Is Your Cyber Insurance Ready for the UK Ransomware Ban?

No — most UK cyber insurance policies were priced before the government’s targeted ransomware payment ban and now need revisiting. The proposed ban, confirmed by the Department for Science, Innovation and Technology (DSIT) on 22 July 2025, will bar public sector bodies and critical national infrastructure (CNI) operators from paying ransomware demands, with implementation details out for consultation through 2026.

That shift changes what insurers will underwrite, what “incident response” cover means in practice, and what a CISO can promise a board facing a ransom demand. For organisations inside scope — and many bracing for a wider rollout — the renewal conversation has already changed.

What Does the UK’s Ransomware Payment Ban Actually Cover?

The ban is narrower than many executives assume. It is not yet law, and it is not economy-wide. DSIT’s confirmed proposal targets public sector organisations — including local councils — and CNI owners and operators, prohibiting them from paying ransomware demands outright. A quarter of consultation respondents backed extending the ban further, and a quarter want it economy-wide, so private-sector organisations outside CNI should assume the perimeter may move. It sits alongside, but separately from, the broader Cyber Security and Resilience Bill, which currently omits a payment ban and instead covers incident reporting and supply chain oversight.

Executive Action:

• Confirm in writing whether your organisation, or a critical supplier, falls within the CNI or public sector definitions under consultation
• Track the DSIT consultation timeline separately from the Cyber Security and Resilience Bill — they are not the same instrument
• Brief the audit or risk committee that scope could widen before the rules take effect

How Is the Ban Already Changing What Insurers Will Pay?

Insurers are not waiting for the legislation to catch up. According to the Association of British Insurers, nearly £200 million was paid out in UK cyber insurance claims last year — up 230% on the year before — with malware and ransomware now accounting for 51% of all claims, up from 32% previously. That trajectory has pushed underwriters to scrutinise extortion cover closely, even as pricing has softened elsewhere: according to Marsh McLennan, cyber reinsurance rates fell 32% at January 2026 renewals despite record claims volume — insurers are repricing risk components, not cover across the board.

For in-scope organisations, some insurers are already restructuring extortion clauses — separating “incident response and recovery” cover, which remains fully payable, from “ransom reimbursement,” which is being narrowed, sublimited, or made conditional on regulatory permission. A policy purchased eighteen months ago may no longer reflect what your organisation can legally do if a ransom demand arrives.

Executive Action:

• Request a clause-by-clause breakdown separating incident response cover from ransom reimbursement cover
• Ask whether your sublimit on extortion payments has changed at this renewal, and why
• Model a scenario where ransom reimbursement is unavailable — confirm business interruption and recovery cover still holds

What Should CISOs Ask Insurers Before the Next Renewal?

Renewal is the moment to close the gap between what a policy says and what the organisation can legally do under a payment ban. Four questions matter most: does breach-coach and negotiation support remain available where payment itself is prohibited; does incident response funding cover data reconstruction and system rebuild as an alternative to payment; is notification to Action Fraud, the ICO, or a sector regulator built into the claims workflow so cover isn’t jeopardised by a reporting delay; and does the insurer’s panel have direct experience with UK public sector or CNI cases, not just generic ransomware response.

Boards expect this level of specificity now. A vague assurance that “we have cyber insurance” no longer satisfies an audit committee that has seen the ABI’s claims data or watched a peer’s coverage dispute play out publicly.

Executive Action:

• Put the four renewal questions above in writing to your broker ahead of the next renewal meeting
• Require evidence of the insurer’s panel experience with UK public sector or CNI incidents
• Align the claims notification workflow with your regulatory reporting obligations so cover isn’t put at risk by timing

How Should CISOs Build a Recovery Plan That Doesn’t Depend on Paying?

Insurance is a backstop, not a strategy. Whatever the ban’s final scope, the best-placed organisations are those that could recover without paying, regardless of what the policy allows. That means immutable, tested backups isolated from the production network; a documented, board-approved decision tree for the first 72 hours of a ransomware event; and a rehearsed tabletop exercise involving finance and communications, not just IT. INFORMD’s executive self-assessment tools and capital approval assessment template are useful starting points for scoping the investment case to the board.

This builds directly on the compliance groundwork covered in our earlier briefing on the UK ransomware payment ban and what CISOs must do to prepare — that piece addressed the legal obligation; this one addresses the financial exposure sitting behind it.

Executive Action:

• Test backup restoration on a realistic timeline at least twice a year, not just verify backups exist
• Run a tabletop exercise that assumes ransom payment is legally unavailable, not just inadvisable
• Present the board with a recovery cost estimate that does not rely on insurance paying a ransom

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