Why These 6 Common Cyber Insurance Requirements Aren't Enough: The Illusion of Cybersecurity Readiness

As cyber threats continue to evolve, and even more so with AI-powered fears, the standards for obtaining cyber insurance will continue to increase. Gone are the days when simply having basic protections in place would suffice. Today, many insurers have tightened their underwriting standards, lowered their payout caps, and narrowed coverage options.

To get coverage, companies are being asked to clear a higher bar year-over-year, ticking off requirements in areas like 'strong' security controls, multi-factor authentication, incident response planning, network security, encryption, and security awareness programs. But are these requirements enough? Is your organization even doing these?

The Illusion of Security in a Checklist

Let's be honest—many of these requirements are simply check-the-box measures. They look good on paper but often fail to address the complexity of the threats businesses face today. Meeting these requirements may qualify your organization for cyber insurance, but don't mistake that for being "cyber-secure." Adversaries are creative, adaptable, and quick to exploit or perform recon on the most ordinary information sources (e.g., event logs) that security teams rarely worry about. Simply put, a checklist approach is not enough to tackle modern cyber threats, and insurers may not be doing you or themselves any favors by focusing on these six requirements.

1. Strong Security Controls: A False Sense of Safety

Yes, having "strong" security controls is crucial, but what does that even mean in practice? The term is vague and open to interpretation. Who is assessing this? And by what measure? Are the measures in place strong enough for common threats such as ransomware or phishing? Which malicious actors? Are they able to protect against insider threats? Are they able to detect adversarial behavior? Do they prevent lateral movement within a network?

In reality, many organizations have security controls that need to be updated, no longer represent their environment, or have been poorly implemented (meaning, not tested). Cyber insurance requirements don't usually dive into how effective these controls are to different types of attacks. If not, having "strong" security controls may provide little more than a false sense of security. True cyber resilience requires continuous validation and real-time testing of these controls to understand if they can hold up under pressure.

2. Multi-Factor Authentication (MFA): Good, But Not Foolproof

MFA is essential, but it is far from a silver bullet. MFA is only effective as long as it's not bypassed—and there are countless examples of attackers finding ways to do just that. Techniques like MFA fatigue (where an attacker bombards a user with repeated MFA prompts until they give in) and SIM-swapping have shown us that MFA can be compromised. Relying on MFA alone doesn't account for the agility of threat actors who are constantly evolving their methods. Real security requires adversarial threat validation to identify gaps and test for exposures that threat actors commonly exploit.

3. Incident Response Plan: A Paper Tiger?

While having an incident response plan is undoubtedly a good idea, it's one thing to have a plan and another to execute it effectively. How many organizations rigorously test and validate their incident response plans under real-world attack conditions? Most incident response plans look fantastic in controlled environments but fall apart under the stress of a live cyberattack. Insurers might require a documented plan, but they often don't ask if it's been tested in adversarial simulations or whether it's aligned with real-world threats. Without active exercises, like purple team testing or simulated attacks, an incident response plan is little more than a paper tiger.

4. Network Security: A Static Defense in a Dynamic World

Network security is crucial, but static controls like firewalls aren't enough in a world where attacks constantly change. Cybercriminals know that many companies rely on these standard defenses, study them, and have developed techniques to bypass them easily. Network security must be dynamic, with proactive threat emulation to validate its effectiveness. Do your firewalls block sophisticated lateral movements? These are the questions insurers should be asking, but rarely do. Effective network security requires constant adaptation and validation to stay ahead of modern threats.

5. Encryption: Necessary, But Not Sufficient

Encryption is foundational, but it's also just one piece of the puzzle. Encrypting data in transit and at rest protects it to an extent, but it doesn't stop attackers who gain access through privileged accounts or who breach systems at the application layer. In other words, if a hacker steals credentials, they can still access encrypted data. A robust security strategy must look beyond encryption, focusing on preventing unauthorized access and detecting malicious behaviors once they're inside. Insurers focusing on encryption as a requirement miss the bigger picture—encryption is a safeguard, not a standalone defense.

6. Security Awareness Program: Too Little, Too Late

Security awareness training is valuable, but it's often insufficient. Many security awareness programs are one-size-fits-all, offering employees a generic overview of best practices without arming them with the knowledge to counter specific, evolving threats. Moreover, human error remains the leading cause of breaches. While training can reduce risk, it's not a substitute for technical defenses that can mitigate the impact of inevitable mistakes. Insurers who put too much emphasis on security awareness training without requiring robust technical controls are setting their clients up for failure.

Why the Future of Cyber Insurance Must Go Beyond Checklists

The cyber insurance industry needs to move beyond these basic requirements and push for a more comprehensive, adaptive approach to cybersecurity. This involves defining a set of cyber fitness metrics that touch on:

• Risk-Based Cyber Hygiene Standards: Insurers should adopt a risk-based approach that assesses an organization's unique threat landscape instead of blanket requirements and questionnaires. This might include specific requirements for high-risk industries, like stricter controls for organizations handling sensitive financial or healthcare data.
• Real-Time Threat Exposure Assessments: Insurers must look at how well an organization can detect and respond to threats in real time. Solutions that provide continuous threat exposure assessments (e.g., SCYTHE) should become part of the underwriting process, as they give a more accurate picture of an organization's readiness to face cyber threats.
• Continuous Validation and Testing: Cyber defenses should be tested continuously, not just at annual audits. Real-world adversarial emulations can identify gaps that these basic requirements won't catch. Insurers should encourage or even require periodic adversarial threat emulation to measure an organization's threat preparedness.
• Dynamic Threat Modeling: Insurers need to consider not just the presence of defensive tools but how they're used in practice. An organization's security posture should be evaluated against realistic threat models that reflect industry-specific risks and emerging attack techniques.

Conclusion: The Need for a New Paradigm in Cyber Insurance Requirements

If cyber insurance aims to minimize risk and cost for both the insurer and the insured, then simply requiring basic security practices won't cut it anymore. Cyber insurers must assess an organization's vital signs to better understand their threat preparedness, similar to an insurer's life and health insurance policies. They should mandate proactive, continuous, and realistic validation of cyber defenses.

Interested in learning more? Stay tuned for my next editorial "The Case for Cyber Fitness Indicators: Why Insurance Companies Need Them to Assess Cyber Liability and?Risk" coming next week, where I will map physical health metrics to cyber and built the case for strong cyber fitness.