Understanding Cyber Insurance Requirements & Compliance Standards

Cybersecurity compliance and cyber insurance requirements can feel like a minefield at times. There are a lot of hoops to jump through and lots of boxes to check. Actually, hang on, we’ve got our metaphors mixed up - if you ever find yourself in an actual minefield, don’t start jumping through hoops. Probably best to avoid jumping altogether if possible.

Anyway, compliance and legal requirements are confusing, and that’s just the start. Just like sticking to the speed limit doesn’t make you a great driver, doing the bare minimum to tick some boxes and pass an audit doesn’t automatically mean that you, your employees, and your clients are protected as well as they should be.

Compliance frameworks give businesses a baseline set of standards to prove that you’ve thought about security and put measures in place. But attackers aren’t working from the same checklist. They don’t care that you’ve ticked the “strong passwords” box or passed an audit. They’re looking for any weak point, and they only need one.

Cyber insurance is a safety net to help you recover if the worst happens. But you don’t automatically qualify just because you have a few policies written down and an antivirus subscription. Insurers want proactivity, not just compliance. Compliance and cyber insurance are essential, but they’re only the beginning of good security. Meeting the bare minimum keeps you out of trouble; going beyond it keeps you out of negative headlines.

So let’s look at what compliance really means, what cyber insurance actually covers, and how Managed Service Providers (MSPs) can help businesses go from “technically compliant” to genuinely secure.

What Are Cybersecurity Compliance Standards (and Why Do They Exist)?

“Compliance standards” of any type sound about as exciting as a seminar on correct spreadsheet formatting (Bob from finance’s ears have just pricked up, because that’s actually his idea of a good time). But these frameworks exist for good reason. They’re basic rules for protecting data, setting expectations, and proving your business takes security seriously. 

Cybersecurity compliance standards are a set of requirements designed to keep sensitive information safe. They tell organizations what security controls they should have, how to document them, and why regulators care.

For example:

• NIST (National Institute of Standards and Technology) gives US businesses a framework for managing risk. The imaginatively named NIST Cybersecurity Framework, or CSF.
• HIPAA keeps healthcare providers from accidentally sharing your medical records with the wrong inbox.
• PCI DSS (Payment Card Industry Data Security Standard) ensures companies that handle credit card data don’t store it in a spreadsheet on someone’s desktop.
• CMMC (Cybersecurity Maturity Model Certification) governs Department of Defense contractors because national security is kind of a big deal.
• GDPR (General Data Protection Regulation) in the UK and EU puts people’s privacy first and gives them control over how companies use their data.
• ISO 27001 sets a global standard for information security management.

Each framework has its own quirks and checklists, but the goal is consistent: protect information and prove you’re doing it responsibly. 

Passing an audit shows you’re playing by the rules, but it doesn’t mean you’re actually secure. A company can be fully compliant one week and breached the next simply because real-world threats evolve faster than any regulatory body can write.

Compliance is like your underwear when you’re heading out. It’s the bare minimum to make sure there are no legal issues. But it’s not sensible to go out in just that. A nice pair of shoes - additional cybersecurity training - and a jacket - consistently evolving best practice - will definitely make sure you’re more comfortable and better protected. Antivirus can be your pants, why not. Once those additional layers are in place, it’s still best not to go commando, in case of emergencies.

That’s why MSPs and business owners should treat compliance not as the finish line, but as the warm up to the marathon that is cybersecurity - including cyber insurance, risk reduction, and genuine peace of mind.

What Is Cyber Insurance (and Why Does It Matter)?

It’s exactly what it sounds like - a policy that helps your business recover when the proverbial, or in this case digital, hits the fan. It’s there for the moments when your best defenses still fail, your systems go down, or you find yourself explaining to a client why their data just went on an unplanned world tour.

Cyber insurance covers the financial fallout of a cyberattack or data breach. It’s a financial safety net that stops one bad day from turning into the end of your business, and we’ll look at some of the potential costs it can cover shortly.

There are three main types of cyber coverage:

1. First-party coverage protects you - your systems, your money, your data.
2. Third-party coverage protects you from others - clients, vendors, or partners affected by your breach.
3. Cybercrime coverage protects you against things like fraudulent fund transfers, social engineering, and email scams.

