AI-enabled cyber attacks are the emerging risk the UK insurance industry feels least prepared to manage, with limited collaboration between insurers also hindering efforts to tackle systemic cyber threats, according to research by KPMG.

The firm’s latest UK Sentiment Survey of more than 100 insurance leaders found that 30% identified AI-enabled cyber attacks as the risk for which the industry is least prepared, ahead of climate-related catastrophes and technology system failures.

Six in ten respondents (60%) said strengthening cyber resilience should be a priority over the next 12 months, while 45% highlighted the need for improved AI governance and oversight. Despite the concerns, 30% identified AI as the emerging technology offering the greatest opportunity to strengthen UK resilience.

Huw Evans, head of insurance and partner, financial services at KPMG UK, said: “The rapid development of AI frontier models is challenging insurers’ operational resilience against a range of rapidly evolving cyber attacks.

“As concerns around the risks of AI frontier models intensify, insurers are increasingly acting at speed to enhance protection, strengthen cyber protection and use advanced AI to protect themselves against AI-enabled threats. This enhanced protection brings added benefits, enabling more confident investment in wider business transformation and reassuring customers and suppliers.

The findings also highlight wider concerns about national cyber resilience. More than a quarter of respondents (28%) said cybersecurity should be the UK’s top priority for strengthening national resilience over the coming year, ahead of defence resilience, cited by 17%. Nearly four in ten (39%) said improving cyber resilience required the greatest collaboration between insurers, government and technology companies.

However, almost a third (32%) identified limited industry cooperation, driven by competitive sensitivities, as the biggest barrier preventing insurers from providing greater protection against systemic cyber risks to clients. This was more than twice the proportion citing systemic risk accumulation or regulation (15%).

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