Introduction:
The Structural Insurance Gap for Cybersecurity Companies
Cybersecurity firms are built to prevent breaches - monitoring systems, detecting threats, and reducing risk before something goes wrong.
But when a breach happens, they don’t control what comes next - insurance companies do.
The insurer steps in, brings in its own vendors, and controls the response. If you’re not on that panel, you’re out - regardless of how effective your product is.
So the company closest to the risk (those working to prevent it every day) are cut from the equation.
That creates a disconnect:
Insurers control:
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Who responds
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How claims are handled
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Where the money goes
We've created a New Approach
Instead of relying on insurers, your cybersecurity firm can offer insurance alongside their product - covering the cost of response and staying in control from start to finish.
In simple terms: the company working to prevent the breach is now able to insure and control the outcome if one occurs.
We do this through a product called a CLIP based Captive.
IThe product allows you to own an A-Rated insurance company as a tool to not only win more clients, but to stay on board if a breach does occur.
What Is Cybersecurity Backed Insurance?
At its core, this model brings three things under one roof:
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Preventing the risk (your cybersecurity platform)
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Standing behind the outcome financially (your own, A-Rated insurance company takes on the exposure that you are preventing in the first place)
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Staying involved post breach rather than being replaced by another insurance company's panel vendor
In this model...
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A cybersecurity company participates/creates the insurance structure
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Insurance is offered alongside (or embedded within) its services
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The firm shares in underwriting outcomes - positive or negative
The result is a system where...
The entity responsible for reducing risk is financially aligned with the outcome of that risk.
This contrasts sharply with traditional models where...
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Insurers control who gets called after a breach - not the companies that were working to prevent it
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Cybersecurity firms are excluded unless they are selected on an insurer’s panel
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The cybersecurity company closest to the risk has no control over how the response is handled. I.e. They are let go.
Key Misalignments
The current cyber insurance market has a fundamental design flaw:
The firm best positioned to contain the loss has no financial stake in the loss outcome.
1. Vendor Selection Is Carrier-Controlled
Insurers rely on pre-approved vendor panels. These panels:
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Favor incumbents
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Move slowly
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Often exclude emerging or specialized firms
2. Security Firms Are Commoditized
Even highly differentiated cybersecurity firms:
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Are most often excluded from panel
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Are interchangeable in the eyes of carriers
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Have limited influence over claims engagement
3. No Incentive Alignment
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Security firms are paid for services
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Insurers pay for losses
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The two are not economically connected
4. Claims Experience Is Fragmented
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The response to a breach is often:
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Disconnected from pre-breach security posture
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Driven by insurer relationships, not performance
5. Capital Efficiency and Structural Benefits
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You are not simply paying premiums to an external insurer—you are retaining and deploying that capital within your own structure
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Over time, this can materially improve capital efficiency
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Captive structures may provide tax advantages when implemented correctly
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The primary value is control—but the capital and tax benefits can be significant.
Why Cybersecurity Firms Are Moving Into Insurance
1. What Our Model Changes
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Win more deals by removing buyer uncertainty
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Differentiate your product by standing behind it financially
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Stay in control after a breach instead of being replaced by insurer-selected vendors
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Stop relying on insurer panels to access the most important part of the lifecycle
2. Deal Differentiation
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This isn’t just differentiation - it changes how buyers evaluate your product
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Reduce reliance on traditional cyber insurance - and lower the total cost for your clients
Give customers a clear financial backstop, not just a promise
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Stand out immediately from competitors who can’t offer the same
3. Stay Involved When It Matters Most
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You are not replaced after a breach by insurer-selected vendors
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You remain the company handling the response - not brought in later or excluded entirely
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Your product and team stay at the center of the outcome
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You control how the situation is handled from start to finish
4. Reduce Reliance on Traditional Cyber Insurance
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You cover the part of the risk you understand best - the response and cleanup
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Your clients rely less on traditional cyber insurance for that exposure
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You replace a generic insurance dependency with something aligned to your platform
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Insurance becomes part of your product - not a separate purchase controlled by someone else
How Cybersecurity Backed Insurance Works
We design each program around the cybersecurity company’s platform, risk profile, and clients. While every structure is customized, there is a consistent framework behind how these programs are implemented. The core components are outlined here.
1. Fronting Carrier
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Issues the insurance policy to the customer
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Provides the licensed, A-rated paper required by enterprise buyers
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Handles regulatory and compliance requirements
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This allows the coverage to be recognized as real insurance - while the structure behind it is controlled by you.
2. Captive Insurance Company
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A captive is formed specifically for your program
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It is self-funded - you are putting capital behind the coverage
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You take on the risk tied to your product’s performance
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The structure reflects how your platform actually impacts outcomes
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This is what allows you to stand behind your product financially, rather than relying entirely on an external insurer.
3. CLIP Structure
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The policy is structured to match your cybersecurity offering
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Coverage is tied directly to the outcomes your product is designed to influence
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The structure focuses on the most predictable part of the loss - response and cleanup
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This is what connects your security product to the insurance - so it works as one integrated solution.
4. Claims & Response
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he policy is designed to cover the cost of responding to a breach
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Your team remains involved in handling the response
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The structure ensures you are not replaced by an insurer’s vendor
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You stay at the center of the outcome - rather than being brought in after the fact or excluded entirely.
