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. According to insurance industry experts, the sum insured taken by banks has risen to $50-100 million in FY26 from around $10-25 million in FY21. 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, with cyber insurance claims from banks increasing to around Rs 150-160 crore compared to roughly Rs 25-75 crore five years ago. As reported by industry experts, the overall cyber insurance market is estimated to have collected premiums of around Rs 900-1,100 crore in FY26, growing roughly 10-15 per cent every year. 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, with the claims experience for the banking and financial services sector generally higher than the overall market due to the nature of their operations and the volume of sensitive financial and customer data they handle. According to Tanuj Gulani, president of liability at Prudent Insurance Brokers, there is strong reinsurance support and adequate insurer capacity in India today, and demand is expected to continue increasing as organisations periodically reassess their coverage in line with the metamorphosis of digital risks.
Premium rates vary significantly depending on an organisation'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. As reported by Najm Bilgrami, head of casualty and financial lines at Tata AIG General Insurance, 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 due to their operations and sensitive data handling.
Despite the rise in claims, cyber insurance premiums have remained largely stable, supported by ample capacity in the reinsurance market. 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. Customer data breaches and fraudulent fund transfers are among the biggest sources of cyber insurance claims for banks and financial institutions, with business interruptions caused by cyber incidents and cyber extortion, including ransomware attacks, emerging as major areas of exposure as financial institutions become increasingly dependent on digital infrastructure.
