US cyber insurance market enters into soft phase: Tokio Marine HCC

According to Tokio Marine HCC – Cyber & Professional Lines Group (CPLG), the US cyber insurance sector is now in a soft market period, due to premium rate changes dropping below zero in 2024.

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The firm recently published its 2024 Cyber Market report, which examines the evolving landscape of the US cyber market, uncovering areas for growth, assessing loss trends, and addressing the attack method deployed by ransomware groups.

The firm highlighted how the US cyber insurance market is currently undergoing a pivotal transformation.

After seeing triple digit growth during the 2020 – 2022 period, the landscape began to shift in 2023 and US overall market growth declined to just 1.6%.

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Along with this, TMHCC also noted how there has been a considerable rise in cyber extortion activity, which has involved threat actor groups turning to more aggressive tactics and high value targets.

The report states that the stagnation in market growth observed in 2023 can be attributed towards a combination of decreasing premium rates and limited growth in policy count.

During the hard market at the start of the decade,  premiums drove growth in the overall market. In fact, policy count increases remained moderate, growing by 10% between 2020 and 2023, and during the same period, premiums grew by over 142%.

However, with premium rate change in the US cyber insurance market falling to below zero in 2024, this has officially marked the onset of a soft market, TMHCC noted.

Furthermore, TMHCC’s report also found that extortion activity likely reached an all-time high in 2023, with leak sites, which have become a strong indicator of activity levels in the market, showed a sizeable uptick in leak site victims, reaching 4,496 in 2023, up from 2,670 the year prior.

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It’s also worth showcasing that malicious attackers continue to remain the primary cause of data breaches, with only a quarter of these incidents stemming from system failure or human error in 2023.

In addition to the increase in extortion activity the time to resolve extortion claims has increased as a result of double-extortion attacks which have become the norm.

Jacob Ingerslev, Senior Vice President, Cyber & Tech Underwriting at CPLG, commented: “As the U.S. cyber insurance market enters a pivotal phase, it is clear that this is not just a period of stabilization but a moment requiring strategic adaptation and innovation.

“While hard market growth was fueled by rapid premium increases, the softening market of 2023-2024 signals that pricing alone can no longer drive expansion. The future will depend on attracting new policyholders, portfolio diversification and working even more closely with policyholders to address increasingly sophisticated cyber threats.

“The long-term success of the cyber insurance market hinges on its ability to balance profitability with robust risk management, adapt to regulatory changes, and create a greater cybersecurity investment.”

Earlier this year, Morningstar DBRS, examined how cyber insurance is rapidly growing and how essential is in the digital age, projecting it to soar to $40 billion by the end of the decade amidst rising cyber threats and stringent data regulations.