How cyber insurers became the new security auditors - Spiceworks

Abhijit Ahaskar May 13, 2026 (Credits: Alfa Photo/Shutterstock) In February 2024, Hamilton, Ontario, was hit by a city-wide ransomware attackOpens a new window . The city refused to pay the $18.5 million ransom and was able to restore essential services within 48 hours. However, several services remained disrupted for weeks. A year later, the city’s cyber insurance provider denied Opens a new window their claim, after an investigation found that several city departments hadn’t implemented multi-factor authentication (MFA) for workers logging into their systems. The insurance policy reportedly stipulated that the coverage would be void if the breach was caused by the lack of basic security features, MFA among them. Palo Alto Networks’ 2026 Global Incident Response ReportOpens a new window found that most breaches are still caused by exposure and basic security lapses rather than uber-sophisticated attackers. The report claims that more than 90% of breaches were enabled by gaps like limited visibility, excessive identity trust, and inconsistently applied controls. This not only delayed timely detection but also allowed attackers to move laterally through the system and maximize their impact. With AI becoming a ‘force multiplierOpens a new window ’ for cybersecurity attacks, insurers stand to benefit because it means that the demand for insurance policies goes up. On the other hand, more attacks mean more payouts. As a result, insurance providers are pivoting from passive underwriting to active, full-scale security audits to accurately gauge their risk. Insurance is no longer a stand-in for actual security measures. You have to have implemented foundational security measures to be eligible for a cyber insurance policy. What an insurance provider-led audit entails Despite the uptick in stringent cybersecurity audits to assess insurers’ risk exposure and possible claims, cyber insurance is quickly gaining favor amongst businesses. The U.S. cyber insurance market saw a 34% increaseOpens a new window in policy purchases in 2025, likely driven by the realization that, as the threat of cyber attacks grows, insurance is essential to cover financial losses from business disruptions. GenAI has lowered the barrier for threat actors even further, allowing them to carry out more sophisticated phishing and machine-speed attacks at scale. The restricted release of Anthropic’s new AI model, Mythos, last month was another reminder of the catastrophic impact of automated AI-driven attacks. Many cyber insurance claims, however, are still related to spear-phishing attacks: Coalition’s 2026 Cyber Claims reportOpens a new window shows that business email compromise (BEC) was the top threat in 2025, accounting for 31% of all claims. Reducing risk and damage from cyberattacks isn’t solely an organizational concern; insurance providers also have a stake since they’re expected to underwrite the losses. Many insurance providers are now working directly with cybersecurity companies; according to Arctic Wolf’s 2025 Cyber Insurance Outlook ReportOpens a new window , 69% of providers now offer in-house risk management services. Spiceworks reached out to Kawin Boonyapredee, CISO advisor at KnowBe4, for comment. He pointed out that insurers’ underwriting requirements, such as MFA, endpoint detection and response (EDR), logging, patching SLAs, backups, and segmentation, have made security mandatory. This, in turn, has accelerated the adoption of baseline controls and focused budget allocation. “Organizations now prioritize investments that demonstrably reduce insurer-rated risk, which shortens procurement cycles for core controls and raises baseline maturity across industries. This shift also drives security teams to formalize processes, document evidence, and run regular exercises to satisfy renewals,” added Boonyapredee. Insurer-led audits also drive executive KPIs and accountability, and help segment organizations based on risk. Firms that don’t meet standards face higher premiums, limited coverage, or can be deemed ineligible for a cyber insurance policy altogether. The firewall is not enough This brings us to the second part of our story: firewalls. They’re usually placed at the network’s edge to monitor all incoming and outgoing traffic, and to block access to restricted or potentially harmful websites. More importantly, they can protect the network from unauthorized access and cyber attacks. However, firewalls aren’t a one-stop solution. A 2025 FireMon reportOpens a new window claims that 60% of enterprise firewalls fail in high-severity compliance checks, while 34% fail at critical security levels. “Even best-in-class firewalls reduce but don’t eliminate risk. Misconfigurations, zero‑days, supply‑chain issues, insider threats, and human error all remain. Advanced tooling shortens dwell time and lowers incident probability, but it doesn’t cover financial, legal, and reputational fallout that follows a successful breach,” said Boonyapredee. He added that insurance complements technical controls by providing contractually backed financial protection and access to external response resources that most organizations don’t have in-house. Insurance also transfers catastrophic and correlated risks that tech solutions like firewalls alone can’t fully cover. How cyber insurance minimizes risk  Coalition’s Cyber Claims reportOpens a new window claims that in 64% of closed claims, organizations didn’t suffer any out-of-pocket losses. But getting an insurance payout is a lot more complex now. Insurers now conduct system audits, and if a company lacks basic security tools, coverage can be denied, as the City of Hamilton found out. Many insurers now conduct external vulnerability scans to rule out open ports or outdated software. They’re also taking a closer interest in their clients’ cyber training programs, as many breaches result from human error. “Insurance provides immediate financial and operational support by funding forensics, legal, PR, ransom negotiations, and business‑interruption losses.  When policies respond, insurers often also supply vetted vendors and coordinators, which speeds containment and recovery and can materially reduce total loss,” said Boonyapredee. Claim denials happen mainly from misrepresentation, policy exclusions, or failing policy conditions, he adds. Arctic Wolf’s 2025 Cyber Insurance OutlookOpens a new window also found that 25% of claims were rejected because the incident didn’t fulfill the terms of the policy, 17% for not disclosing risks, and 16% for gross negligence.  Furthermore, the report shows that email security, network security, and data backups are among the preconditions set by insurance providers for companies to be eligible for insurance. Stricter controls are implemented during the renewal process, requiring companies to implement MFA, a 24/7 security operations center (SOC), or managed detection and response (MDR) solutions. Conclusion Insurance providers aren’t just selling policies anymore. They’re also setting minimum security standards for organizations, especially small and medium enterprises (SMEs), which often lack the same cybersecurity expertise as large enterprises. While their primary job is to provide business disruption coverage, they also give clients access to specialists, advanced funding, and ransom negotiation services. More importantly, they’re enforcing a baseline of security maturity that helps organizations prepare for our new normal: one where AI-driven threats operate at ever-increasing scale. Share This Article: Abhijit Ahaskar Abhijit Ahaskar is an Assistant Editor at Toolbox. He has over 11 years of experience covering B2B technologies, including cybersecurity, automation, AI, IoT and cloud computing. He has previously worked at Mint, PCQuest and MyMobile. You can get in touch with him at abhijit.ahaskar@swzd.com Do you still have questions? Head over to the Spiceworks Community to find answers. Take me to Community