While 2025 was a quieter year for the cyber insurance-linked securities (ILS) space, S&P Global Ratings emphasised that the market still remains an effective alternative capital solution that offers insurers an effective way to transfer large-scale, systemic cyber risk to the capital markets.
“Three public cyber catastrophe bonds have been issued this year, consisting of renewals by Hannover Re, Beazley, and Chubb, with no new sponsor coming to the market. Earlier sponsors, such as Axis Capital and Swiss Re, look unlikely to renew their soon-to-expire cyber ILS exposure,” S&P’s analysts explained.
Beazley most recently secured its $300 million PoleStar Re Ltd. (Series 2026-1) issuance, which became the largest cyber catastrophe bond seen so far within the market.
You can read all about every cyber catastrophe bond ever issued transaction in our Deal Directory, where you can filter the list by peril to show only cyber cat bonds.
Analysts stated that the main headwind within the cyber ILS space in 2025 revolved around a solid increase in capacity and competitive pricing being seen within the traditional reinsurance market, which competes with ILS structures.
“While the market remains selective, the structures continue to provide non-proportional protection that complements traditional reinsurance. We consider that cyber ILS remains an effective alternative capital solution, offering insurers a targeted way to transfer large-scale, systemic cyber risk to the capital markets,” S&P continued.
In that same report, S&P also revealed that it has assigned a stable outlook on the global cyber insurance industry, with the agency citing the segments sound profitability and expectation of continued robust performance in 2026.
The rating agency also noted that cyber insurers utilise substantial reinsurance, with primary insurers ceding about 44% of premiums to reinsurers in 2024, on average.
Moreover, analysts also said that reinsurance is a cornerstone of stability in the cyber insurance space, highlighting how large-scale cyber events, including global ransomware attacks and widespread data breaches, can generate losses that far exceed the capacity of a single insurer.
“In addition to risk-sharing, reinsurers provide valuable expertise in modeling and assessing cyber threats, which is especially important given the evolving nature of cyber risk.
“Without reinsurance, many insurers would struggle to write large or complex cyber policies, limiting market growth and the ability to respond effectively to catastrophic cyber events,” S&P added.
As per the report, cyber reinsurers have proven “increasingly willing” to assume risk as cedants have improved their underwriting discipline, technical underwriting capabilities, and risk controls.
Analysts also affirmed that this shift towards excess of loss treaties, which avoid routine attritional losses, has also helped reinsurers to reduce their combined ratios. Of course, it has also been a driver of insurance-linked securities market activity focused on the cyber peril.
Importantly, S&P also believes that the cyber reinsurance market is in the early stages of becoming a maturing sector.
“This evolution underscores increasing sophistication, with reinsurers not just backstopping premiums but acting as active partners in helping insurers navigate the complex, fast-moving landscape of cyber risk,” S&P said.
That suggests the capital market role in cyber reinsurance will persist and as the peril evolves could become increasingly important over time.
Read about every cyber cat bond transaction issued so far, including the first private cat bond deals and the more recent 144A cyber cat bond issuances, by filtering our Deal Directory by peril to view only cyber cat bond transactions.
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