UK insurance sector faces systemic cyber risks from supply chain dependencies, report warns

A new report highlights the urgent need for industry-wide, continuous monitoring and shared intelligence to mitigate systemic cyber risks in UK supply chains, especially within the insurance sector.

In recent months a string of supply‑chain linked cyber incidents affecting UK retail and transport firms has underscored how entire industries can hinge on a handful of critical third‑party providers, according to a report by Ben Francis, Insurance Lead at Risk Ledger. T...

hat concentration, the report warns, leaves the insurance sector, deeply reliant on intermediaries and specialist service providers, particularly exposed to systemic failure if a single vendor is compromised.

Industry data shows only 14% of UK firms assess the security of their immediate suppliers, a gap that the report describes as “an illusion of resilience” that quickly dissolves when trusted vendors become points of failure. Regulators have already responded: ministerial guidance has urged company leaders to step up collective efforts to safeguard national security, while the Financial Conduct Authority and Prudential Regulation Authority operational resilience rules (FCA PS21/3, PRA SS1/21 and SS2/22) compel firms to map critical dependencies supporting important business services. The forthcoming UK Cyber Security & Resilience Bill is expected to reinforce that focus, the report says.

But compliance alone, the analysis argues, will not close the visibility gap. Traditional third‑party risk management (TPRM) remains rooted in periodic assessments of tier‑one suppliers and lacks continuous monitoring of suppliers’ internal controls. The report cites research showing 64% of UK insurers have incomplete visibility beyond direct third parties, an exposure amplified by modern, multi‑tiered supply chains where vendors themselves rely on other providers.

The consequences are not hypothetical. A study by Orange Cyberdefense found 58% of large UK financial services firms suffered at least one third‑party supply‑chain attack in 2024; 23% were targeted three or more times. Meanwhile, market data indicates the cost of cyber incidents is rising: the Association of British Insurers reported UK insurers paid about £197m in cyber claims in 2024, more than trebling 2023 payouts, with malware and ransomware accounting for roughly half of those claims, according to industry figures reported by Computing.

Those trends feed a systemic threat: concentration and contagion. When multiple insurers unknowingly rely on the same shared provider, be that a cloud platform, claims processing vendor or data analytics service, a single compromise can cascade across the market. The report highlights survey findings that 90% of UK firms experienced a supply‑chain cyber incident in the last year and 62% suffered two or more, framing concentration risk as a “ticking time bomb.”

The paper calls for a shift from isolated compliance to collective defence. Intelligence sharing among threat teams, already practised through bodies such as FS‑ISAC and other ISACs, should be extended to TPRM functions, it says. By pooling non‑sensitive data on supplier relationships, firms could build an industry‑wide dependency map to expose hidden concentration risks that are invisible from any single organisation’s viewpoint.

According to the original report, collaboration would deliver multiple benefits: reducing duplicated effort, raising the baseline for security across the ecosystem and helping regulators achieve their aim of mapping systemic exposures. The author points to the success of shared threat‑intelligence models as a template and suggests firms treat TPRM as a continuous, collective intelligence exercise rather than a one‑off compliance task.

The policy implications are clear. Regulators are seeking more granular data from regulated entities and designated critical third parties to identify single points of failure; yet the report warns that the gap between regulatory ambition and practical capability could leave firms struggling to comply and the sector vulnerable in the interim. The paper recommends industry‑wide initiatives to improve continuous monitoring, standardise supplier data sharing and develop secure mechanisms for collective dependency mapping.

As Britain prepares for new cyber‑resilience legislation and insurers face a rising bill from cyber losses, the report concludes that securing the market will require more than stronger perimeter defences at individual firms. Collective visibility and coordinated defence, it argues, are strategic imperatives if the insurance sector is to avoid becoming collateral damage in future supply‑chain attacks.

Source: Noah Wire Services