Cyber insurance remains a cornerstone for managing digital risk, yet the market is evolving in ways that may surprise many organizations. By 2026, policies are expected to provide less certainty than policyholders have come to assume. Insurers are introducing new exclusions, enforcing stricter underwriting standards and responding to the rapid emergence of complex threats such as AI-driven vulnerabilities, zero-day exploits and connected Internet of Things exposures.
For risk managers and insurance brokers, anticipating these exclusions and developing strategies to address coverage gaps is essential. Misalignment between perceived protection and actual policy coverage can expose organizations to significant operational disruption and financial loss.
The next section examines why insurers are introducing these new exclusions and what drives their focus on high-uncertainty, potentially catastrophic exposures.
Why Exclusions are Escalating
Claims metrics in 2025 show relative stability, with reports indicating that both the number and average severity of large cyber claims have remained largely unchanged compared with prior years. On the surface, this might suggest that insurers are not under pressure. However, the surge in exclusions is driven less by historical claims and more by emerging, high-uncertainty risks that could produce catastrophic losses.
Insurers are increasingly concerned about exposures without established actuarial history, including AI-driven attacks, zero-day vulnerabilities, connected IoT systems and state-sponsored cyber operations, according to a 2025 report by Allianz.
Even isolated events, such as the 2024 CrowdStrike outage affecting multiple Fortune 500 companies, illustrate the accumulation risk insurers now face—where a single incident can affect numerous policyholders simultaneously.
This combination of unquantified risk, potential for systemic loss and regulatory uncertainty has prompted insurers to tighten coverage and add exclusions to protect against scenarios that could produce outsized financial consequences.
Emerging Exclusions to Expect in 2026
Risk managers should anticipate new categories of exclusions that will redefine what traditional cyber insurance covers. Understanding the rationale behind each exclusion and its potential impact is critical for preparing organizations.
Artificial Intelligence Risks
Artificial intelligence is becoming ubiquitous, yet insurers are increasingly excluding claims linked to its use. Policies may deny coverage for errors or omissions in AI systems, misleading outputs or regulatory violations tied to AI implementation.
A notable concern is the breadth of some exclusions, which may apply not only to a company's own AI systems but also to third-party platforms used in business operations. This expansive scope creates uncertainty about whether claims will be honored when AI played even a minor role. Risk managers must scrutinize AI-related language in policies and assess whether existing coverage aligns with emerging liabilities, according to an article in the Harvard Law School Forum on Corporate Governance and Financial Regulation.
State-Sponsored Cyberattacks
Following global geopolitical developments, insurers are expanding war or cyberwar exclusions to cover state-backed attacks, according to Mitigata. The impact can be profound, as even incidents occurring in peacetime may fall within the exclusion if a government is implicated. This is particularly significant for organizations operating in critical infrastructure sectors or with extensive international digital networks. Awareness of the scope and triggers of these exclusions is essential for preparing mitigation strategies and considering supplementary coverage.
Catastrophic and Widespread Events
Insurers are increasingly defining "widespread events" or "catastrophes" in ways that limit aggregate exposure from systemic incidents, according to an article by Chubb. These exclusions may restrict coverage when multiple policyholders are affected simultaneously, such as through a coordinated ransomware attack targeting a popular cloud provider. For organizations, this can mean delayed payouts or denied claims when the event's scale triggers a policy exclusion. Clear understanding of these terms is necessary to plan alternative risk strategies.
Web Tracking and Regulatory Liabilities
Policies are tightening language around website tracking, data privacy and compliance with evolving regulatory regimes. Failure to satisfy underwriter inquiries regarding tracking technologies can lead to broad exclusions. Similarly, coverage for fines, penalties and reputational harm is often limited. Organizations must ensure that their security posture, privacy practices and compliance measures are fully documented to avoid coverage gaps.
Enforcement of Existing Exclusions
Even long-standing exclusions are being applied more rigorously, the 2025 Allianz report found. Insurers are denying claims for failure to meet minimum security requirements, including missing multi-factor authentication, unpatched vulnerabilities or outdated incident response protocols. Insider threats, third-party vendor risks, contractual liabilities and regulatory fines are also increasingly scrutinized. For risk managers, this means that maintaining robust, documented controls is not optional but a condition for coverage.
Managing Exclusions
To navigate this tightening environment, organizations should align coverage with actual risk. Key actions include:
- Implementing and documenting robust controls, including multi-factor authentication, endpoint detection and response systems and formal incident response readiness.
- Being transparent during underwriting by accurately representing security posture and addressing known vulnerabilities.
- Conducting regular risk assessments to ensure IT infrastructure aligns with coverage requirements.
- Reviewing policy language closely, with attention to definitions for catastrophes, state-sponsored attacks and minimum security requirements.
- Collaborating with specialized brokers who understand the nuances of cyber policies and can advocate for coverage clarity.
These measures help reduce the likelihood of denied claims and ensure policies reflect actual organizational risk. Insurance remains necessary, but it must be coupled with proactive risk management to be effective.
Filling Gaps with Alternative Risk Transfer
When traditional policies leave high-severity, low-frequency risks uncovered, alternative risk transfer solutions can provide supplementary protection.
Captive Insurance
A captive is a subsidiary insurance company established to underwrite risks for its parent organization. Captives allow coverage of exclusions such as state-backed cyberattacks, AI liabilities, or reputational loss. This approach enables customized protection, keeps premiums and underwriting profits within the organization and provides certainty where commercial markets may be constrained.
Parametric Insurance
Parametric policies pay out based on predefined triggers rather than measured losses. For example, a payout may be tied to a specific number of exposed records or a defined system downtime period. Parametric insurance ensures rapid access to capital for business interruption costs, even if the primary cyber policy contains restrictive exclusions.
Capital Market Solutions
Cyber risks can also be transferred to capital markets through insurance-linked securities such as catastrophe bonds. These instruments attract external capital to cover peak risks, including systemic cyber events, and can expand overall capacity for insuring niche exposures that traditional policies exclude.
Conclusion
Cyber insurance exclusions are expanding in response to evolving threats and increasing claims severity. By 2026, risk managers and brokers must recognize that traditional policies alone may not provide full coverage, particularly for AI-related liabilities, state-sponsored attacks and catastrophic events. Proactive strategies, including robust documentation, controls, regular risk assessments and complementary alternative risk transfer solutions, are essential to bridge coverage gaps. Aligning insurance with operational realities ensures that organizations maintain resilience, protect enterprise value, and respond effectively when cyber incidents occur.