A good policy doesn’t just hand you a check after an attack. It brings in a whole team to help you recover. It’s like having your own digital emergency services on speed dial - a batsignal for cybersecurity. Cyber insurance won’t stop you from getting hacked, but it can make sure an errant click or a bad day doesn’t become a catastrophic and business-ending event.

It’s worth noting here that cyber insurance is not the same as a cybersecurity warranty - those can be helpful, but they’re much more narrow in scope. Usually a warranty is vendor-specific and will cover costs caused by issues with a particular product or service (providing certain conditions are met - like when you voided the warranty on your waffle iron by getting syrup in the fuse.)

Why Your Business Needs Cyber Insurance

Every business that uses the internet is a potential target. That includes yours and your client's.

Cybercriminals don’t just go after big corporations with billion-dollar turnovers. In fact, small and medium-sized businesses are often their favourite victims. You’ve got valuable data, fewer security resources, and a hundred other things on your plate. From a hacker’s point of view, that’s the perfect combination.

According to the University of Salford in the UK, 43% of global cyberattacks now target SMBs - and 75% of SMBs could not continue operating if they were hit with ransomware. It makes sense- the average cost of a breach for these businesses is in the hundreds of thousands, and that’s before you even start counting the reputational damage.

Cyber insurance gives you a fighting chance. It provides the financial support and expert help you’ll need to get back on your feet after a breach. You could have the best security stack in the world and still fall victim to a supply chain compromise, or a phishing scam, like an employee clicking the wrong link on a Friday afternoon - who knew lunchtime beers could have such serious consequences?

It’s worth noting that more clients and vendors are starting to expect it. If you’re part of a supply chain, there’s a good chance your partners will want to see proof of cyber insurance before they sign a contract. For MSPs, it’s a way to show that you take risk management as seriously as you take uptime.

Cyber insurance isn’t just for surviving a breach. It enables you to operate confidently day to day, secure in the knowledge that one mistake won’t undo decades of hard work.

The Cost of Not Having Cyber Insurance

What happens when a business decides to skip cyber insurance? Well, there’s a slim chance that absolutely nothing will happen. No breach, no issues, and you’ve saved some cash. But it’s a huge gamble and the odds aren’t great, as previously discussed. And of course, you’ll have a harder time finding clients without your proof of insurance.

When a breach happens, the costs start stacking up faster than you can say “We should have sorted this out earlier” or “Dammit, Phin’s article was right on the money.”  Some of these bills are obvious. Others arrive quietly, usually at the exact moment you think things can’t get any worse - like when a sitcom character says so out loud as you hear a clap of thunder.

Some typical costs businesses face without cyber insurance:

• Incident response. You’ll need cybersecurity specialists to investigate what happened, contain the damage, and make sure attackers are out of your systems. They do important work and they charge accordingly.
• Data recovery. Losing critical business data is bad enough. Paying to restore or rebuild it is even worse.
• Legal support. If personal data was exposed, you may need lawyers. And regulators can get involved depending on the type of data and where your business operates.
• Notification obligations. Many laws require you to notify every customer or employee whose data was affected.Plus, let’s face it, regardless of any legal obligations it’s just common decency and good business to let people know. That means time, admin work, call centres, and support staff. 
• Downtime and lost revenue. When systems are offline, business stops. For SMBs, even a short outage can hit hard.
• Reputation damage. Some customers will be understanding, others will not. Rebuilding trust takes time and money.
• Potential fines. If the breach exposes data that falls under GDPR, PCI DSS, HIPAA, or similar regulations, you could face penalties.

Even a small breach can cost tens or hundreds of thousands of dollars. Larger incidents can easily reach seven figures. Without insurance, all of that comes straight out of the business. Insurance doesn’t stop an attack, but it does stop the aftermath from spiraling out of control. It gives you resources, experts, guidance, and financial support at the exact moment you need all four.

