Cyber Risk: A Dual Threat
Cyber risk continues to dominate the insurance sector’s risk landscape and is growing in complexity. Insurers face
dual exposure: protecting their own operations and underwriting cyber risk for clients. This overlap creates unique
vulnerabilities that demand integrated resilience.
The industry’s reliance on sensitive data, interconnected systems and third-party platforms makes it a prime target
for sophisticated attacks. Ransomware campaigns increasingly target insurers for high-value data, while compromise
of business emails and manipulation of claims or policy data by fraudsters are persistent threats. Shared market
platforms and aggregators for policy administration, claims, and data exchange can rapidly propagate a breach across
multiple organizations, amplifying the impact of a single cyber event.
For example, claims processing systems may be locked or corrupted, delaying payouts and damaging customer trust.
Policy administration platforms could be compromised, leading to data loss or unauthorized changes, or customer
portals and digital channels may be taken offline, impacting service delivery and sales.
From an underwriting perspective, the maturing cyber insurance market presents new opportunities for profitable
growth. Despite a surge in claims frequency, average payment amounts have declined, reflecting improved underwriting discipline and a
focus on robust cyber security controls. With ample capacity and competitive pricing, insurers have expanded
coverage and limits while growing their cyber portfolios. At the same time, they are investing in advanced modeling
and incident response capabilities to manage systemic risk and sustain profitability.
As insurers capitalize on these opportunities, maintaining a balanced approach is essential. Cyber resilience must be
embedded across both operations and underwriting to protect insurers’ organizations and to strengthen the risk
profiles of insureds. This includes enforcing access controls, encrypting data, testing response plans and managing
third-party risk. As the cyber risk landscape rapidly evolves with the adoption of AI, disciplined underwriting,
advanced modeling and strong oversight will be key to managing systemic risk and sustaining profitability.
Systemic Exposure: Climate Change and Natural Disasters
Climate change and natural disasters are ranked separately in our survey, but their effects are deeply intertwined.
Climate change not only drives regulatory shifts and transition risks but also can influence the behavior of natural
disasters, which cause direct property damage. Together, they represent a systemic challenge to underwriting,
pricing and capital allocation.
As a result of higher exposure and climate shifts, weather-related disasters are not only more frequent than they
used to be — they are also more destructive. In 2024 alone, global natural disasters resulted in $368 billion in
economic losses, with only 40 percent insured. These perils are eroding insurer earnings and creating volatility in
underwriting performance. In highly exposed markets, profitability is becoming more fragile, especially where treaty
structures and pricing models have not adapted to the new risk landscape.
The impact of climate-related events is often magnified by concentration risk — ranked tenth in our survey — where
large volumes of insured assets are clustered in high-exposure regions. Natural disasters such as hurricanes, floods
and wildfires can trigger outsize losses when they strike densely populated or economically critical areas,
particularly where insurers have significant portfolio exposure. This geographic and asset concentration amplifies
the financial and operational consequences of extreme weather, making diversification and scenario modeling
essential components of climate risk management.
For insureds, this means coverage availability and affordability are under pressure, making relevance a strategic
imperative for insurers seeking to maintain trust and deliver value. To manage the systemic threat of climate
change, insurers must evolve their approach to risk modeling, capital deployment and product innovation.
Forward-looking climate diagnostics and portfolio-specific analytics are essential to understand exposure and inform
underwriting.
Geopolitical Volatility: Navigating the Unpredictable
Geopolitical volatility surged in 2025, driven by trade tensions and regional conflicts. For insurers, this has
introduced uncertainty across claims, demand and investment strategies.
This affects insurers’ portfolios, but it also poses direct risk management challenges for insurance organizations.
Heightened political tensions, sanctions and regulatory shifts can disrupt global operations and access to key
markets. Insurers must proactively monitor geopolitical developments, stress test their own exposures, and ensure
crisis management and business continuity plans are robust and regularly updated.
Elevating geopolitical risk oversight to the board level helps organizations anticipate emerging threats and respond
with agility, turning risk management into a source of resilience and competitive advantage.
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