Forrester: Cyber Insurance Will Grow by 15% in 2026

Forrester Research predicts written cyber insurance premiums will rise 15% in 2026 as new artificial intelligence threats and data demands emerge.

In a new report, analysts at the global market research company anticipate the widespread adoption of AI to reverse the cyber market’s recent deceleration. When asked why, Rohit Makhijani, a principal analyst at Forrester, said that implementing AI increases threat surface area.

“If you’ve got a bigger house, you’re going to need more insurance,” he explained in a phone interview. “There’s more to lose.”

Makhijani added that AI is enabling malicious actors to become more sophisticated.

The technology has become “a weapon for bad actors” and a target itself, he said. AI’s potential to create and accelerate new threats from cybercriminals is outpacing the defensive capabilities of many organizations, the report’s authors concluded, leading to an increase in successful attacks.

That aligns with broader findings: Moody’s Ratings shared in October that cyberattacks targeting the entities it rates have been more frequent over the past decade than at any time previously, although they have fallen from a 2020 peak.

Related: Weak Governance of Artificial Intelligence Raises Risks of Cyberattacks

While modern software systems often rely on a complex network of third-party vendors and suppliers, many organizations fail to rigorously assess third-party cybersecurity practices or manage open-source software risks, which can leave them exposed to supply chain attacks, Moody’s added.

Swiss Re numbers show that global cyber insurance growth has cooled after an explosive expansion between 2017 and 2022. Makhijani attributed this slowdown to the market’s maturation, noting that “there’s a lot of capacity that is chasing risk.”

Looking forward, however, “The expectation is that we’ll see a similar pattern where demand will pick up driven by this increased surface area for threat,” he said.

The report’s authors believe cyber insurers should become proactive partners in cybersecurity by providing cyber defense services, risk mitigation tools and innovative ways to underwrite new risks posed by AI.

AI and Automation to Drop Expense Ratios

Forrester’s analysts also predicted that expense ratios at the top 50 insurers will decline by two percentage points in 2026 due to AI and automation.

Carriers are doubling down on automation to protect margins as global insurance growth slows, Forrester reported. Forrester has found that a third of AI decision-makers in the insurance industry say automation efficiency improvements are among the ways their organization has been most positively impacted by AI in the past year.

Still, realizing returns on investment from AI remains challenging due to gaps in strategy, data readiness, AI governance and talent, Forrester reported. Makhijani said the insurance industry is struggling to determine which use cases to implement.

“We see these things when there is new technology and something new that really is truly transformative and changes the way people work and do their jobs,” he said. “Change is hard, but change also takes time.”

Moving forward, Forrester’s analysts expect the top insurers—those with the scale, budget and strategic clarity to industrialize AI—to find top-line success and pull ahead. The report notes that Chubb, for instance, spends more than $1 billion annually on technology, while The Hartford has committed to leading the industry in AI.

“The rest, with more limited resources, will fall behind,” the report said.

Makhijani said that historically, small carriers tend to quickly follow the big ones, but there will be a lag. It will take them time to catch up, and they risk losing ground to competitors that are advancing, he added.

Topics Trends Cyber