The first half of 2025 has seen cyber reinsurance capacity continue to expand, affecting market dynamics and offering cedants more favorable terms.
According to Lockton Re’s latest update, an estimated US$250 million in new capacity has entered the market, largely in the form of non-proportional structures. The entry of new players – both start-ups and established carriers entering the cyber line – has contributed to an environment where supply is currently outpacing demand.
Softening rates in the direct cyber insurance market have been observed globally, with premium declines averaging between 5% and 15%, depending on geography, sector, and loss history. Mid-market sectors in mature markets experienced the most aggressive reductions, while less mature territories saw more modest shifts due to limited data and competition.
The report shows several major ransomware incidents in the first half of the year affecting sectors including retail, education, and telecoms across various regions. These attacks often involved third-party vulnerabilities and have pushed more firms – especially previously uninsured ones – to consider or expand their cyber coverage. However, reinsurers remain cautious, particularly around systemic risk linked to critical infrastructure and key technology vendors.
One of the notable developments is the increased uptake of cyber insurance among first-time buyers, particularly outside the US. Expanded coverage now includes broader contingent business interruption and modules addressing regulatory response and reputational harm. Carriers are shifting toward modular, customizable products.
Loss ratios in the US cyber market rose by over seven percentage points to 48.8% in 2024, while direct premiums written slightly declined, per recent AM Best data. Despite this, reinsurer profitability in cyber remains positive, though margin pressures are mounting due to general coverage, falling rates, and heightened competition.
Retrocession markets also showed growth, with reinsurers actively seeking coverage to manage exposure. Retro purchases diversified by structure, and rate reductions were noted, particularly for portfolios with strong loss performance and data quality.
Emerging markets – specifically Latin America, Southeast Asia, and the Middle East – are attracting increased attention. Reinsurers are backing localized MGA structures to diversify their portfolios. While capacity deployment remains conservative, interest is growing, supported by product adaptation and localized risk understanding.
Appetite for Insurance-Linked Securities (ILS) and Industry Loss Warranties (ILWs) continued to grow, though cautiously. Investors are engaging more deeply with cyber modeling and index tools like Perils-CyberAcuView, though concerns over basis risk remain due to the lack of a major cyber catastrophe.
How do you see the cyber reinsurance market evolving in the second half of 2025? Share your thoughts in the comments.
