Cyber attacks are now a constant threat to banks, brokers, and investment firms. This guide explains how cyber insurance protects financial institutions from data breaches, ransomware, and fraud while supporting FCA and PRA compliance. Learn what’s covered, what it costs, and how the right policy strengthens your firm’s resilience and reputation.
Financial services firms are among the most targeted organisations in the UK. Every transaction, client record, and payment instruction holds value to cybercriminals. Banks, brokers, and investment firms all manage sensitive financial data that can be exploited for profit or used to damage trust.
Ransomware, phishing, and payment diversion scams are now part of daily business risk. Attackers understand that financial firms operate under pressure and depend on uninterrupted systems. A single compromised account or locked trading platform can cause financial loss, client disruption, and reputational harm within hours.
The regulatory consequences can be just as serious. The Financial Conduct Authority (FCA) requires firms to maintain operational resilience and report significant incidents quickly. A cyber breach that disrupts client access or compromises data can lead to enforcement action, fines, or capital implications. Even short outages may trigger reporting duties or increased regulatory scrutiny.
Cyber insurance gives firms the tools and support to respond effectively. It covers the cost of investigation, data recovery, legal advice, and communication with regulators and clients. Most importantly, it provides reassurance that expert help is available when systems fail or threats emerg
Cyber insurance for banks, brokers, and other financial institutions is designed to help firms recover quickly from digital disruption. It protects against attacks that target funds, client data, and operational systems, providing both immediate response and longer-term financial support. Below are the key areas of cover, explained in plain language.
Ransomware is one of the biggest threats to the financial sector. Attackers encrypt files, disable systems, and demand payment to restore access. A cyber insurance policy covers the cost of forensic investigation, data restoration, and system rebuilds. It can also include specialist negotiators who assess the ransom demand and manage communication with the attackers, ensuring any response complies with UK sanctions law.
If a ransom is paid legally and as a last resort, the policy can cover that expense. More often, insurers prioritise secure recovery through backups and technical fixes, keeping client data safe and reducing downtime.
Fraudulent payment requests are a major cause of financial loss across the sector. These scams, often called business email compromise (BEC) or funds transfer fraud, involve criminals impersonating executives, suppliers, or clients to trick staff into making unauthorised payments.
Cyber insurance can reimburse losses caused by verified social engineering attacks, such as spoofed invoices or diverted funds. It also covers the cost of forensic tracing, legal support, and improvements to internal security controls to prevent future incidents. Having multi-factor authentication and clear payment verification processes in place helps ensure full cover under most policies.
A data breach in finance is more than an IT issue; it is a regulatory and reputational emergency. Cyber insurance covers the cost of investigating how the breach occurred, notifying the Information Commissioner’s Office (ICO), and informing affected clients. It can also fund legal representation and public relations support to manage communications.
In some cases, policies may include cover for regulatory fines and penalties, but only where legally insurable. Most importantly, this cover ensures your firm can meet its GDPR obligations quickly and professionally while maintaining client confidence.
When systems go offline, revenue stops immediately. Whether the cause is ransomware, a network outage, or a data centre failure, business interruption cover compensates for lost profits and the additional costs of getting back online.
This includes expenses for temporary systems, overtime for recovery teams, and third-party service costs needed to maintain operations. Financial institutions often have strict service-level agreements (SLAs), and this cover can help offset penalties or lost revenue caused by missed commitments.
Trust is everything in financial services. A cyber incident can quickly damage client confidence, especially if it becomes public. Cyber insurance includes access to crisis communication experts who manage media statements, client updates, and online reputation repair.
These professionals work with your leadership team to ensure the firm’s message is consistent, transparent, and reassuring. Effective communication after an incident can protect client relationships and prevent long-term loss of business.
If a cyber incident affects clients, suppliers, or other partners, the financial and legal fallout can be serious. Third-party liability cover protects your firm against claims for financial loss caused by system failures, service disruption, or data breaches.
