The global insurance industry is confronting a rapidly widening protection gap as cyber threats evolve faster than insurers can underwrite them, with uninsured cyber losses projected to surge beyond $700 billion before the end of the decade.
This warning comes from the latest Insurtech Global Outlook 2026 report by NTT DATA, which argues that the insurance sector has reached a structural turning point where traditional risk assessment models are struggling to keep pace with increasingly complex digital, climate and demographic threats.
According to the report, cyber risk has overtaken every other category to become the single largest source of uninsured business losses globally. The protection gap for cyber incidents, estimated at approximately $171 billion in 2023, is projected to rise more than fourfold to nearly $744 billion by 2030, highlighting what analysts describe as an urgent mismatch between escalating digital risks and the insurance industry’s current capacity to absorb them.
The findings suggest that emerging technology-driven threats are scaling at a pace far beyond the capabilities of conventional underwriting models, exposing businesses worldwide to growing financial vulnerabilities while placing insurers under mounting pressure to rethink how risk is identified, priced and managed.
Beyond cybersecurity, insurers are also grappling with increasingly costly climate-related disasters. Uninsured losses resulting from floods, storms, wildfires and other extreme weather events have climbed to approximately $180 billion globally, while liability claims have increased by 57 percent, further stretching an industry already facing unprecedented levels of uncertainty.
NTT DATA said these converging trends indicate that risk is no longer developing in isolated categories but has become increasingly interconnected, requiring insurers to move beyond their traditional role as providers of financial compensation after losses occur.
Instead, the report argues that insurers must embrace continuous risk monitoring, prevention strategies and AI-enabled decision-making to remain relevant in an environment where threats evolve almost in real time.
“The insurance industry is at a structural inflexion point,” the report stated, noting that doing nothing is no longer a neutral option but a strategic decision that could erode competitiveness and relevance.
Despite the growing urgency, the report reveals that the industry’s adoption of artificial intelligence remains uneven.
While around 66 percent of insurance employees already use AI tools in their daily work, only 22 percent of insurance companies have successfully scaled AI applications into full production across their operations.
Rather than technology limitations, NTT DATA identified organisational barriers as the primary obstacle. Concerns surrounding governance, explainability, regulatory compliance, trust and operating models designed before the AI era continue to slow enterprise-wide deployment.
The report estimates that insurers capable of building AI-native and agentic operating models could reduce operational costs by as much as 35 percent through greater automation, process optimisation and faster decision-making.
According to the report, the widening complexity gap reflects a world where cyberattacks, extreme weather events, demographic shifts and systemic shocks increasingly overlap, making historical data alone insufficient for predicting future losses.
As a result, insurers are being encouraged to adopt more dynamic, data-driven and continuously monitored approaches that can respond to rapidly changing risk environments rather than relying solely on traditional actuarial methods.
The report also highlighted the growing severity of climate-related risks. Global natural catastrophe losses reached $162 billion during the first half of 2025, representing a $6 billion increase compared with the corresponding period a year earlier.
Nearly half of respondents surveyed identified natural catastrophes including storms, floods, earthquakes, wildfires and other extreme weather events as the world’s leading source of global risk.
Cybersecurity concerns ranked equally high. Forty-nine percent of respondents identified cyber incidents including ransomware attacks, malware infections, IT outages, data breaches and regulatory penalties as the leading cause of business interruption.
Artificial intelligence itself is also becoming a growing source of concern within cybersecurity.
The report found that 66 percent of respondents believe AI and machine learning technologies now dominate cybersecurity risk perceptions, while 63 percent admitted their organisations do not assess the security implications of AI tools before deploying them.
NTT DATA warned that such practices could expose organisations to new vulnerabilities at a time when AI is increasingly embedded in business operations.
The report argues that the widening protection gap presents not only significant challenges but also substantial opportunities for insurers willing to modernise their business models.
As governments, businesses and households confront rising exposure to physical, digital and demographic risks, demand is expected to grow for innovative insurance products capable of providing broader protection and encouraging long-term resilience.
To help insurers navigate the changing landscape, NTT DATA outlined four strategic priorities.
The first is embedding resilience into operating models by shifting away from reactive claims processing toward continuous risk detection, predictive analytics and prevention powered by AI, simulation technologies and advanced data platforms.
The second is scaling responsible artificial intelligence by ensuring explainability, regulatory compliance and human oversight are integrated into AI systems from the outset to strengthen trust among customers and regulators.
The report also recommends creating more empathetic, prevention-focused customer experiences, noting that hyper-personalised insurance services are expanding at an annual growth rate exceeding 35 percent while 67 percent of employers are increasing investment in preventive healthcare and risk management initiatives.
Finally, NTT DATA urged insurers to strengthen ecosystem partnerships through embedded insurance models, open standards and regulation-ready digital infrastructure.
The report noted that the embedded insurance market surpassed $116 billion in 2025, underscoring its growing importance as a channel for expanding insurance access and creating new revenue opportunities.
Bruno Abril, global head of Insurance at NTT DATA Inc., said the industry now faces structural shifts unlike any experienced in previous decades.
“The insurance industry is facing structural shifts in the face of unprecedented market volatility and uncertainty. There are, however, clear opportunities for insurers to embrace AI-driven solutions to bolster trust and resilience,” Abril said.
Summing up the industry’s challenge, the report warned that delaying transformation carries increasing costs.
“Doing nothing is a strategic decision, one that leads to higher volatility, lower trust and declining relevance. Acting now unlocks a future where insurers are not just payers of claims, but architects of resilience,” it stated.
