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Rising Portfolio Risks Drive Need for Strong Cyber Insurance Policy Coverage
Private equity sponsors must now prioritize strong cyber insurance policy coverage. According to the law firm Proskauer, 2025 brings increasing portfolio risks from geopolitical instability, inflation, and cybercrime. They warn that legal and operational risks at the portfolio level can have a direct impact on sponsors. Claims may target both directors and sponsors during economic distress.
Coordinated Cyber Insurance Policy Structures Recommended
Sponsors are advised to align their own insurance policies with those of portfolio companies. Poor coordination increases the likelihood of coverage disputes.
Proskauer stresses the need for clear policy terms. These should address scenarios where individuals act in dual capacities — as sponsor employees and portfolio directors — to ensure seamless protection.
Cyber Insurance Policy Challenges
Proskauer notes, “Of course, the types of litigation and regulatory risks covered by D&O policies are far from the only risks faced by portfolio companies, and that can impact sponsors. For example, the increased frequency and severity of data breaches, ransom demands, and social engineering theft has made protection against cyber risks through strong cyber insurance policies critical for portfolio companies and their sponsors.”
The article goes on to add, ” It is rare for all cyber risks of concern to be covered under the same policy. Instead, it is common for cyber “crime” risks (for example, social engineering and fraudulent transfers) to be covered under a crime policy or endorsement to a fidelity bond, with other cyber risks (for example, data breaches and business interruption from cyber events) to be covered under a separate cyber policy.”
The piece sums it all up clearly: “Coordinating these separate coverages is important to ensure that as broad a spectrum of cyber risks as possible is covered.”
Sponsors Increasingly Negotiating Portfolio-Wide Cyber Insurance Policies
More sponsors now negotiate comprehensive, portfolio-wide cyber insurance policies. This proactive approach helps close coverage gaps and enhances legal and commercial leverage.
Careful policy renewal is also crucial for financially distressed portfolio companies. Insurers often introduce restrictive exclusions at renewal.
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