A pair of distinct sub-markets have evolved within the U.S. cyber insurance space, one dominated by surplus lines carriers writing primary and excess cyber-specific policies and the other focused on endorsements to commercial policies, according to a new AM Best report. The results between the two vary, with third-party claims growing more rapidly within the surplus lines side of the market.
The combined overall premiums generated from cyber insurance coverage increased slightly to $7.5 billion in 2025, compared with $7.1 billion in the prior year. That modest increase in premium growth was due mainly to companies moving some of their cyber business from offshore to a U.S.-domiciled entity, indicating flat or very little growth in the segment’s U.S. premium.
“What’s important to note here is that for several years now, large companies, with mature captive insurers and sophisticated cyber risk mitigation practices, have moved away, in part or entirely, from the commercial market and insured their cyber exposure via their captives,” said Fred Eslami, associate director, AM Best. “This is not reflected in the NAIC Cyber Supplement, which serves as a core source of information on this segment.”
The industry-wide cyber loss ratio ticked upward by 4.3 percentage points to reach 53.0% last year, marking its second consecutive increase. Perhaps more importantly, the segment’s loss ratio peaking over 50% marked the first time since the ransomware spike of the COVID era that led to remote work, in many cases without proper security measures in place. “That ransomware surge led to an immediate increase in pricing,” Graham said. “However, this time the loss ratio increase is occurring as pricing is still declining and even accelerating the decline.”
As for the shifting dynamic within the cyber market, the report notes that surplus lines insurers have consistently grown their share and now have almost two-thirds of all cyber insurance by premium. Since 2021, the paid loss ratio for surplus lines carriers remains below that of admitted carriers. However, the incurred loss ratio for surplus lines carriers, 55.9, is higher than that of admitted carriers, 50.2. “The gap is actually narrower than last year,” said Christopher Graham, senior industry analyst, AM Best. “But consecutive years of a higher incurred loss ratio suggest surplus lines carriers may be writing different business than admitted carriers— particularly business prone to a longer tail for which losses take longer to settle.”
Among the report’s other key takeaways:
- With third-party claims increasing, there has also been a rise in class action lawsuits with fewer claimants per suit. As data breaches are reported, legal firms are collecting the data themselves and reaching out to victims of the breach.
- There is still an untapped market among small to medium enterprises, but the large number of them could also create aggregation risk for insurers.
Graham and Eslami will join industry executives and innovation leaders on an upcoming analytical briefing hosted by AM Best. Additional panelists will include Ariel Evans, president RiskQ; Roman Itskovich, founder and chief risk officer, At-Bay; Judy Selby, partner, TittmannWeix. The briefing is scheduled for Thursday, July 23 at 10:00 a.m. EDT. To register for the virtual briefing, please visit here.
AM Best has maintained a stable outlook on the global cyber insurance segment for the past year, citing a cautious level of underwriting in a dynamic risk environment.
To access the full copy of the Best’s Market Segment Report on U.S. cyber insurance, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=366020.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.
Copyright © 2026 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.
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