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Cyber insurance trends 2025: What executives need to know
Cyber insurance is essential for protecting an organization from the financial impact of a cyberattack and is a critical part of a risk management strategy.
Cyber insurance is an increasingly important type of insurance for any organization requiring digital services for its operations.
Cyber insurance is a risk management strategy that employs risk transfer. It shifts the financial impact of a cybersecurity incident from an affected organization to its insurance provider, which takes responsibility for all costs covered in a given policy.
Cyber insurance emerged in the late 1990s, initially as an offshoot of errors and omissions (E&O) insurance. It now covers various cyberattacks, including data breaches, ransomware and social engineering attacks, along with other business interruptions.
Why cyber insurance must be a priority for CISOs in 2025
Chief information security officers (CISOs) face myriad responsibilities, among them improving security posture, maintaining regulatory compliance and reducing organizational risk to cyberattacks and incidents.
Cyber insurance doesn't eliminate the need for rigorous security controls and posture, nor for continuous training and education. However, CISOs recognize cyber insurance as a critical component of risk management and incident response for several reasons, including the following:
- Growing number of data breaches. Organizations are increasingly at risk of a data breach. Verizon's 2025 "Data Breach Investigations Report" listed 12,195 confirmed breaches, the largest amount in the report's history.
- Rising cost of cyberattacks. Not only is the number of data breaches rising, but the associated costs are also increasing. According to an IBM report, the average cost of a breach globally reached $4.9 million in 2024, a 10% year-over-year increase and the highest dollar amount ever recorded. Cyber insurance addresses this threat -- a critical reason CISOs must prioritize it.
- Regulatory and compliance pressures. CISOs worldwide face increasing regulatory and compliance standards. The EU's Digital Operational Resilience Act mandates risk management measures that increase the urgency for cyber insurance. The U.S. Securities and Exchange Commission (SEC) also now requires public companies to report cybersecurity incidents within four business days.
- Business continuity. Recovery from a breach takes time, which sometimes disrupts business continuity. Modern cyber insurance policies cover lost revenue and extra expenses from interrupted operations.
- Risk exposure. Traditional business insurance often explicitly excludes cyber-risks, precluding coverage for cybersecurity incidents. Cyber insurance fills these potentially costly gaps.
Cyber insurance trends shaping the enterprise market
Several key trends currently guide enterprises -- and their CISOs -- as they approach organizational cyber insurance procurement, its coverage design and risk management integration.
Market rates are going down
According to the Marsh Global Insurance Market Index, global cyber insurance rates declined during 2024, with further declines expected through 2025. The report noted that insurance industry capacity and competition increased, helping decrease rates.
Regulatory requirements demand new coverage options
The expanding regulatory landscape drives insurers to develop new coverage options. The following are among the more recent options:
- Regulatory defense and penalty coverage. This insurance addresses costs associated with regulatory investigations and noncompliance fines.
- Crisis management and public relations coverage. This product mitigates the reputational impacts of cybersecurity incidents.
- CISO liability protection. This emerging coverage addresses individual executive liability related to cybersecurity responsibilities.
Systemic risk and third-party dependencies reshape coverage priorities
In recent years, coverage priorities have expanded. Policies are now written to deal more effectively with mounting risks from third-party dependencies.
Concern among CISOs grows over supply chain attacks. Major incidents -- such as those affecting Change Healthcare, CDK Global and CrowdStrike -- harm similar enterprises regardless of industry. Modern policies increasingly include enhanced business interruption protection to cover third-party risk.
AI and emerging technology exposures create new risk categories
AI adoption creates unique risk categories requiring specialized coverage approaches.
Model hallucinations and AI-driven fraud have propelled certain new coverage requirements. One example is insurance provider Coalition, which now includes specific coverage language and options for AI-related cybersecurity events.
What do insurers expect from enterprise security teams?
Insurers do not blindly provide cybersecurity policies to organizations. Insurance underwriting's due diligence includes scrutiny of an enterprise's security capabilities to assess risk and determine coverage premiums accurately.
Modern insurance underwriting processes require organizations to demonstrate competency with critical security controls, including the following:
- Multifactor authentication.
- Endpoint security protection.
- Email security.
- Backup and recovery systems.
- Vulnerability management programs.
Insurance providers also assess an enterprise's alignment with regulatory compliance and cybersecurity standards, including the NIST Cybersecurity Framework, ISO 27001/27002 and the Center for Internet Security benchmarks.
Organizations also typically provide risk assessment documentation, such as reports from internal risk assessments and third-party validations. Insurers further require evidence of security metrics that indicate ongoing measurement of program effectiveness.
Cyber insurance market forecast: What's to come?
The evolving cyber insurance market shows a strong growth trajectory based on projections from leading research organizations. S&P Global Ratings predicted cyber insurance premiums will reach $23 billion by 2026, up from $14 billion at the end of 2023 -- representing nearly 20% annual growth. The firm emphasized that cyber insurance remains one of the fastest-growing subsectors of the global insurance market.
