While the cyber insurance market is seeing more capacity and increased competition, insurers are still battling with the challenge of increasing frequency and severity of claims, according to John Menefee, enterprise cyber lead at Travelers Bond and Specialty Insurance, in a conversation with Carrier Management at Travelers’ New York City office.

“It’s been a soft market for a few years running, and 2025 was a continuation of that,” he said. “There continues to be a lot of capacity, a lot of new players entering the market. Everyone is fighting for market share on new business at a time where there’s been an increase in frequency and severity of claims.”

Some of this pressure is being driven by ransomware, in which the nature of losses has evolved significantly over the past several years. Ransomware incidents are increasingly evolving into multidimensional claims that involve litigation, privacy exposure and longer-tail liability.

“Three or four years ago, most ransomware claims were primarily about income loss. These claims usually involved the first-party costs associated with responding to a ransomware event, including costs to restore the network, hire a breach coach, notify affected individuals, etc., but you didn’t see the related third-party claims. You didn’t see class action lawsuits with any level of frequency,” Menefee said. “And now, it’s not every time, but it’s a lot more frequent.”

He added that not only are ransomware attacks increasing over time, but litigation is increasing and becoming more expensive.

“We’re seeing the tail extend. That’s a challenge when there’s so much capacity and rates continue to fall,” he said. “That’s a combination that likely can’t last.”

The evolving claims environment is reshaping how insurers structure their approach to cyber coverage as insureds have a greater need for proactive services. Increasingly, brokers and policyholders are placing greater emphasis on the advisory services carriers can provide in addition to the policy itself.

“Cyber is unique in that the value proposition isn’t solely the risk transfer,” he said. “It is increasingly being valued for risk control services that a carrier can offer to customers. Our agents are doing a really good job of communicating the importance of that and selling that as a benefit. And the carriers that do that really well, I think, are going to stand out versus the carriers that don’t.”

Standing out in a competitive market can be tough, and Menefee said another factor determining carrier success in cyber will be taking a holistic approach.

“I think the carriers that are well positioned for long-term success in cyber are those carriers that invest in the entire scope of the cyber ecosystem,” he said. “You’ve got to have great coverage. You have to have a great claims team. You have to have the right data and invest in the data and the teams that can work with you to do all the things relative to operationalizing that data to manage your portfolio.”

He said data analytics are critical differentiators as insurers seek to refine pricing and improve risk selection, and it’s something Travelers is investing in.

“We also use that same data, that same insight, to get really, really good at risk selection and to get really, really good at pricing,” he said. “The carriers that invest in that are going to be able to have an advantage relative to risk selection, pricing, modeling, exposure for cat events and pricing that, I think, defines long-term success for carriers now in this space.”