Cyber Insurance Market Set for Explosive Growth Amid Emerging Threats and Regulatory Pressures

While cyber insurance buyers are experiencing a favorable pricing environment with generally flat rates, the industry faces critical challenges including supply chain vulnerabilities, AI-related exposures and non-breach privacy litigation, according to a new market outlook report from Gallagher.

Against this backdrop, market forecasts indicate the global cyber insurance market is poised for significant growth, with projected premiums rising to $30-50 billion by 2030 from $16-20 billion in 2025, the report said.

Innovation Fueling Market Expansion

The current trajectory of the cyber insurance industry reflects a fundamental shift in how risk is being managed and shared across the market, according to the report. Reinsurance has become central to this momentum, introducing innovative mechanisms that allow cyber insurers to transfer risk to capital markets more efficiently than ever before.

Insurance-linked securities now enable the transfer of cyber risk directly to investors, while parametric reinsurance and catastrophic bonds provide alternative pathways for risk distribution, Gallagher said. These instruments have catalyzed an influx of capacity into the cyber insurance market, intensifying competition among carriers. The result has been decidedly favorable for buyers—the U.S. market is experiencing essentially flat pricing in 2026, a significant retreat from the hard market peaks of 2021.

However, this buyer-friendly environment is not uniform across all sectors, according to the report. Health care represents a notable exception, with carriers expressing greater caution due to elevated claims activity. Some major insurers have implemented single-digit rate increases in this sector, signaling potential market shifts ahead, the report noted.

A Threat Landscape Defined by Sophistication and Complexity

The cyber threat environment has undergone a marked transformation, with attackers employing increasingly sophisticated tactics, Gallagher said. Ransomware remains prevalent, but threat actors have fundamentally altered their approach—shifting from data encryption to simple exfiltration and threatening public disclosure to extort payments.

Supply chain attacks have emerged as a persistent vulnerability. By compromising software vendors or managed service providers, attackers can potentially affect thousands of organizations through a single breach. Recent incidents have targeted SaaS companies, cloud providers and code repositories, with attackers focusing on software updates and authentication tokens.

Another alarming trend involves non-breach privacy violations rooted in website tracking technologies, according to the report. Litigation based on pixel tracking has surged, drawing on statutes ranging from California’s decades-old Invasion of Privacy Act to the Federal Wiretap Act. Attorneys have successfully leveraged these laws to pursue class action settlements and statutory penalties of $250 to $10,000 per violation across technology, health care, financial services and retail sectors.

AI-generated deepfakes present an emerging concern, particularly when weaponized in phishing campaigns, Gallagher said. These synthetic attacks exploit visual and auditory trust, making them exponentially more difficult to detect than traditional phishing schemes. The FBI’s Internet Crime Complaint Center logged more than 193,000 phishing and spoofing complaints in 2024, with wire fraud losses exceeding $109 million.

Policy Evolution and Underwriting Adaptation

Insurers are actively revising policy language to address emerging exposures that traditional cyber coverage was not designed to accommodate, Gallagher said. Supply chain coverage has become a focal point, with carriers now commonly requiring written contracts between policyholders and impacted vendors as a condition of coverage. Some insurers have begun limiting contingent business interruption coverage specifically for IT vendor losses while excluding non-IT vendor disruptions entirely.

Non-breach privacy claims present another underwriting challenge. While some carriers have exited this space entirely through exclusionary language, others are implementing new technologies to assess data collection and sharing practices. The landscape remains fragmented, requiring careful attention to policy definitions around waiting periods and periods of interruption.

The most significant shift involves artificial intelligence, Gallagher said. With over 200 active legal cases involving AI-related issues spanning data bias, intellectual property infringement and discrimination, the industry is scrambling to develop coherent coverage approaches. Underwriters are increasingly focused on ensuring policyholders have robust governance frameworks, transparent AI models and dedicated risk management protocols in place.

Read the full report here. &