Middle Market Cybersecurity Breaches Decline But Risks Persist
Cyber risks are growing more complex, yet data breaches in the U.S. middle market have decreased. According to RSM US LLP’s 10th Annual Cybersecurity Special Report, 18% of middle market companies experienced a breach in the past year. That’s down from 28% the previous year. Still, experts warn this decline doesn’t mean companies are safer. Executives are increasingly confident, 97% report trust in their cybersecurity. Yet, this may create a false sense of security. Experts believe the decline in cyber breaches may be linked to undetected threats, not better protection.
Cyber Insurance Adoption Hits Record High
In response to persistent risks, more companies are turning to cyber insurance. In 2025, 82% of middle market firms reported having a cyber liability insurance policy, the highest level ever recorded.
“It has gotten harder to get the same coverage levels, and you definitely cannot get them for the same price as you used to,” says Alden Hutchison, a principal at RSM US. “There are a lot more requirements, and they make the client prove a lot more security controls are in place to get coverage. But companies are purchasing the policies because they care, and they see the risk.”
However, fewer executives understand their coverage, specifically, not knowing what is covered. Only 69% said they were familiar with their policy details, down from 75% the year before. This knowledge gap is more severe among smaller firms, where familiarity dropped from 66% to 51%.
“With a lot of new policies being established, only those that negotiated them know them in depth,” says Mark Antalik, a managing director at RSM US. “That’s a little scary; what kinds of things are organizations agreeing to and how protected are they?”
Larger Firms Face More Cybersecurity Threats Than Smaller Ones
RSM’s survey of 402 U.S. and 101 Canadian middle market executives shows that larger companies are twice as likely to suffer a breach. Twenty-four percent of larger firms reported breaches, compared to just 12% of smaller ones.
Smaller firms often have limited budgets and fewer cybersecurity staff. This results in weaker identity management and slower adoption of AI governance protocols. These gaps make them vulnerable, even if they report fewer breaches.
Ransomware Still Looms as a Top Threat
Ransomware remains a significant concern. A quarter of respondents experienced a ransomware attack or demand. Larger firms saw more activity, with 35% targeted compared to 15% of smaller firms.
Of those attacked, only 41% said their security defenses were completely successful. That leaves many vulnerable to financial loss and operational shutdowns.
Business Continuity Plans on the Rise
Firms are focusing on continuity to reduce disruption from attacks. The most common strategies include:
- Crisis communication plans (52%)
- Business continuity plans (51%)
- Disaster recovery systems (50%)
Larger firms are also investing in threat-hunting technologies, while smaller firms lean more on standard planning.
AI Governance Emerging as a Critical Need
As companies adopt AI, new threats and governance challenges arise. Notably, 34% of smaller firms said they lack AI governance processes. This exposes them to heightened risks.
Organizations need frameworks to manage AI risks, from monitoring systems to staff training. Data governance is vital, as AI depends on the integrity and protection of input data.
Cybersecurity Budgets Are Increasing
Nearly all respondents (91%) said they expect to raise cybersecurity spending this year. However, experts caution that investment doesn’t always lead to effective outcomes.
Many firms focus on buying tools but neglect consultative services that help implement smarter, more cost-effective solutions.
Staffing Remains a Major Challenge
Talent gaps continue to strain cybersecurity programs. One-third of companies have five or fewer security personnel. Larger firms typically have more staff, but all face challenges attracting and retaining skilled workers.
To compensate, 51% of firms outsource cybersecurity risk and compliance functions, with others outsourcing:
- Security operations centers
- Incident response
- Vulnerability management
- Employee training
Canada Shows Contrasting Trends
Canadian firms trail the U.S. in cyber insurance uptake (68% vs. 82%) but have more mature AI governance. They also report larger internal security teams, with 39% employing 16 or more cybersecurity staff.
Cloud Adoption Growing – But Multicloud Brings Risk
Cloud usage continues to climb. The largest group of companies reports having 21%-50% of operations in the cloud.
Yet, many are stepping into multi-cloud environments prematurely. Experts warn that multi-cloud setups often double the complexity and risk, especially without proper expertise or resources.
Digital Identity Is Now the New Security Perimeter
Traditional perimeter security has evolved. Today, identity-based controls are essential. Centralized identity and access management systems with multifactor authentication (MFA) are the top strategies used by 46% of firms. Smaller companies lag behind larger ones in adopting these protections.
Collaboration With External Partners Remains Low
Only 46% of larger and 37% of smaller firms collaborate with suppliers and regulators for resilience planning. This lack of coordination could expose firms to widespread disruption, especially during large-scale incidents.
Conclusion: Cyber Insurance Is Essential But Not Enough
While cyber insurance adoption is rising, it cannot replace active cybersecurity defenses. Companies must understand their policies, close staffing gaps, implement AI governance, and build resilient systems to handle modern threats.
Like so many other reports in this space, the RSM’s report is a stark reminder. The threat is there. But, with the right strategies and wise investment, middle market firms can move from reactive to proactive in cybersecurity.
