Insurers have been warned they will need to fully understand the risks that artificial intelligence poses to clients and the industry if they are to provide an effective response and protection.

The warning comes as Swiss Re issued its annual cyber report, “Building a sustainable cyber market in the AI era”, which examined how the cyber insurance market has continued to grow at a single-digit pace even as AI, ransomware and increasing digital dependency rapidly reshape the underlying risk landscape.

Its analysis found that AI is currently reshaping existing cyber risks rather than creating entirely new categories of insured loss. Threat actors can use AI to accelerate vulnerability identification, automated attacks and next-generation phishing, while businesses can deploy it to improve threat detection, incident response and cyber resilience.

It explained: “Across the industry, AI has quickly become one of the defining discussion topics, given its potential to transform insurance operations and decision-making. At the same time, there is ongoing debate about the extent to which this value-creating technology might intensify existing risks across multiple lines of business.”

The reinsurer continued in the cyber sector, AI appears primarily to be reshaping and amplifying existing cyber risks rather than creating entirely new categories of insured loss. Typical commercial cyber insurance products may already respond to a subset of AI-driven cyber incident scenarios, as AI models can fall within policy definitions of computer systems. Resulting losses could be covered under different sections of standard commercial cyber policies today, making it essential for insureds and insurers to develop a common understanding of how current wordings respond to AI-driven incidents.

Fabian Willi, head cyber key accounts at Swiss Re, said: “AI is not creating an entirely new cyber risk landscape but it is amplifying the risks we already know. AI-related cyber claims remain limited today, but clarity over how existing cyber policies respond will become increasingly important as exposures evolve. In this environment, insurers and reinsurers will need to proactively monitor emerging exposures and loss trends, and ensure pricing reflects the risk being assumed.”

Swiss Re’s data also found that competitive pressure continues to weigh on pricing. Global cyber rates have now fallen for four consecutive years. While US pricing is showing signs of stabilisation as carriers respond to profitability pressure, competition remains stronger in Europe.

The new report highlights two major growth opportunities: closing the protection gap of uninsured companies and addressing underinsurance of existing insurance buyers.

At the smaller end of the market, micro-SMEs and SMEs remain largely uninsured, despite representing $4.9 billion of estimated premium in 2026. In the mid-market, growth can come from both new buyers and higher limits.

For large corporates, the issue is increasingly whether existing protection is sufficient. Severe cyber losses can materially exceed typical limits, particularly where ransomware or data breaches lead to prolonged business interruption, restoration costs, supply-chain disruption and lost revenue. Swiss Re says a doubling of current average limits may be needed in some cases, depending on a company’s activities, geography and risk profile.

Dani Tobler, head cyber at Swiss Re, said: “The cyber protection gap is not only about getting more companies insured; it is increasingly about whether the protection already being bought is enough for the losses businesses actually need insurance to absorb. For large corporates, our data shows that an average of ten losses a year over the past five years would have exceeded the average policy limit of $120 million. As digital dependency increases and AI potentially expands the attack surface, that question of limit adequacy becomes even more important.”

The report concluded: “Swiss Re’s message for the market is clear: cyber demand is likely to keep growing as digital dependency increases, but sustainable expansion will require clearer understanding of AI-related exposures and pricing and limits that continue to reflect the risk being assumed. Reinsurance will remain important in helping carriers manage volatility and accumulation as portfolios and insured limits grow.”