The UK Cyber Security and Resilience Bill – Policyholder Implications

The Cyber Security and Resilience (Network and Information Systems) Bill (the Bill) was introduced to Parliament on 12 November 2025. It aims to modernise the UK’s cyber regulatory regime, widen the scope of regulated entities, and strengthen resilience across critical sectors, amid rising threats and recent high‑profile cyberattacks. 

For insurance policyholders, the Bill is expected to prompt greater focus on demonstrable compliance with enhanced risk‑management and governance standards. There will also be a continuing emphasis on disclosure at the time of placement and incident reporting, in particular within cyber policies. 

Key Elements of the Bill and Implications for Policyholders   

1. Expanded regulatory scope

For the first time, companies providing digital services will be regulated, including IT and cybersecurity firms, that support both private and public sector organisations. These providers will be required to meet minimum security standards and promptly notify customers of significant or potentially significant cyber incidents. If not already in place, these service providers will need to implement robust incident response plans and ensure continuous monitoring and close coordination with regulators and the National Cyber Security Centre. 

Professional indemnity and cyber coverage will need to be reassessed in light of heightened regulatory obligations. Reliance on in-scope service providers and how the relationship is monitored will need to be reviewed, as this could impact the level of cover available.

2. Increased incident reporting obligations

The Bill broadens the scope of what constitutes a reportable incident, capturing a wider range of events. This includes ransomware incidents (i.e., where software infects a victim’s computer system, preventing or impairing access to applications or files - usually containing sensitive or personal data - until a sum of money is paid), or pre-positioning (i.e., where attackers gain undetected access to a victim’s network for future significant disruption). 

The Bill also introduces more stringent reporting timeframes, with in-scope entities being required to submit to the relevant regulator:

1. an initial notification within 24 hours of becoming aware of a reportable incident; and
2. a full notification within 72 hours. 

It will be key to consider how these more stringent reporting obligations are reflected within current cyber insurance wordings.  Policy conditions will in due course need to be aligned with reporting requirements under the legislation to avoid friction when it comes to making a notification. Insurers are likely to expect detailed disclosures and timely notifications that track the legislation’s reporting expectations. 

In addition, these broadened incident-reporting obligations will likely heighten scrutiny of boards’ oversight of detection, escalation and response. Directors will therefore be expected to perform robust due diligence over cyber risk and to implement controls that meet the legislation’s standards, and to evidence compliance to insurers through disclosures. 

3. Enhanced regulator’s powers

The Bill adopts a sector‑specific, multi‑regulator model to deliver targeted and proportionate oversight across in-scope services. It assigns implementation and ongoing supervision to 12 regulators, each responsible for its relevant sector or service. For example, medium and large managed service providers that deliver IT and cybersecurity services will be regulated by the Information Commissioner’s Office, reflecting its proposed role in overseeing network and information systems security, operational resilience and incident response. 

The Bill proposes to provide these regulators with enhanced powers to enforce compliance, including the ability to introduce fines and penalties for organisations that fail to comply with cybersecurity standards. 

The extent to which regulatory fines and penalties imposed by one or other regulator can be validly insured under policy terms remains a complicated issue. Policyholders will need to closely examine the policy wording to understand how fines and penalties arising following a breach of cybersecurity obligations are treated and the nature of the penalty or order imposed. Some wording refers to cover being available unless the fines or penalties are uninsurable by law. That will require a clear understanding of the legislation, the powers of the authority or organisation imposing the penalty and the purpose of and language around any regulatory fines.

Beyond policy wording, insurability of fines and penalties under the legislation will likely require an assessment which includes (a) whether the relevant regulator has issued an express prohibition on the insuring of fines and/or penalties; and (b) the nature of the conduct resulting in the penalty or fine and the mischief which is sought to be prevented (i.e., (i) intentional or reckless wrongdoing; (ii) strict liability situations, where no particular fault is required; and (iii) negligence).

Conclusion

In summary, the Bill raises the bar for cyber resilience and governance and will shape how coverage and incident reporting are treated across both cyber and other relevant elements of cover. Regulatory reporting will need to be aligned with policy conditions, and governance and controls should be clearly and routinely evidenced. Taking these steps will minimise coverage gaps, reduce claims friction, and strengthen operational resilience as the new regime takes effect. 

The Bill is progressing through Parliament and is expected to commence in phases from the first half of this year. Some provisions will take effect on Royal Assent, with certain regulatory powers coming into force one month later. The remaining measures will be brought into force by secondary legislation.

For further insights from Reed Smith on cyber risk, see our recent pieces on navigating cyber risk and on cyber coverage for data centers.