AM Best, the insurance credit rating agency and analytics provider, has observed that the US cyber insurance sector has effectively separated into two distinct sub-markets.
One is led by surplus lines insurers offering standalone primary and excess cyber cover, while the other is made up of cyber extensions attached to broader commercial insurance policies. AM Best noted that these segments are not performing in the same way, with third-party claims rising more quickly in the surplus lines segment.
According to AM Best’s latest findings, total cyber insurance premiums in the US edged up to $7.5 billion in 2025 from $7.1 billion a year earlier. The agency attributed this limited increase largely to the relocation of certain cyber portfolios from offshore structures into US-domiciled entities, rather than any meaningful expansion in underlying domestic demand.
Fred Eslami, Associate Director at AM Best, explained: “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. This is not reflected in the NAIC Cyber Supplement, which serves as a core source of information on this segment.”
AM Best also reported that the overall cyber insurance loss ratio rose by 4.3 percentage points to 53.0% over the past year, representing the second consecutive annual increase. The agency highlighted that this is the first time since the ransomware surge seen during the COVID-19 period that the ratio has exceeded the 50% mark, when widespread remote working initially left many organisations exposed due to weaker security arrangements.
Christopher Graham, Senior Industry Analyst at AM Best, commented: “That ransomware surge led to an immediate increase in pricing. However, this time the loss ratio increase is occurring as pricing is still declining and even accelerating the decline.”
The report further showed that surplus lines insurers continue to expand their footprint, now accounting for close to two-thirds of all cyber insurance written by premium volume. AM Best noted that while paid loss ratios for surplus lines carriers have remained lower than those of admitted insurers since 2021, the incurred loss ratio tells a different story, standing at 55.9 compared with 50.2 for admitted carriers.
Graham added: “The gap is actually narrower than last year. 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.”
AM Best also highlighted several wider trends influencing the sector. It reported an increase in third-party claims, alongside more frequent class action litigation involving fewer claimants per case. The agency noted that as organisations report data breaches, legal practices are increasingly sourcing affected individual data independently and contacting those impacted directly.
The agency further pointed to what it described as an underdeveloped opportunity in the small and medium-sized enterprise segment. However, AM Best warned that the sheer scale of this market could introduce accumulation risk if multiple SMEs are affected by the same cyber events.
AM Best concluded that it has maintained a stable outlook for the global cyber insurance sector over the past year, citing continued caution in underwriting practices amid a shifting cyber risk environment.
