations are increasingly using AI to identify vulnerabilities in their cybersecurity networks and respond more rapidly to threats.
"Something we don't talk about enough is organizations' ability to deploy AI as a benefit," Nunziata said. "That's the flip side of the coin that gets lost in the uncertainty."
Insurers are now asking not just whether AI is part of a company's operating system, but how organizations are using it to improve their risk profile and defend against threat actors.
Your membership also unlocks:
