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

Banks and financial institutions have doubled their cybersecurity 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 2025-26 (FY26) from $10-25 million in 2020-21, according to insurance industry experts.

The increase comes amid a rise in cyberincidents 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 reinforce their cover.

While information technology (IT) and technology companies remain the biggest buyers of cyberinsurance, with some opting for cover of as much as $200-300 million, banks and financial institutions are accounting for a growing share of claims.

The claims ratio for cyberinsurance in the banking sector has risen to over 50-60 per cent in FY26, industry experts said. Cyberinsurance claims from banks, which stood at ₹25-75 crore five years ago, have increased to ₹150-160 crore. The overall cyberinsurance market, meanwhile, is estimated to have collected premiums of ₹900-1,100 crore in FY26.

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

“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 evolving nature of digital risks,” Gulani added.

Customer data breaches and fraudulent fund transfers are among the biggest sources of cyberinsurance claims for banks and financial institutions. Business interruptions caused by cyberincidents and cyberextortion, 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 12-15 per cent of cyberinsurance policies report or notify a cyberincident during the policy period, the claims experience for the banking and financial services sector is generally higher than the overall market because of the nature of their operations and the volume of sensitive financial and customer data they handle,” said Najm Bilgrami, head of casualty and financial lines, Tata AIG General Insurance.

Leading lenders were among the early buyers of cyberinsurance, 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, cyberinsurance 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 cyberincidents and again in 2024, when premiums increased by 25-40 per cent because of higher claims.

Major cyberincidents have, however, prompted banks and IT companies to increase the size of their insurance cover. “Premium rates, however, vary widely depending on an organisation’s risk profile, ranging from 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 added.

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