Many SMEs are not adopting cyber insurance
A lot of small and midsized enterprises in the UK and Ireland are not paying attention to one of the most straightforward defenses available right now, cyber insurance. The data is clear. Arctic Wolf’s 2025 Cyber Insurance Report shows that only 50% of businesses in this space currently have cyber coverage. That leaves the other half exposed to attacks that, on average, cost around £90,000. That kind of risk, left unmitigated, hurts operations, brand trust, and bottom lines.
This isn’t just about damage control after a breach. The absence of cyber insurance is a clear sign of a broader problem: some companies still treat cybersecurity like it’s optional. It’s not. The attack surface is expanding. Threat actors are getting smarter, using AI, advanced phishing tools, and zero-day exploits. If you’re not prepared to handle that, you’re handing over control, of your systems, your data, and potentially your business.
There’s also operational exposure beyond just financial loss. Managed service providers, the outsourced IT firms supporting these businesses, are increasingly being evaluated by insurance companies. In other words, insurers are now asking, “Is your tech partner up to standard?” And if they’re not, coverage could be denied or premiums may spike. So even if you don’t feel directly affected, the readiness of partners you work with is part of your exposure map now.
For leaders, especially C-suite executives, this means redefining what ‘prepared’ really looks like. Having antivirus, firewalls, and incident response plans is foundational, but cyber insurance validates these practices in the eyes of third-party underwriters. It signals that your organization takes risk reduction seriously, not just for show, but as part of running a disciplined, forward-looking company.
If you’re in a leadership role and haven’t put cyber insurance on your boardroom agenda yet, you’re already behind. The real cost isn’t in the premiums, it’s in ignoring what’s becoming a basic requirement of operating in today’s digital economy.
Cyber insurance is evolving into a strategic necessity integral to modern risk management
Cyber insurance used to be an afterthought, something you added for extra peace of mind. That’s no longer the case. The nature of cyber threats has changed. What we’re dealing with now are adversaries using AI, scripting large-scale attacks, and moving faster than most companies can react. In this environment, cyber insurance is not optional. It’s part of the core infrastructure of how businesses manage risk.
Executives should see this shift clearly. Protection is no longer just the job of the IT department. Finance, operations, compliance, every area is exposed when infrastructure goes down or sensitive systems are hit. That’s why forward-thinking firms are embedding cyber insurance into their broader governance systems. It isn’t just about recovery. It’s about business continuity, making sure damage doesn’t scale out of control after the first breach.
The changes are reflected in how the industry is reacting. Arctic Wolf reported that 70% of cyber insurance brokers in the UK and Ireland expect claim volumes to increase over the next 12 months. These aren’t empty predictions. Last year, 18% of businesses surveyed had already experienced an attack, with average insurance claims at £87,000. Bigger companies faced losses upward of £633,000. These figures are real, and they’re increasing.
Brokers aren’t just reacting. They’re adapting. We’re seeing more alignments between insurers and cybersecurity providers. The goal is simple: standardize expectations, improve resilience, and reduce risk. For enterprise leaders, this means that security posture and insurance eligibility are becoming tightly linked. You don’t just apply for a policy, you must show that you’ve taken tangible steps to defend your organization.
As Kevin Kiser, Senior Director of Strategy for Insurance Alliances at Arctic Wolf, puts it, cyber insurance is “a strategic pillar of modern risk management.” That’s accurate. A solid insurance policy now reflects how seriously your organization takes digital resilience. It’s a signal to investors, partners, and customers that you’re operating with intent, not reacting after the fact, but engineering protection into your operations.
There is a dangerous gap in compliance for SMEs
Many businesses, especially small and midsize ones, still misunderstand what cyber insurance actually involves. There’s a belief that getting coverage just means filling out some forms and ticking boxes. That mindset is a problem. It’s leading to operational gaps and compliance failures that create real exposure when something goes wrong. Insurance is changing, and so are the expectations from underwriters. You can’t just declare that you’re secure. You have to prove it.
As cyber risks intensify, insurers are placing more weight on verifiable cybersecurity practices. They’re not just looking at whether a business has insurance, they’re asking what controls are implemented, how threats are monitored, what recovery plans exist, and who’s responsible for security oversight. Businesses that can’t demonstrate this don’t just risk being denied coverage, they risk being deemed non-compliant with growing digital standards across supply chains, investors, and regulators.
This is an area where SMEs are lagging behind. Many haven’t updated their approach to align with what the insurance industry now requires. That’s not just a technology issue, it’s a leadership issue. If the executive leadership team treats cyber insurance like a one-time task rather than an ongoing policy and control framework, they’re not ready for the current security landscape.
As compliance standards tighten, insurers are doubling down on due diligence. That means more precise questionnaires, audits, and binding requirements tied directly to payout eligibility. Businesses that suffer an attack but didn’t maintain strong baseline protections, or weren’t transparent about their actual posture, could find that a policy doesn’t pay out the full amount, or anything at all.
Ritchie Puckey, Head of Compliance at Espria, summed it up clearly: “There is a cyber insurance crisis quietly unfolding for British SMEs that most business leaders are currently underestimating.” He points out that assuming a cyber policy is just a piece of paperwork is a dangerous oversight. For companies serious about resilience, cyber insurance must be treated as a compliance protocol, not a backup option.
For C-suite executives, the task now is to embed this awareness across teams. Review actual risk controls. Validate them. Audit your posture before an insurer or regulator forces the issue. Because doing this now is significantly less expensive, and far less damaging, than doing it after an incident hits.
Key takeaways for decision-makers
- SMEs lack cyber insurance coverage: Half of SMEs in the UK and Ireland remain uninsured against cyber threats, exposing themselves to average incident costs of £90,000. Leaders should prioritize acquiring cyber insurance as a foundational component of risk management.
- Cyber insurance is now core infrastructure: As threats grow more sophisticated and financial impacts escalate, insurers and brokers demand proof of security maturity. Executives must treat cyber insurance as a strategic pillar tied to operational continuity and enterprise resilience.
- Misunderstanding insurance leads to compliance gaps: Many SMEs wrongly treat cyber insurance as a simple checklist task, leaving them non-compliant and uninsured in critical areas. Leaders should ensure teams can demonstrate active cyber risk controls to meet today’s policy and compliance demands.