This cover includes defence costs, settlements, and compensation where your firm is found responsible. It ensures that, even if clients or partners take legal action, you have the financial and legal support to handle the claim.
The FCA expects firms to manage cyber risk as part of day-to-day governance, not as an afterthought. That means strong systems and controls, resilient operations, clear oversight of third parties, and fast, accurate incident reporting. The PRA sets parallel expectations for banks and insurers. Below is a plain-English summary of what good looks like.
Firms must identify their important business services, set impact tolerances, and prove they can stay within those tolerances during disruption. Work should cover mapping, scenario testing, governance, and a written self-assessment. The FCA and PRA issued a joint policy on building operational resilience, and the PRA’s SS1/21 explains in detail what they expect from banks and insurers.
Under SYSC, firms must take reasonable care to establish and maintain effective systems and controls. That includes IT security, access management, monitoring, and financial crime controls. Senior management is expected to oversee the risks and make sure arrangements are proportionate to the firm’s activities.
You remain responsible for outsourced services. FCA rules require proper due diligence, clear contracts, exit strategies, and ongoing monitoring of material outsourcers.
Recent joint work by the FCA, PRA and Bank of England focuses on the resilience of critical third parties such as cloud providers. The PRA’s updated SS2/21 sets out detailed expectations for outsourcing and third-party risk management.
What good looks like
Supervisors expect proportionate preventive controls and a documented, tested response plan.
That typically includes multi-factor authentication for remote access and email, timely patching, network segmentation, backup and recovery, and clear first-hour actions for containment and evidence preservation. These capabilities support the firm’s ability to remain within impact tolerances.
Material cyber incidents should be reported to the FCA without delay, especially where customer impact is likely. The FCA has consulted on a streamlined incident and third-party reporting process to improve timeliness and completeness of notifications.
Ransomware that affects service availability or client data is likely to be notifiable. The FCA’s recent FOI statistics show hundreds of material cyber incidents are reported each year.
Banks and insurers answer to both the FCA and the PRA on resilience. The PRA’s SS1/21 requires firms to set and test impact tolerances for important business services, while the joint FCA-PRA-BoE framework sets sector-wide expectations for resilience planning and reporting. Firms should align board governance, MI, and testing to meet both regulators’ requirements.
Cyber insurance does not replace compliance. It supports resilience by funding incident response, forensics, legal advice, restoration, and client communication.
It can also evidence recoverability for important business services, but it is one control among many and cannot compensate for weak governance or missing minimum controls.
When underwriting cyber insurance for banks, brokers, or investment firms, insurers focus on how well a business prevents, detects, and responds to cyber threats.
Because the financial sector faces complex and high-value risks, the application process is more detailed than for most other industries. Below are the areas insurers pay closest attention to, and what firms should prepare before applying.
Insurers expect financial institutions to demonstrate a mature level of cyber hygiene. This means having the core technical defences already in place and working effectively.
Essential controls usually include:
Larger firms are often expected to hold recognised certifications such as Cyber Essentials Plus or ISO 27001. These demonstrate that security processes are formalised and audited. Firms without these certifications may still be insurable but can expect higher premiums or stricter terms.
When applying for or renewing a cyber policy, firms must provide accurate and complete information about their systems, controls, and past incidents. This is known as the duty of fair presentation, set out in the Insurance Act 2015.
Underwriters will ask for details of:
It is better to disclose more details than too few. Inaccurate or incomplete information can lead to disputes or even claim rejection later. Insurers understand that no firm is risk-free; what matters most is transparency and evidence of continuous improvement.
Because financial services firms face unique threats, insurers often use tailored questionnaires that go beyond the standard cyber insurance proposal.
These forms help underwriters understand exposure in areas such as payment systems, trading platforms, and client data management.
Expect to answer questions about:
Some insurers may also request supporting documents such as penetration test reports, vulnerability assessments, or third-party risk reviews. These provide assurance that your controls have been independently verified.
