The cyber insurance-linked securities (ILS) market has gone quiet in 2026, but the silence has nothing to do with investor appetite. According to Brittany Baker, VP of Solution Consulting at CyberCube, the culprit is simple economics: a soft traditional reinsurance market has reduced the need for sponsors to seek alternative capital.
Baker spoke with Artemis around the Monte Carlo Reinsurance Rendez-vous event in early September. She said that while no 144A cyber catastrophe bonds have appeared this year, industry-loss warranty (ILW) transactions continue, and investor interest remains stronger than the supply of deals.
"The soft market means traditional reinsurance capacity exists at lower prices, which decreases the general need to reach towards the ILS market for risk and capital management," Baker said. Cyber balance sheets are not yet a dominant driver of overall risk for most carriers, so resources flow elsewhere first.
Investor education continues despite deal drought
Baker stressed that demand is not the bottleneck. "From what we can see there is more investor demand than sponsor supply, so that's not holding back the market at this time." Many investors have used the lull to deepen their understanding of cyber risk, building comfort and adjusting mandates so they can act when bonds return.
The last 144A cyber cat bonds closed in December 2025. The sole cyber cat bond in 2026 was a renewal of Hannover Re's parametric cloud outage deal, Cumulus Re. Yet Baker expects supply to increase. "I also think those investors that stay keyed-in to developments in the threat landscape will be in the best position to move when those bonds come up," she said.
Pricing gap keeps sponsors on the sidelines
The core issue is price. "As pricing for ILS comes down and when the traditional market hardens, this will bring ILS more into the conversation as sponsors consider the risk transfer options available to them," Baker explained. For now, cheap traditional reinsurance wins.
CyberCube runs bi-annual Global Threat Briefings for investors, with the next attritional loss model update due in late 2026 and catastrophe model V7 slated for mid-2027. The firm has also invested heavily in AI for Insurance research, with a major white paper scheduled for release around the Rendez-vous de Septembre.
AI as a future ILS catalyst
Artificial intelligence is a central focus. Baker described AI as "an amplifier to the cyber threat landscape" and outlined three channels through which it could reshape insurance: shifting frequency and severity trends in standalone cyber coverage, creating new single points of failure, and generating perils that fall outside intended coverage-potentially requiring a new standalone AI line of business.
For AI for Cybersecurity Analysts, these developments carry direct implications. New accumulation paths and capital needs driven by AI risk could open fresh opportunities for ILS structures that do not exist today.
"New or shifting types of risk driven by AI will certainly bring opportunity to the ILS market, be it in increased capital needs, new accumulation paths, or new types of structures not considered today," Baker said.
Why this matters for insurance professionals
Cyber ILS is in a holding pattern driven by pricing, not by any structural flaw in the asset class. When the market hardens-and history suggests it will-sponsors will return. Insurance professionals who track threat landscape shifts and model updates now, particularly around AI-driven risks, will be positioned to move faster than competitors when the next issuance cycle begins. The education work happening during this quiet period will determine who leads the next wave of cyber ILS deals.
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