Cyber

The Australian Cyber market remained profitable in 2026 supported by a favourable claims environment. However, the outlook is becoming less certain. Rates are falling as capacity remains abundant and the risk environment is rapidly evolving leading to challenges in coverage and accumulation. Three themes are influencing the market and how insurers navigate these will determine their outlook.

Rates continue to fall

Cyber was not immune to the broader softening of the commercial insurance market, with Marsh’s Global Insurance Market Index recording a 6% reduction in Cyber rates. Capacity and competition is putting continued downward pressure on rates and the market has moved from the hard market conditions of the early 2020s towards a more competitive environment.

For insurers, the key question for 2027 is whether pricing adequately reflects the evolving risk landscape.

AI is reshaping Cyber risk

AI models are evolving at a rapid pace, with capabilities advancing faster than many earlier expectations. While AI has the potential to strengthen cyber defences, it also enables threat actors to automate and scale attacks more efficiently – which previously required significant time or resources.

For insurers, the rapid pace of change makes it harder to predict future losses using past experience. New risks may emerge before insurers have enough data to understand or price them, creating the potential for “silent AI”, where existing policies cover AI-related losses in ways that were not originally intended. Insurers may need to review policy wording and underwriting approaches to ensure coverage remains aligned with their risk appetite.

“We expect the market to remain profitable but with tighter margins”

Uptake is increasing, particularly among SMEs

Awareness of Cyber risk continues to grow across organisations of all sizes. In May 2026, ASIC noted a significant shift in the Cyber threat landscape, highlighting existing Cyber controls are “likely to be tested, more often, and under greater pressure”. One month later, Five Eyes agencies warned frontier AI could fundamentally transform offensive and defensive Cyber capabilities within months. As the threat landscape evolves, Cyber risk is increasingly becoming a boardroom topic, with cyber resilience moving beyond an IT concern into a strategic priority.

Combined with falling premium rates, this appears to be supporting greater uptake of Cyber insurance. BizCover reported a 50% increase in Cyber insurance policies sold to SMEs in the year to October 2025. While penetration rates remain relatively low, increased SME participation provides an opportunity for insurers to grow policy numbers even as average premiums decline.

What matters for 2027?

Disciplined underwriting becomes increasingly important in a soft and competitive market. Insurers will need to balance the pressure to compete on price with a clear understanding of emerging exposures, while loss prevention and strong Cyber controls remain critical to limiting claims. In a rapidly evolving risk environment, the insurers best placed for 2027 will be those that combine disciplined risk selection and pricing with a strong focus on preventing losses before they occur.

We expect the market to remain profitable but with tighter margins. Our expectation is a moderate increase in gross written premium of 4%, with growth in policy numbers offsetting reductions in average written premium. We expect this to translate to a combined operating ratio of 81% – while still a healthy result, insurers are likely to have less headroom than recent years.