Joy Agwunobi
Cyber risk is set to enter a more complex and systemic phase by 2026, as hidden digital interdependencies rather than isolated cyberattacks emerge as the dominant threat shaping losses across the insurance and reinsurance market.
This outlook was highlighted in an industry briefing reported by Reinsurance News, which captured insights from senior executives at Coalition, a cyber insurance provider. The executives collectively warned that the cyber market is approaching a turning point, where traditional underwriting tools may no longer be sufficient to assess increasingly correlated and interconnected risks.
According to the report, reinsurers and insurers are facing mounting pressure from systemic cyber exposures driven by shared software, concentrated cloud infrastructure, and complex supply chains. These risks, Coalition executives argue, are challenging established underwriting models at a time when soft market conditions are already straining pricing discipline.
Diana Liu, head of underwriting at Coalition Re, said the industry’s growing exposure to digital interdependence will intensify scrutiny around systemic risk accumulation. As businesses rely more heavily on common platforms, software providers, and cloud environments, losses are becoming more correlated and capable of spreading rapidly across portfolios.
She warned that many current aggregation methods, often based on broad categories such as geography, industry, or revenue are increasingly misaligned with the realities of digital risk. In her view, these approaches fail to capture how deeply interconnected modern enterprises have become.
Liu noted that sector-specific cyber events, sometimes described as “mini-catastrophes,” are likely to expose the shortcomings of existing models. This, she said, will push reinsurers toward more transparent, data-driven views of cyber portfolios, built around shared vulnerabilities and technology dependencies rather than surface-level classifications.
To avoid destabilising systemic failures, she argued that the cyber reinsurance market will need to adopt technically grounded aggregation frameworks that better reflect real-world digital correlations. As 2026 draws closer, she added, demand for this level of risk clarity is expected to accelerate as carriers and cedants recognise that high-level portfolio metrics alone can no longer contain accumulation risk.
Cloud outages reshape underwriting priorities
Tiago Henriques, Coalition’s chief underwriting officer, pointed to cloud infrastructure as a growing focal point for cyber underwriting, particularly in relation to business interruption exposure.
He said recent large-scale outages, many stemming from technical failures rather than malicious attacks, have underscored how vulnerable businesses remain when critical cloud services go offline. When thousands of servers or websites are disrupted simultaneously, the resulting losses can accumulate rapidly across insurers’ books.
Henriques explained that while multi-region or multi-cloud strategies could reduce this exposure, many organisations lack the resources to implement them. As a result, insurers are increasingly exposed to aggregation risk tied to shared infrastructure dependencies.
He added that these events have revealed a broader gap in how cyber dependencies are evaluated and insured. Technical debt and infrastructure weaknesses, he said, are frequently overlooked during underwriting, leaving insurers underprepared for correlated losses linked to systemic failures.
To remain profitable, Henriques stressed that insurers will need a deeper understanding of how technology interconnections translate into loss potential. This, he said, will allow underwriting approaches to more directly address business interruption risks tied to cloud platforms and other critical digital systems.
Privacy claims expected to rise
From a claims perspective, Anne Juntunen, senior claims manager at Coalition, highlighted privacy litigation as another area of growing concern heading into 2026.
She observed that wrongful data collection claims are already increasing, driven by greater public awareness of state-level privacy laws and wiretap statutes that allow individuals to seek statutory damages for improper data practices.
While such claims were once largely pursued by well-resourced law firms targeting high-traffic websites, Juntunen said a new wave of opportunistic claimants is emerging. These actors are increasingly using automated or template-based demand letters, recognising that even small-scale claims can be financially viable.
As privacy regulation becomes more fragmented and tracking technologies grow more sophisticated, she warned that businesses without clear disclosures, robust consent mechanisms, or proper oversight of third-party tools will face heightened exposure. Without proactive steps such as auditing web technologies and tightening vendor controls organisations may see a rapid rise in third-party privacy claims.
Despite these rising risks, Shawn Ram, Coalition’s chief revenue officer, noted that the cyber insurance market remains soft, with competitive pricing and rate reductions expected to persist into 2026.
He cautioned that while carriers may be tempted to prioritise growth, aggressive pricing could obscure underlying aggregation and tail risks. As policy terms across the market continue to converge, Ram said price alone will no longer be enough to differentiate insurers.
Instead, he expects competition to shift toward value-added capabilities, including enhanced security services, richer threat intelligence, and more effective breach response support that helps policyholders actively reduce risk.
According to Ram, the coming year will reveal which insurers have the underwriting discipline required to grow sustainably. Those relying too heavily on short-term claims trends, he warned, could face significant volatility if cyber event frequency or severity increases.
Supply chain exposure broadens the risk picture
Looking beyond single-vendor failures, Kyle Bryant, head of international at Coalition, said supply chain aggregation risk is likely to drive further evolution in cyber coverage.
He argued that the industry’s focus on individual service providers has distracted from a broader systemic threat: customer aggregation exposure. When a major buyer experiences a severe cyber disruption, downstream suppliers, particularly smaller manufacturers can suffer disproportionate economic losses.
Bryant pointed to recent incidents, such as the cyberattack on Jaguar Land Rover, as examples of how deeply exposed suppliers can be when critical customers are disrupted to the point of halting operations.
He noted that most existing cyber policies offer limited protection for suppliers affected by a customer’s cyber event, leaving significant gaps in risk transfer. As concern around this exposure grows, Bryant said insurers are likely to expand policy boundaries and introduce more explicit coverage for dependent-customer disruptions.
By 2026, he added, this shift could reshape how cyber insurance addresses interconnected supply chains, resetting expectations around contingent cyber risk and broadening the scope of protection across the market.
