Cyber insurance market surges as threats diversify

The cyber insurance market saw an compound annual growth rate (cagr) of 16% over the last five years, making it one of most rapidly growing insurance segments.

This is according to a report from credit rating agency Morningstar DBRS, titled Cyber Insurance – A Tool to Mitigate Increasing Cyber Threats to Corporates, SMEs and Banks.

The report suggested that the growth was largely a response to the “adoption of new digital technologies, including artificial intelligence”, and a “reliance on third-party services”, leading firms to become “increasingly vulnerable to cyber attacks and operational incidents”.

Asymmetrical impact

These attacks – such as the recent incidents involving retailers Marks and Spencer and Co-op, estimated to have cost the firms between £270m and £440m – impact almost every industry.

The healthcare sector experiences the costliest data breach incidents, with the average financial impact of such events reaching £8.4m in 2024.

The financial (£5.2m), industrial (£4.7m) and technology (£4.7m) industries have the next highest cost per incident. The energy, pharmaceutical, professional services, transportation, entertainment and communications industries all had slightly lower costs, at between £3.5m and £4.5m per data breach.

Evolving landscape

The report also highlighted the difficulties posed to insurers by the evolving landscape of cyber threats.

Morningstar DBRS explained: “Cyber insurance risks develop in a fast-changing landscape characterised by the quick spread of emerging digital technologies, a changing and developing regulatory environment and increasing geopolitical tensions.

“This supports the proliferation of existing and new, malicious and non-malicious cyber threats that can ultimately lead to an increase of cyber claims.”

In 2024, 24% of cyber claims notifications related to network interruptions – disruptions to a firm’s computer network systems.

Some 20% of notifications related to data breach events, while 18% related to ransomware events, and a further 13% to system infiltrations.

Phishing scams, e-crime and other incidents constituted the remaining 25% of notifications.

These events, while often targeted at a single firm, have the potential to impact a wide range of auxiliary firms and supply chain dependencies, highlighting why cyber insurance has proven to be one of the fastest growing markets.