Cyber market may switch in favour of insurers early next year: Gallagher

The cyber insurance market remains competitive, with “substantial” premium savings on offer, but things may shift in favour of carriers as early as the first quarter of next year, according to Gallagher. It says certain sectors are already seeing more caution from insurers.

The broker says there is “intense” cyber market competition, with new entrants offering more flexible underwriting and rate reductions varying widely between carriers, often between 20% and 40% for the same risk.

As a result, insureds are increasingly opting to switch insurers to get cheaper cover, says Gallagher. But it advises risk managers to carefully consider the track record of new market entrants before choosing lower premiums over the more comprehensive coverage that is often offered by established players.

The broker makes clear in a new report that there remains an “ongoing” cyber market shift in favour of insureds.

“The cyber insurance market has unequivocally transitioned into a soft market, as carriers have begun to ease the stringent measures implemented during the hard market phase to maintain profitability. The market currently offers clients a chance to procure coverage at highly advantageous terms,” it explains.

“However, there may be a shift in the market towards hardening in the future, possibly as early as Q1 2025. Industries like healthcare, which have experienced significant claims, are already seeing a more cautious approach from insurers,” says Gallagher.

The report goes on to urge risk managers to exercise caution when considering whether to switch to a different insurer solely based on lower premiums, as there is a potential for coverage discrepancies to arise.

“While premium savings are appealing, insureds must exercise caution when considering offers from insurers with limited experience or history in the cyber insurance market. Sustainable coverage and robust risk management practices should remain paramount considerations for insureds navigating a complex and evolving insurance landscape,” says Gallagher.

It adds that cyber carriers are now venturing into industry sectors that were previously considered high risk – such as aviation, healthcare and the public sector – indicating a more inclusive approach to providing coverage.

And it says that traditionally loss-making industry sectors are increasingly attracting interest from multiple insurers. “This diversification of market appetite reflects evolving risk perceptions and strategic expansion by insurers,” says the report.

It also reports a notable relaxation in the minimum security requirements previously mandated to obtain cyber insurance, allowing for greater flexibility in accessing coverage.

Gallagher lists some of the coverage dynamics currently in play in the cyber market.

It says there is increased scrutiny and potential exclusions related to AI claims activities. Meanwhile, an increase in class action lawsuits related to website tracking software has led to increased underwriter due diligence around the use of these tools, alongside potential exclusions where risks are not being managed effectively

Gallagher also believes that insurers are likely to implement “deeper underwriting practices” for dependent business interruption and full supply chain coverage in response to systemic events such as the recent CrowdStrike outage. This is likely to include the introduction of exclusions or sublimits to manage this exposure effectively, it adds.