In boardrooms across the financial sector, cyber insurance has shifted from a “nice-to-have” component of risk management to a non-negotiable prerequisite for doing business. It is viewed as the ultimate financial backstop in the event of a catastrophic cyber event. Yet, as its importance has grown, the process of obtaining and maintaining meaningful coverage has become exponentially more difficult. Spurred by a tidal wave of high-cost claims from systemic ransomware attacks, the cyber insurance market has hardened dramatically.
For finance, risk, and security professionals, this shift changes everything. The old approach of simply filling out a questionnaire is gone. Today, securing a viable policy is less a financial transaction and more a rigorous, evidence-based audit of an organisation’s security maturity. Understanding the new rules of this game is essential for survival.
The New Realities of the Cyber Insurance Market
The relationship between insurer and insured is no longer passive. Insurers are now active participants in their clients’ risk management, demanding a new level of transparency and control.
1. The Underwriting Gauntlet
Insurers are no longer taking a company’s word for its security controls. Applications are now subject to intense, evidence-based scrutiny. Underwriters are employing their own external scanning tools to check for open ports, expired certificates, and other externally visible vulnerabilities. Internally, they demand verifiable proof of specific, non-negotiable controls, as their data shows these are the most effective at preventing major losses. These core controls include:
- Multi-Factor Authentication (MFA): This is the top priority. Insurers demand MFA be deployed across all remote access points (VPNs), privileged user accounts (admins), and critical cloud services. They view it as the single most effective defense against credential theft, the primary vector for most breaches.
- Endpoint Detection and Response (EDR): Legacy signature-based antivirus is no longer considered adequate. Insurers require modern EDR solutions because they provide the behavioural analysis needed to detect advanced, fileless malware and the forensic visibility to track an attacker’s movements.
- Resilient, Tested Backups: A backup strategy is judged on its ability to withstand a ransomware attack. This means adhering to the “3-2-1” rule (three copies of data, on two different media types, with one copy off-site) with an emphasis on immutability or an air-gapped offline copy. Crucially, insurers now ask for proof that these backups are tested regularly.
- Privileged Access Management (PAM): With the goal of most attackers being the compromise of administrator accounts, insurers now see PAM solutions—which vault, rotate, and monitor privileged credentials—as a fundamental control, not a luxury.
A failure to demonstrate maturity in any of these areas can lead to exorbitant premiums, significantly reduced coverage limits, or an outright denial of coverage. One UK-based fintech recently saw its renewal premium triple year-over-year, with the insurer citing their lack of a mature PAM solution as a primary factor in the risk reassessment.
2. The Shrinking Ransomware Safety Net
Ransomware has been the primary loss driver for insurers, and they are responding by fundamentally altering coverage to reduce their exposure and force better security hygiene from clients. Many policies now include co-insurance clauses for ransomware payments, meaning an institution might be responsible for 50% or more of the ransom payment and associated costs. Others are introducing sub-limits, capping the payout for a ransomware event at a small fraction of the total policy value. Most concerningly, some policies are moving to exclude specific types of ransomware attacks or nation-state-sponsored cyber warfare, leaving the institution to bear the full cost.
3. The “Golden Handcuffs” of Incident Response
A critical but often overlooked detail in policy language is the requirement to use the insurer’s pre-approved panel of vendors in the event of a breach. This means that upon discovering an incident, a financial firm is often contractually obligated to use the insurer’s chosen incident response (IR) firm, legal counsel, and forensic investigators. While this can streamline costs for the insurer, it can create significant friction for the insured. The panel firm may lack specific expertise in the institution’s niche technology (e.g., specific core banking software), and the time wasted onboarding a new IR team during a live crisis can be catastrophic.
A Strategic Approach to Modern Cyber Insurance
1. Treat the Application as an Audit
Proactive preparation is the key to securing favourable terms. Teams should approach the insurance application and renewal process with the same rigor as a formal regulatory audit. This involves creating a comprehensive evidence package before the application is submitted. This package should include network diagrams, data flow maps, penetration test reports from the last 12 months, a copy of the Incident Response Plan, and results from recent employee security training and phishing campaigns. A clear, evidence-backed narrative of security maturity is far more compelling than a checked box.
2. Use Insurer Requirements to Drive Security Uplift
Instead of viewing the insurer’s long list of required controls as a burden, it should be seen as a market-validated security roadmap. This external validation can be a CISO’s or risk officer’s most powerful tool for securing budget from the board. It reframes security spending from a cost centre to an essential enabler of the firm’s financial risk transfer strategy. Aligning the security roadmap with insurer requirements not only improves insurability but demonstrably strengthens the organisation’s defenses against the most common and damaging attacks.
3. Scrutinise Policy Language and War-Game the Claim Process
Work closely with brokers and legal counsel to understand every exclusion, sub-limit, and condition in the policy. The incident response plan must then be tested against the policy’s specific requirements. Conduct tabletop exercises that simulate not only the technical response but also the business process of making a claim. The simulation should ask pointed questions: Who has the authority to contact the insurer? What is the exact notification window required (e.g., 24, 48, 72 hours)? Where are the contact details for the insurer’s breach coach stored, and are they accessible if the network is down? This “war-gaming” is the only way to ensure the plan on paper will work in a real-world crisis.
The cyber insurance landscape has fundamentally changed. It has evolved from a simple financial transaction into a complex partnership where the insurer is an active stakeholder in a firm’s risk management posture.
Financial institutions that embrace this new dynamic—and proactively align their security program with the realities of the modern insurance market—will not only secure better coverage but will, more importantly, build a more resilient and defensible organisation.
