Estimated reading time: 5 minutes
Vendors Remain the Systemic Nightmare Scenario
Cyber insurance still faces its biggest unknown: a major third-party outage hitting thousands of customers at once. On the latest Cyber Insurance News & Information podcast, host and executive editor Martin Hinton talks with Peter Foster, Chairman of Willis’ Global FINEX Cyber Solutions, about that risk. Foster describes a “systemic” event as a failure at a large service provider that supports many organisations worldwide. That outage could last hours or days and trigger heavy accumulated losses across the cyber insurance market.
Underwriters watch this closely. Many expected recent third-party incidents to harden pricing again. Competition and limited loss development stopped that shift. Foster warns that a single large failure could still move premiums quickly.
Boards Confident, but Claims Tell a Tougher Story
Foster links the discussion to Willis’ recent Cyber in Focus analysis of thousands of claims. The data shows losses run longer and broader than many boards expect.
Executives often feel prepared until they face a real incident. Tabletop exercises and realistic drills separate resilient organisations from overconfident ones.
Underwriters now start renewal calls by asking what has changed in the security organisation since last year. They want proof of investment, better controls, and regular testing, not vague assurances.
This scrutiny shapes cyber liability insurance terms and pricing across large corporate towers.
SMEs and Mid-Market Firms Sit in The Crosshairs
Foster rejects the idea that small and medium-sized enterprises are unattractive targets. Attackers regularly target “mom-and-pop” businesses that lack support and are forced to rebuild systems from scratch.
Here, cyber insurance and related cyber risk cover can act as a forcing function. Policies often bundle services that improve basic cyber hygiene and incident response.
Insurers want better risks, so they push MFA, backups, and playbooks into the SME segment. Competition and a relatively “soft” cyber insurance market make this a good time for smaller firms to shop for cyber coverage and push brokers to include real risk-management support.
Pixels, Data Collection, and Privacy Push Long-Tail Exposure
Foster highlights data collection as a rising flashpoint. Pixel and analytics tracking can leak personal information to large technology platforms.
Regulators and class-action firms now treat that as a privacy exposure, even when customers never realised their data had moved. Email addresses, browsing behaviour, and other identifiers can fall within privacy definitions.
Some insurers talk about excluding these risks. Others see a differentiator and offer broader cyber risk insurance that still responds. In return, they expect insureds to identify pixels, fix tracking issues, and document governance.
AI risk: Coverage Today, Arguments Tomorrow
Artificial intelligence is already embedded in industrial systems, software, and services. Foster notes that most existing cyber insurance and technology E&O policies can respond to many AI-related failures today.
The problem lies in the edge cases. A manufacturer may quietly embed AI in machinery without buying professional indemnity or tech E&O. If the AI fails and causes third-party damage, coverage disputes can follow.
Foster expects more reservation-of-rights letters before the market tightens wording or broadens it explicitly. He urges buyers to ask brokers how policies address AI-driven privacy, discrimination, IP, and service failures.
Ransomware Bans Could Hurt Small Businesses and Healthcare
On ransomware, Foster takes a pragmatic view. Law enforcement opposes payments because they fund crime and encourage repeat attacks.
He worries that an outright legal ban would crush some small firms and endanger medical services. A clinic unable to access systems may face immediate patient-safety issues.
Foster favours a nuanced policy. He accepts the moral hazard but notes that blanket prohibitions create their own damage, especially for smaller insureds without deep resilience budgets.
Market Soft Today, But One Shock Could Flip It
Cyber insurance premiums have eased after the sharp ransomware spike of 2017–2019. Capacity is strong, and new entrants are chasing growth, especially outside North America.
Foster sees continued expansion in Europe, Asia, and Latin America, where cyber insurance penetration stays low. That unsaturated demand attracts capital.
The risk is abrupt reversal. A single systemic vendor failure could push loss ratios up and drive weaker markets out. Foster advises clients to think carefully about primary carrier relationships and long-term stability, not only price.
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Boards Must Interrogate Their Cyber Insurance Programs
Foster’s closing message to boards is blunt. Treat cyber insurance as a live instrument, not a static box-tick.
At each renewal, directors should ask how the policy responds to current threats: systemic vendor failure, ransomware, data-collection exposures, and AI-driven harm. They should demand precise mapping between those risks and the wording.
If gaps appear, organisations can seek additional cyber liability insurance, adjust limits, or invest in controls that reduce uninsured loss.
Hinton’s entire conversation with Foster delves deeper into tabletop exercises, CISO burnout, board oversight, and renewal strategies. For leaders shaping their cyber insurance and cyber risk cover plans for the next year, this episode is required listening.
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