What Retailers Need to Know About a Changing Marketplace
Originally published in Retail Tech Insights | May 1, 2025
Retailers operate in an increasingly complex digital environment, exposing them to more cyber risks than ever before through e-commerce, mobile payments, customer data platforms, and third-party services. At the same time, the cyber insurance marketplace is shifting, bringing both opportunities and potential challenges.
The cyber insurance market remains favorable to buyers, with added policy benefits, better pricing, and increased coverage allowing insureds to get exactly what they are looking for, and with ample capacity and limits, their options are boundless. However, there are signs that this soft market may not last. Retailers need to understand today’s conditions in preparation for the future.
Current Market Conditions
Competition remains fierce in the cyber risk marketplace, with new insurers focused less on efficiencies for their policyholders and more on providing cybersecurity benefits to limit exposures. Premiums have declined steadily over the past year, and many policyholders are able to secure higher limits and broader coverage. Retailers can take advantage of this competitive environment, with insurers offering expanded benefits and risk management tools as part of their policies.
This favorable market is supported partially by new insurers and managing general agents (MGAs) offering access to cyber insurance coverage, many of whom are focused on growing market share. With reinsurers backing their exposure, MGAs are often less risk-averse, giving retailers more options when seeking cyber insurance options. However, this dynamic also creates long-term uncertainty, particularly if claims frequency or severity increases.
Ransomware Pressures
Ransomware remains one of the top concerns for the cyber insurance market and a growing threat for retailers. Retail businesses are frequent targets due to the volume of payment data they handle and their reliance on connected systems. According to the State of Ransomware in Retail report published by Sophos, 69% of retail businesses were the victim of ransomware attacks in 2023.
Ransomware can be a short-term event with long-term consequences. Short-term expenses to hire a forensic investigator and pay a ransom but meaningful business interruption and long-term liability issues involving class action lawsuits and regulatory actions are a growing concern. This changes how claims are handled and affects the type of coverage needed. Many businesses are also choosing not to pay ransoms, leading to longer recovery times and more complicated insurance responses.
Even though many organizations have improved their response strategies, attackers are becoming more advanced. Generative AI and automation tools are enabling more convincing phishing emails and faster exploitation of vulnerabilities, especially in sectors with customer-facing systems and high transaction volumes.
Risk Evolution and Claims Development
Cyber risk is evolving rapidly. Technologies such as generative AI and machine learning are raising new questions about liability, risk transfer, and insurance coverage. At the same time, regulations around data privacy and biometric identifiers are tightening, with state-level laws concerning facial recognition or fingerprint scanning becoming more common.
While some cyber events, like ransomware attacks without data loss, can resolve quickly, other claims take years to mature. Class action lawsuits, regulatory investigations, and long-tail privacy claims often emerge far after the original incident occurred. This delay can cause initial insurer loss ratios to appear more favorable than they are, leading to market corrections later.
The continued uncertainty around how these risks develop adds pressure to the insurance market. A sharp increase in claims activity or delayed loss development could trigger a return to a hard market, with reduced capacity and higher premiums.
Underwriting and Readiness
Insurers have become more sophisticated in evaluating retailer cyber risks, heavily scrutinizing point-of-sale systems, e-commerce platforms, third-party vendor integrations, and internal controls. This evolution also reflects a shift in how cyber insurance is viewed, not just as financial protection, but as part of a broader risk management strategy. Retailers are expected to demonstrate proactive cyber hygiene, and policies now often include supportive tools.
Risk Management Tools
Retailers should look for cyber insurance policies that go beyond coverage. Many insurers now offer value-added services that can help reduce exposure and improve readiness, including:
- Employee training – Specified programs can help staff recognize phishing and social engineering attempts, increasing an organization’s security.
- Incident response planning – Breach response teams, forensic experts, and legal support resources may be made accessible in the event of a cyber incident.
- Penetration testing – These simulated attacks can uncover vulnerabilities in a retailer’s systems and when applicable, online storefronts.
- Security benchmarking – Ratings can help understand how a retailer’s cybersecurity stacks up to similar organizations.
- Self-assessment tools – Helpful resources can assist in evaluating internal controls and developing action plans for improvement.
These services can strengthen defenses, reduce the chance of a claim, and even improve terms during policy renewal.
Looking Ahead
While conditions remain favorable, retailers should not assume this will continue indefinitely. A large-scale cyberattack, shifts in AI-related liabilities, or delayed loss development could quickly change insurers’ desire to provide coverage to certain retail establishments. In that case, reduced coverage, tighter underwriting, and premium increases could return.
Retailers are facing a high-stakes cyber environment, but they also have access to more support, better coverage, and lower costs than in recent years. By understanding the current marketplace, leveraging available tools, and planning for risk, retailers can position themselves for long-term protection in a rapidly evolving landscape.