Banks double cyber insurance cover to $100 mn as digital threats intensify

Banks and financial institutions have doubled their cyber insurance cover over the past five years to as much as $100 million, as rising cyberattacks, higher claim severity and tighter regulatory scrutiny push lenders to seek greater protection against digital risks.

The sum insured taken by banks has risen to $50-100 million in FY26 from around $10-25 million in FY21, according to insurance industry experts.

The increase comes amid a rise in cyber incidents and claim severity, prompting lenders to reassess their insurance requirements annually and, in some cases, even during the policy period. Stricter regulatory reporting requirements have also pushed financial institutions to bolster their cover.

While IT and technology companies remain the biggest buyers of cyber insurance, with some opting for cover of as much as $200-300 million, banks and financial institutions are increasingly accounting for a larger share of claims.

The claims ratio for cyber insurance in the banking sector has risen to more than 50-60 per cent in FY26, industry experts said. Cyber insurance claims from banks, which were roughly Rs 25-75 crore five years ago, have increased to around Rs 150-160 crore. The overall cyber insurance market, meanwhile, is estimated to have collected premiums of around Rs 900-1,100 crore in FY26.

“In terms of premium, the cyber insurance market is about Rs 900-Rs 1,100 crore in FY26, growing roughly 10-15 per cent every year, with BFSI and IT companies buying the largest programmes. Large NBFC organisations opt for nearly $100 million cover, and companies today evaluate their limits more frequently and critically than they did in the past. Coverage under cyber insurance has also evolved rapidly over the last few years,” said Tanuj Gulani, president, liability, Prudent Insurance Brokers.

“Furthermore, there is strong reinsurance support and adequate insurer capacity in India today, and we expect demand to continue increasing as organisations periodically reassess their coverage in line with the metamorphosis of digital risks,” Gulani added.

Customer data breaches and fraudulent fund transfers are among the biggest sources of cyber insurance claims for banks and financial institutions. Business interruptions caused by cyber incidents and cyber extortion, including ransomware attacks, have also emerged as major areas of exposure as financial institutions become increasingly dependent on digital infrastructure.

“While industry experience indicates that around 12-15 per cent of cyber insurance policies report or notify a cyber incident during the policy period, the claims experience for the banking and financial services sector is generally higher than the overall market due to the nature of their operations and the volume of sensitive financial and customer data they handle,” said Najm Bilgrami, head, casualty and financial lines, Tata AIG General Insurance.

Leading lenders were among the early buyers of cyber insurance, but the rapid expansion of digital banking after the Covid-19 pandemic has increased their exposure to cyberattacks and triggered more insurance claims.

Despite the rise in claims, cyber insurance premiums have remained largely stable, supported by ample capacity in the reinsurance market, industry experts said. Rates had risen sharply in 2021 during the pandemic following a surge in cyber incidents, and again in 2024, when premiums increased by around 25-40 per cent following higher claims.

Major cyber incidents have, however, prompted banks and IT companies to increase the size of their insurance cover. Premium rates vary significantly depending on an organisation’s risk profile.

“However, several major cyber incidents have prompted banking and IT firms to increase their insurance coverage and rates. Premium rates vary widely depending on an organization’s risk profile, ranging from around 0.5-1 per cent of the sum insured for lower-risk firms to 3-10 per cent for higher-risk sectors such as financial institutions and export-oriented IT companies,” Bilgrami said.

The strongest angle is cover rising to $100 million alongside banking-sector claims climbing to Rs 150-160 crore, because it gives the story both scale and the reason behind the jump.