Going without cyber insurance is a risk that grows every year. The internet is not getting safer and attackers are not getting bored. If anything, they are getting smarter, faster, and more creative. Insurance will not prevent a breach, but it absolutely can prevent a business-ending disaster.

What You Need to Qualify for Cyber Insurance

If cyber insurance is the safety net every business needs, it might surprise you to learn that you do not automatically qualify for it. Insurers used to hand out cyber policies with the enthusiasm of a supermarket handing out free samples. Those days are long gone - we don’t know when we last got a gooey nougaty treat on a stick at the store. Oh, and also it’s harder to get a cyber insurance policy these days, because insurers understand the substantial risk they’re taking - even businesses that take cybersecurity seriously can still be vulnerable.

Nowadays, if you want coverage, you have to prove you are doing the basics. Insurers want to know that you are lowering your risk rather than relying on them to clean up the mess. A few passwords, a couple of antivirus licenses, and a printed policy that’s main use is propping up that one wonky desk in the corner will not cut it.

Here are the most common requirements businesses have to meet before insurers will offer a policy or a reasonable premium.

1. Multi-Factor Authentication (MFA)

MFA is the golden child of security controls. It is simple, effective, and stops a huge number of attacks. Insurers expect it across critical accounts, especially email, admin access, and remote logins. If you do not have MFA in place, your application will probably not make it past page one.

2. Regular Software Patching

Cybercriminals love an unpatched system. Every uninstalled update is an unlocked window. Insurers want to see that you are keeping operating systems, applications, and devices up to date, ideally with an automated patching process so nothing slips through the cracks.

3. Endpoint Protection and Monitoring

Antivirus is good. Endpoint Detection and Response (EDR) is better. Insurers want reassurance that you can detect suspicious behaviour on devices before it becomes a full-blown breach. Anything that gives you visibility and alerts you quickly earns major points.

4. Data Backup and Recovery

If you can’t restore your data, you can’t recover from a breach. Insurers expect regular backups, stored securely, and ideally separated from your main environment so ransomware cannot take everything out in one go.

5. Security Awareness Training

Just like in cars, where the most dangerous part is “the nut behind the wheel”. People are often the weakest link, but they can also be your strongest defense. Regular Security Awareness Training helps employees spot phishing, think before they click, and understand how attackers operate. Platforms like Phin make it easy to train teams without turning it into a chore, preventing any potential ID10T errors.

6. Incident Response Plans

A documented plan shows insurers you know what to do when things go wrong. It should outline how you detect, triage, contain, and recover from an incident. Having one can speed up your recovery and prevent small issues from becoming large disasters.

7. Vendor and Supply Chain Management

If your partners access your systems, you’re responsible for managing their security too. Insurers look for evidence that you have contracts, risk assessments, and monitoring processes in place.

8. Compliance Tracking and Oversight

Many MSPs and businesses lean on partners like Compliance Scorecard, UKON, and Beltex for this. These tools help track compliance, streamline assessments, and gather the documentation insurers expect during both application and renewal.

These requirements might feel overwhelming at first, but every control on this list reduces your actual risk while also improving your chances of being approved for cyber insurance. Insurers want to know that you are lowering the odds of a breach, not gambling with them.

Qualifying for a cyber insurance policy doesn’t take perfection. It just needs you to demonstrate that you have the right foundations in place, and take security seriously. If you provide that ASsurance, they’ll be more likely to provide the INsurance.

Why You Should Go Beyond Basic Compliance Standards and Cyber Insurance Requirements

Compliance and cyber insurance are important. Both provide structure, accountability, and protection. But if you stop there, you are missing the bigger picture. Compliance and insurance requirements tell you what you must do. Good security is about what you should do. And while there’s an overlap, those two things aren’t usually identical.

Attackers move faster than regulators. Compliance frameworks are reviewed and updated, but not at the speed of cybercrime. An attacker can change tactics in an afternoon. It can take regulators years to update a standard. Meeting yesterday’s requirements might not protect you from today’s threats.

Compliance focuses on documentation, not resilience. You can be compliant and still vulnerable. Audits test whether you have policies written down and certain controls in place. They do not measure how well you prevent, detect, or respond to real attacks.

