AM Best Flags Danger Sign in Cyber Insurance: Losses Rise as Prices Keep Falling

The U.S. cyber insurance market is flashing a warning signal. On June 26, AM Best released a new market segment report showing that the industry-wide loss ratio for cyber insurance climbed to 53.0% in 2025 — the first time it has exceeded 50% since the ransomware spike of the COVID era, according to the rating agency. What makes the finding notable, AM Best analysts said, is that losses are rising at the same time prices are falling, reversing the pattern that restored stability after the last major stress cycle.

Total U.S. cyber insurance premiums edged up to $7.5 billion in 2025, from $7.1 billion the prior year, according to AM Best. But the agency cautioned that the increase is largely a bookkeeping shift: large companies have been moving cyber portfolios from offshore structures into U.S.-domiciled entities, inflating the headline figure without reflecting real growth in underlying domestic demand.

A Market Split in Two

AM Best found that the cyber insurance market has effectively divided into two distinct segments. Surplus lines insurers — specialty carriers that operate outside standard state rate-and-form regulations — now write close to two-thirds of all U.S. cyber premium by volume and dominate coverage for complex, standalone risks. The remainder of the market consists of admitted carriers, which tend to bundle cyber protection as an add-on endorsement to broader commercial policies.

The two segments are not performing equally. AM Best reported that the incurred loss ratio for surplus lines carriers stands at 55.9, compared with 50.2 for admitted carriers — meaning the specialty market is absorbing a larger share of emerging losses. Senior industry analyst Christopher Graham said in the report that third-party claims are rising more quickly in the surplus lines segment, reflecting the more complex and larger-limit risks those carriers take on.

Why Prices Are Still Falling

The dynamic confounds normal market logic. In the ransomware crisis of the early 2020s, rising losses prompted rapid price increases that eventually stabilized the market. This time, AM Best noted, that correction has not arrived. Graham said pricing is "still declining and even accelerating the decline" despite two consecutive years of loss ratio deterioration.

AM Best also flagged a structural shift pulling premium out of the commercial market entirely. Large companies with sophisticated risk management programs have been moving their cyber exposure into their own captive insurance vehicles, leaving the commercial market with a riskier and less diversified pool of insureds, according to the report. That trend is not fully visible in standard industry data, associate director Fred Eslami noted, because captive activity does not show up in NAIC Cyber Supplement filings.

What This Means for Business Policyholders

For small and mid-size businesses that rely on the commercial cyber insurance market — not a captive — the AM Best findings are a reason to pay close attention at renewal. The combination of rising insurer losses and continued price softening may not last: rating agencies have historically flagged similar inflection points before markets harden abruptly. Business owners in data-sensitive industries such as professional services, healthcare administration, and retail should confirm that their current cyber limits and coverage terms still match their actual exposure, rather than assuming last year's policy remains adequate.

Researched and written by Geneva’s automated AI research desk from the sources cited above. General industry reporting — not insurance, legal, or financial advice, not a statement about any specific policy, and not an offer of coverage; coverage availability, terms, and pricing vary by state and insurer. Geneva Insurance Group is an independent agency licensed in 12 states. For guidance on your own coverage, talk to a licensed advisor.