Simplified Flow
Simplified Flow
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Client purchases cybersecurity services (with or without embedded insurance)
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Insurance policy is issued by the fronting carrier
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Risk is ceded (assigned) to the captive
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Cybersecurity firm participates in:
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Underwriting economics
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Claims outcomes
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What This Changes
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Security firms are no longer just vendors—they are lifecycle participants
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Insurance becomes an extension of the product, not a separate purchase
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Claims outcomes and prevention efforts become economically linked
Real-World Use Cases
This model is most effective where cybersecurity firms already have the following characteristics
1. Incident Response Capabilities
Firms that:
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Handle breach response
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Control remediation timelines
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Influence loss severity
2. Managed Detection & Response (MDR / XDR)
Providers that:
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Continuously monitor environments
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Reduce dwell time and breach impact
3. Cloud Security & DevSecOps Platforms
Companies that:
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Prevent misconfigurations
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Reduce systemic vulnerabilities
4. Firms Offering Guarantees or SLAs
Examples:
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Uptime guarantees
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Breach prevention assurances
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Performance-backed commitments
These firms are already economically exposed - insurance formalizes and structures that exposure.
Case Study (Condensed)
Situation:
A mid-market cybersecurity firm (~$25M revenue) faced repeated challenges:
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Rejected from multiple insurer panels
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Losing enterprise deals to competitors who could offer stronger financial backing
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Limited influence in post-breach scenarios
Solution
The firm implemented a structured insurance program alongside its cybersecurity offering:
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A fronting carrier issued policies to clients
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A captive was established to support the program
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Coverage was offered as part of the firm’s core service—designed to cover breach response and cleanup
Outcome
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Improved enterprise deal conversion by removing buyer hesitation
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Differentiated from competitors who could not stand behind their product financially
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Maintained control after a breach instead of being replaced by insurer-selected vendors
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Strengthened client trust by backing the product with real coverage
Risks, Constraints, and Regulatory Considerations
1. Regulatory Structure
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Insurance must be issued by a licensed carrier to be recognized as valid coverage
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A fronting structure is required to meet regulatory and contractual requirements
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The program must be designed to comply with insurance laws across the jurisdictions where clients operate
2. Capital Requirements
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The program is self-funded, meaning you are putting capital behind the coverage
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Capital is typically sized based on expected losses, with additional buffer for variability
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Fronting carriers may require collateral (often in the form of a letter of credit)
3. Skin in the Game
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No longer just selling security - you are backing it financially
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If something goes wrong, you are on the hook
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The model rewards strong performance and exposes weak ones
4. Structural Complexity
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Requires coordination across:
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Insurance
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Reinsurance
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Legal
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Operations
5. Misalignment Risk
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You can end up insuring risk your product doesn’t control
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Losses can come from factors outside your platform—while you still pay for them
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Bad structure turns this from an advantage into a liability
When This Model Works (and When It Doesn’t)
Strong Fit
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$10M–$100M+ revenue cybersecurity firms
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Companies with enterprise clients
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Firms with measurable impact on loss outcomes
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Providers already offering guarantees or performance commitments
Weak Fit
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Early-stage startups
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Pure consulting or advisory firms
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Companies without claims or response capabilities
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Firms lacking operational scale
FAQs
This is the space to introduce the Features section. Use this space to highlight your unique aspects and to present specific credentials, benefits or special features you offer.
What is insurance for cybersecurity companies?
Insurance for cybersecurity companies refers to a structured approach where a security firm offers coverage alongside its product, typically through a licensed carrier and captive structure. The goal is to align the company’s services with the financial outcome of a breach, rather than relying entirely on third-party insurers.
Why are cybersecurity firms excluded from insurance panels?
Insurers typically rely on pre-selected vendor panels for breach response. Entry into these panels is limited and controlled by the insurer, which means many cybersecurity firms—regardless of capability - are excluded from participating in post-breach response.
How does this differ from traditional cyber insurance?
Traditional cyber insurance separates prevention and response. Security firms work to reduce risk, while insurers control the response and associated vendors after a breach. This model integrates the two, allowing the cybersecurity firm to remain involved and align coverage with its product.
Do cybersecurity companies need to become insurance carriers?
No. The structure relies on a licensed insurance carrier to issue the policy, combined with a captive that supports the program. This allows the cybersecurity firm to participate in the insurance layer without becoming a regulated carrier itself.
What role does a captive play in this structure?
The captive is the mechanism through which the cybersecurity firm funds and supports the insurance program. It allows the firm to take on the portion of risk tied to its product and stand behind its performance financially.
What does the insurance actually cover?
Coverage is typically focused on the cost of responding to a breach - incident response, remediation, and related expenses. It is designed to align with the part of the loss the cybersecurity firm is best positioned to influence.
What does the insurance actually cover?
Is this a replacement for traditional cyber insurance?
Who is this model appropriate for?
This approach is best suited for established cybersecurity firms with enterprise clients, recurring revenue, and a product that demonstrably reduces breach frequency or severity. It is not typically appropriate for early-stage or purely advisory firms.
Conclusion: A Shift in Control
That model is beginning to change.
Today, insurers decide who gets called after a breach, and most cybersecurity firms are left out unless they’re on a panel.
Our proprietary product gives cybersecurity companies a clear opportunity to shift the power dynamic.
Instead of waiting to be selected, they can build insurance into their own product and take control of the outcome.
This isn’t just about alignment - it’s about ownership. Ownership of winning more deals, handling the response, maintaining the relationship, and participating in the economics of the risk.
For firms operating at scale, the question is simple: continue relying on insurers, or take control of the outcome yourself.
