Cyber insurance for small and medium-sized businesses: protecting businesses beyond physical assets

Cyber threats are a growing concern for businesses of all sizes. While large corporations often make headlines for cyberattacks, small and medium-sized businesses (SMBs) are increasingly being targeted.

Many businesses would not think twice about insuring their premises, equipment or stock against risks such as fire or theft. Yet when it comes to cyber risk, it is still often seen as something that can be overlooked. The reality is that if systems are compromised, a business can quickly find itself unable to operate.

Recent statistics and the evolving nature of cyber threats show that no organisation is immune. Cyber insurance can provide a practical way to help businesses manage these risks. Depending on the business circumstances, it can offer potential financial support and access to specialist expertise when needed most.

 

The scale of cyber risk in the UK

According to the 2025 Cyber Security Breaches Survey by the UK Home Office’s Department for Science, Innovation and Technology, 43% of businesses experienced a cybersecurity breach or attack in the past 12 months. The figures are even higher for medium-sized businesses (67%) and large businesses (74%). Of the attacks, phishing remains the most common, with 85% of businesses affected by phishing-related incidents.

Cyberattacks do not just originate within the workplace. Many stem from remote working arrangements, where everyday practices can introduce additional vulnerabilities. While working from home offers flexibility and convenience, it can also create greater exposure if security is not carefully managed.

Cyber insurance can provide an additional layer of protection and may help businesses mitigate some of the financial and operational impact of cyber incidents. It can also offer access to specialist assistance following an event.

 

The importance of cyber insurance

Cyber insurance can provide more than just cover for data breaches and privacy incidents. Depending on the policy’s terms, it may also help businesses manage risks such as funds transfer fraud and business interruption arising from ransomware attacks or system outages.

Here are some of the ways cyber insurance may support businesses:

1_Support with financial losses
Cyber insurance may help cover certain costs arising from cyber incidents, such as data breaches, ransomware attacks and system downtime. Depending on the policy and business circumstances, this could include recovery expenses, legal costs and interruption-related losses.

2_Support with regulatory and legal liabilities
Some policies may help businesses manage the financial impact of investigations, legal defence costs and certain regulatory expenses where sensitive data has been compromised. This includes potential regulatory costs and fines where insurable by law.

3_Access to incident response expertise
Policies can provide access to specialist support services, such as cybersecurity experts, forensic investigators, and public relations advisers, who may help businesses respond to and manage incidents more effectively.

4_Support for reputation and customer communications
Cyber insurance can provide assistance with customer notification requirements and communication support following a breach to help businesses manage potential reputational impacts.

5_Business continuity support
Some policies may help businesses mitigate the financial impact of cyber incidents by providing support for interruption-related losses and access to recovery services.

Cyber insurance policies can be particularly helpful in the face of ransomware attacks, which have become increasingly common. These attacks may not always involve data theft but can severely disrupt business-critical systems and operations.  This is where access to specialist response support can be especially important. Early intervention may help contain an incident, reduce disruption and support a faster recovery process.

It is also important to consider third-party exposure. Many businesses rely on external providers for IT services, cloud storage or payment processing. Responsibility for customer or business data, however, may still remain with the organisation itself.  If a third-party provider suffers a breach, a business could still face operational disruption, customer notification obligations and reputational consequences. Depending on the policy wording, cyber insurance may help mitigate some of the associated financial and operational impact.

 

Understanding policy limitations

Cyber insurance policies vary significantly between insurers and are subject to policy terms, conditions, exclusions and limits. Cover may not apply in all circumstances, and businesses should carefully review policy details to understand the scope of protection provided.

It is also important to recognise that cyber insurance does not replace the need for robust cybersecurity controls and good risk management practices. Measures such as employee training, strong password policies, multi-factor authentication, regular software updates and secure backup processes remain essential in helping reduce cyber risk.

 

The growing need for cyber insurance

In the 2025 Government survey, only 45% of businesses had some form of cyber insurance, rising slightly from the previous year and reflecting increasing awareness of cyber-related risks.

With cyber threats becoming more sophisticated and frequent, many businesses are reviewing whether cyber insurance forms an appropriate part of their wider risk management approach. While strong IT security remains essential, no system can be considered completely immune from cyber threats.

Remote working vulnerabilities, third-party data exposure and the increasing frequency of attacks on SMBs all contribute to a more complex risk environment. In this context, cyber insurance may offer an additional layer of financial and practical support alongside existing cybersecurity measures.

If your business is reviewing its cyber risk arrangements, it may be worthwhile to explore the available options.

 

Fidentia Insurance’s commercial team can help businesses understand the different types of cyber insurance available and identify solutions that may be appropriate for their needs.

Contact:

Fidentia Insurance Brokers Limited
Tel: +44 (0) 20 3150 0080
Email: thomasharvey@fidentiains.com

 

This article is for general information only and does not constitute advice. Cover is subject to underwriting, policy terms, conditions, exclusions and limits. Regulatory fines are only insurable where permitted by law.