Poor cyber hygiene, like missing MFA, weak patching, or limited monitoring, can lead to higher premiums, reduced coverage, or even a refusal to quote. Firms that can demonstrate a proactive security culture, regular testing, and a clear roadmap for improvement are seen as lower-risk and often receive better terms.
Cyber insurance premiums in the financial sector vary widely but are generally higher than in most other industries. Financial institutions hold valuable client data, handle large transaction volumes, and operate under strict regulatory oversight.
These factors increase potential losses and the complexity of claims, which insurers price into their policies.
As a guide, SME financial firms typically pay between £2,000 and £20,000 per year for cyber insurance. Larger or higher-risk organisations, such as private banks or fintech platforms processing high-value payments, often pay more.
Many brokers recommend higher cover limits for financial institutions, typically between £5 million and £20 million, reflecting the potential scale of disruption and regulatory costs following a major cyber event.
For a detailed overview of typical cyber insurance pricing across industries, see our cyber insurance costs guide.
Cyber insurance pricing in financial services is shaped by a firm’s risk profile, governance, and ability to respond to incidents. The following factors have the greatest influence on cost and terms.
Firms regulated by the Financial Conduct Authority (FCA) or Prudential Regulation Authority (PRA) face higher reporting obligations and enforcement risks. Insurers assess how well these firms comply with the FCA Handbook (SYSC 3.2) and operational resilience rules. Demonstrating compliance, good governance, and documented controls can reduce premiums.
Financial institutions rely heavily on external service providers such as cloud platforms, payment processors, and IT vendors. Each supplier introduces risk if not properly managed. Insurers evaluate your due diligence, contract terms, breach notification clauses, and ongoing vendor monitoring to understand your exposure.
A tested incident response plan lowers perceived risk. Firms that run regular cyber exercises, maintain secure offline backups, and use professional monitoring tools such as Endpoint Detection and Response (EDR) are seen as better prepared. Evidence of independent security testing, such as penetration tests or audits, supports stronger applications.
Firms that operate across borders or process data from multiple jurisdictions face additional legal complexity.
Handling EU or US client data means complying with GDPR and other data protection frameworks. Insurers review how your business manages international transfers and breach notification across different regulators.
A record of previous cyber incidents can increase premiums or restrict cover. However, insurers value transparency. Firms that can demonstrate lessons learned, improved controls, and independent validation of fixes often receive more favourable terms.
Cyber insurance for financial institutions is comprehensive, but there are limits to what insurers will pay for. Understanding these exclusions helps avoid disputes and ensures your firm maintains full protection. For a full breakdown, see our cyber insurance exclusions guide.
These exclusions highlight the importance of maintaining strong cyber hygiene, transparent disclosure, and insurer-approved response procedures.
Cyber insurance works best as part of a layered approach to managing cyber risk. It complements, rather than replaces, the technical and governance frameworks that financial institutions already maintain.
A well-structured cyber strategy combines preventive controls, compliance frameworks, and insurance to build resilience from every angle.
Frameworks such as Cyber Essentials and ISO 27001 help firms prevent attacks by setting clear expectations for access control, patching, and data protection. Cyber insurance, by contrast, focuses on what happens after a breach, funding investigation, restoration, and communication.
Together they create a dual defence: one that reduces the chance of an incident and ensures recovery when prevention fails.
Holding certifications such as Cyber Essentials Plus or ISO 27001 can also lower premiums. Insurers view these as proof of mature governance and may offer broader cover or faster acceptance for certified firms.
The FCA and PRA expect financial firms to demonstrate operational resilience, which includes both prevention and recovery. Cyber insurance supports that requirement by funding rapid response and restoration. It shows regulators and auditors that your firm has a credible plan to recover from disruption and protect clients during a crisis.
Large enterprise clients are increasingly asking suppliers to show both compliance and cover. Many request evidence of cyber insurance in vendor assessments, alongside security certifications and penetration testing reports.
Having both strong controls and adequate insurance can make your firm a more trusted partner in regulated markets.