A breach does not care how neat your paperwork is. Insurance requirements are about eligibility, not excellence. Insurers want to reduce their risk, so they set minimum requirements. MFA, backups, patching, and training are non-negotiable. They protect both you and the insurer.

But minimum requirements do not make you secure, just insurable. Your clients expect more than the basics - if you are an MSP, this part is huge. Businesses trust you with their systems, their data, often their entire operation. Meeting compliance standards is good, but clients increasingly expect you to lead the way rather than follow the rules.

New vulnerabilities appear constantly. Attackers experiment with new techniques. AI speeds up parts of the attack process. Entire criminal groups build business models around exploiting gaps. Minimum standards can’t keep up, but continuous improvement can.

Better security reduces costs in the long run because controls lead to fewer incidents. Fewer incidents lead to fewer claims. Fewer claims lead to better premiums and smoother renewals. It also keeps you out of court, keeps your customers happy, and keeps your internal teams sane.

Real security is proactive, not reactive - compliance tells you what to report after a breach. Insurance helps you survive a breach. Good security can stop the breach in the first place, or at least make it less damaging.

That is the difference between managing risk and simply hoping for the best.

The Role of MSPs in Acquiring Cyber Insurance for Clients

Managed Service Providers play a much bigger part in the cyber insurance process than most people realize. They are not just the IT team that resets passwords and fixes printers. They build, maintain, and validate the security foundation that insurers expect to see. In other words, MSPs help determine whether a client is insurable in the first place.

When a business applies for cyber insurance, insurers send a long list of questions. Everything revolves around controls, processes, documentation, and risk management. That’s when the client turns to the MSP and mouths “help”. 

MSPs help clients understand insurer expectations - those documents aren’t written for the reader’s pleasure. They use technical language, assume a certain level of security maturity, and often reference controls the client hasn’t heard of. MSPs translate all of that into normal human English and explain what is actually required.

Then they implement what insurers expect to see. MFA, patching, EDR tools, documented processes, backups, monitoring, Security Awareness Training. These controls are the bread and butter of MSP work. Without them, clients cannot qualify for coverage or risk being denied a payout later.

MSPs provide the evidence insurers want. Audit logs, training records, backup reports, compliance documentation, incident response plans. MSPs already manage or generate most of this, which puts them in the perfect position to gather and present it.

Clients do not always know the difference between being compliant, being insurable, and being secure. MSPs help them understand the gaps and suggest improvements. That guidance is what turns an MSP from a vendor into a long-term partner.

MSPs reduce risk for both the client and the insurer. They standardize security controls and promote continuous improvement, lowering the likelihood of a breach. That helps clients stay safer and helps insurers feel confident about providing coverage. Everyone wins.

If a breach does happen, clients rely heavily on their MSP. They need help containing the incident, recovering data, coordinating with insurers, and documenting what happened. A strong MSP relationship speeds up the recovery process and prevents small issues from turning into large disasters.

Tools like Compliance Scorecard, UKON, Beltex, and Phin’s own Security Awareness Training platform help MSPs streamline compliance, track improvements, and prove security maturity. These partnerships are becoming a key part of the insurance conversation.

Whether you are an MSP responsible for dozens of clients or a business owner trying to protect your own organization, the goal is the same: build a security foundation that goes beyond the minimum.

Compliance will keep the auditors happy. Insurance will help you recover. But going further protects your people, your clients, and your reputation.

Start meeting insurance requirements

If you want to strengthen your security posture and make sure you're ready for cyber insurance requirements, start with the basics. Phishing is still one of the largest causes of data breaches (according to CISA, more than 90% of successful cyber-attacks start with a phishing email) and it is often the easiest for attackers to exploit because it just needs a tiny human error. “To err is human, to click on a link offering you free Sabrina Carpenter tickets is just silly” or whatever Alexander Pope said.

Download our Ultimate Phishing Prevention and Response Checklist to see where you stand, identify gaps, and take your first steps toward a stronger security foundation. It is a simple way to keep your business safer and your clients protected.

Security is not something you do once. It is an ongoing process. And the more you invest in it early, the better prepared you will be when it matters most.