Munich Re forecast the market at $16.3 billion in 2025, with premium volume more than doubling by 2030 at an average annual growth rate of more than 10%, according to the reinsurer.
| Market size projections | |||
| Year | Market size | Source | Annual growth |
| 2023 | $14 billion | S&P Global Ratings | Base year |
| 2024 | $15.3 billion | Munich Re | 9.3% |
| 2025 | $16.3 billion | Munich Re | 6.5% |
| 2026 | $23 billion | S&P Global Ratings | 15%-20% annually |
| 2030 | $32 billion | Munich Re | 10% annually |
Current market data from Swiss Re, another reinsurer, also showed market penetration gaps. In the U.S., for example, while 80% of large corporations have some form of cyber insurance, that number plummeted to 10% among small and medium enterprises.
Questions the board might ask about cyber insurance
Cyber insurance, as a critical component of enterprise risk management (ERM), demands board-level oversight.
The most pressing board concerns center on coverage gaps and ensuring policies are in place to handle this ever-changing threat landscape. Directors also need to grasp how cyber insurance integrates with broader ERM frameworks and regulatory compliance obligations.
Critical questions include the following:
- How does management identify, assess, prioritize and report cybersecurity risk? And how do these processes inform the organization's cyber insurance coverage decisions?
- How does the organization manage third-party cybersecurity risks? And does its cyber insurance coverage extend to supply chain and vendor-related incidents?
- How well is the organization equipped to respond to and recover from a cybersecurity breach? And what role does cyber insurance play in incident response?
Comprehensive board queries
By addressing key inquiries, directors can better understand potential coverage gaps, ensure alignment with enterprise risk appetite and establish clear protocols for incident response. The following table comprises 32 strategic questions across eight critical categories to evaluate cyber insurance effectiveness. These questions equip boards to make informed decisions about cyber risk transfer.
| Category | Key questions | Strategic focus |
| Coverage strategy | What cyber risks are excluded from the current policy? | Risk identification |
| How do current coverage limits compare to potential breach costs in the industry? | Financial protection | |
| What triggers could void coverage during a crisis? | Policy compliance | |
| How does the current cyber insurance policy coordinate with directors and officers and E&O coverage? | Insurance integration | |
| Financial management | What's the total cost of cyber risk (premiums plus uninsured exposure)? | Total cost of ownership |
| How do these premiums compare to industry benchmarks? | Market positioning | |
| What ROI does the organization achieve from insurance-driven security improvements? | Value measurement | |
| How would a major incident impact financial statements and credit ratings? | Business impact | |
| Risk management | How does cyber insurance align with the organization's enterprise risk appetite? | Strategic alignment |
| What security controls are required to maintain our coverage? | Operational requirements | |
| How does the organization measure and report cyber-risk maturity to insurers? | Performance metrics | |
| What's the plan if cyber insurance becomes unavailable or unaffordable? | Contingency planning | |
| Operational oversight | Who has the authority to make decisions during a cybersecurity incident? | Governance structure |
| How quickly can employees access insurance-provided incident response resources? | Crisis management | |
| What documentation must be maintained to ensure successful claims? | Compliance management | |
| How does the organization validate that its security controls meet insurer requirements? | Audit and verification | |
| Market intelligence | How are cyber insurance terms and prices evolving in the industry? | Market awareness |
| What emerging risks might not be covered by current policies? | Risk planning | |
| How do peer organizations structure their cyber insurance programs? | Competitive benchmarking | |
| When should the organization consider captive or alternative risk transfer mechanisms? | Strategic options | |
| Regulatory compliance | How does the organization's cyber insurance support SEC cybersecurity disclosure obligations? | Regulatory alignment |
| What cyber insurance documentation must be maintained for regulators? | Compliance documentation | |
| How do state privacy laws affect coverage needs and requirements? | Legal compliance | |
| What's the difference in reporting obligations to insurers as opposed to regulators? | Stakeholder management | |
| Claims readiness | What scenarios trigger a cyber insurance claim? | Incident planning |
| How does the organization optimize the chances of full claim payment? | Recovery optimization | |
| What's the backup plan if claims are denied or disputed? | Risk mitigation | |
| How long does claims resolution typically take in the organization's coverage areas? | Business continuity | |
| Performance measurement | What key performance indicators require tracking for cyber insurance program effectiveness? | Success metrics |
| How does the organization measure the business value of its cyber insurance investment? | ROI assessment | |
| What benchmarks help evaluate the organization's program against industry standards? | Comparative analysis | |
| How often should the organization reassess its cyber insurance strategy? | Governance |
Download this template with comprehensive board queries.
Sean Michael Kerner is an IT consultant, technology enthusiast and tinkerer. He has pulled Token Ring, configured NetWare and been known to compile his own Linux kernel. He consults with industry and media organizations on technology issues.
