The 2026 cyber market is already challenging, and how insurers face these challenges will be a turning point for the industry, according to Coalition CEO Joshua Motta.

“2026 is going to be a very challenging market,” he said. “I think it’s really going to separate those that have a differentiated approach to underwriting and managing cyber risk and those that don’t.”

One of the biggest challenges is the continued soft market that is leading to increased competition as insurers seek ways to grow, he said. On top of that, increased usage of AI and aggregation risk are creating additional areas of uncertainty.

“[AI] is now potentially creating a whole new risk surface for companies that some insurers may inadvertently be picking up,” he said. “And then, of course, there’s aggregation dynamics, where there now have been a number of cloud outages. While it’s certainly not catastrophic, it raises the specter that there could be a much more significant loss that could hit the market.”

Resilience’s Chief Underwriting Officer Maria Long pointed to deepfakes as another risk area to watch in 2026.

“We’re seeing deepfakes reach a critical tipping point, dramatically amplifying social engineering risks,” she said. “Cyber markets are looking to affirmatively address coverage which is largely inherently covered in existing forms. We need to consider where severity and frequency will occur and whether it’s tolerable, while actively monitoring our loss landscape and coverage pricing.”

Motta added that it’s now easier than ever to create a deepfake video that could cause reputational or financial harm to a company or organization. The challenge with insuring these types of risks comes down to how the video is used.

“If that is used to defraud them of money, it’s a traditional social engineering loss that would probably be covered under a standard cyber insurance policy,” he said. “But if it’s just a video that creates some sort of reputational damage or harm, a lot of those losses wouldn’t be covered under a policy.”

Motta said Coalition saw a gap in the market and decided to respond by adding a new deepfake response endorsement to its cyber insurance policies globally, announced in December of last year.

“We cover the cost of hiring the right firms to forensically attest that it is in fact a fake video,” he said. “And of course, we can provide some of the financial recompensation for the damages or whatnot that companies experience, as well as potential funds for public relations related efforts to restore their reputation.”

He said adaptability is what insurers will need to demonstrate as they navigate the remainder of 2026.

“In my perspective, the best insurance companies in the world have to be very good at avoiding being adversely selected against,” he said. “If you can collect enough data that you actually know more about the cyber risk to that organization than they do, which is sort of our underwriting objective, then you can do something very rare in insurance, which is positive risk selection. If you can then do that at portfolio-level scale, I think you can understand your aggregation exposure to considerably greater detail and make sure that you’re pricing for it.”

Melissa Carmichael, head of U.S. cyber risks at Beazley, said the company is aiming to do just that as it remains fully committed to cyber despite a backdrop of increased claims and severity.

“Where conditions are unsustainable in terms of pricing as we’re seeing in the U.S., we’re holding firm on rates rather than really chasing the market down. Striking a balance to find the right market pricing stability is really important and can be a challenge.”

Melissa Carmichael, Beazley

“But where conditions are unsustainable in terms of pricing as we’re seeing in the U.S., we’re holding firm on rates rather than really chasing the market down,” she said. “Striking a balance to find the right market pricing stability is really important and can be a challenge.”

She said Beazley has been focusing on broadening its coverage and supporting insureds’ needs while ensuring adequate pricing for long-term sustainability.

“We continue to fine-tune our pricing, not only to take into account the long-term trends in cyber but also the risk characteristics and the claims,” she said.

The entities that will be best suited for a cyber incident are the ones that understand their threat environment and focus on the risk management, she added.

“Preparation is really key, so those companies that are prepared are far better suited to make it through an outage with minimal impact,” she said. “Those companies that really test their plans via attack simulations and tabletop exercises or even those that have a history of similar incidents can all set up organizations for resilience in the face of a cyber outage.”

Motta said this advice to remain resilient and manage risk goes for insurers as well.

“I think people have long realized that now having proprietary data, being able to continuously assess risk, having technical talent within the underwriting capacities, this is non-optional,” he said. “We’ve seen an entire realignment of the market. Obviously, there are a number of InsurTechs that have entered the space, but we’re seeing incumbents that are dramatically transforming. They’re hiring these people, they’re trying to acquire technology, they’re trying to get better data to offer underwriting.”

All of this can create healthy competition that will move the market forward despite challenging conditions, he added.

“I absolutely think that people are going to compete. I think that that’s the direction the market is going,” he said. “I certainly think that will help and has helped people improve their underwriting results.”