The OT Cyber Insurance Gap: Why Standard Policies Miss Cyber-Physical Loss

In August 2025, a cyberattack shut down Jaguar Land Rover's UK plants for roughly five to six weeks. The economic impact rippled across some 5,000 organizations in its supply chain and ran to an estimated £1.9 billion [1]. The company's cyber insurance coverage for it: about £25 million. The UK government stepped in with a £1.5 billion loan guarantee to prevent a cascade of supplier bankruptcies [2].

That gap — between a multi-billion-pound loss and a policy that covered a fraction of it — is not a story about one company buying too little insurance. It's a structural feature of how cyber and property policies are built, and it sits, largely invisible, on the balance sheets of industrial operators worldwide. If a cyberattack can stop your production, damage your equipment, or halt your supply chain, there's a reasonable chance your current coverage doesn't reach the loss you'd actually suffer.

This is the OT cyber insurance gap. Understanding why it exists is the first step to closing it.

Does cyber insurance cover physical damage?

For most standard policies, the honest answer is: not the physical part, and often not the business interruption that follows from it.

Walk a cyber-physical loss through the two policies an industrial operator typically holds. A cyberattack reaches the plant floor and causes a physical outcome — equipment damaged, a process halted, product spoiled. You file on your cyber policy, which was built around data breaches, privacy liability, and incident response. It looks at the physical damage and the business interruption from a physical stoppage and, in many wordings, says that's not what this policy covers. So you file on your property policy, which was built around fire, flood, and windstorm. It looks at the cause — a cyberattack — and points to a cyber exclusion. The loss falls into the seam between them.

That seam is not an accident or an oversight by either underwriter. It's the predictable result of two insurance products that were each designed around a different peril, meeting a loss that belongs to neither of their original models.

Why the gap exists structurally

Across OT submissions, unanswered questions tend to fall into three groups, each mapping to controls that drive loss severity.

Cyber insurance grew up in the late 1990s around a specific problem: data. Breach notification, privacy liability, third-party claims, the cost of responding to a compromise. That's the DNA of the product, and it's why a standard cyber policy is well-shaped for a records breach and poorly shaped for a damaged turbine.

Property insurance has the opposite DNA. It's built for physical loss but from physical causes, and over the past decade many property wordings have added explicit cyber exclusions — clauses designed to keep cyber-triggered loss out of the property tower and prevent it from accumulating in unexpected places.

Cyber-physical loss lives precisely where those two products don't overlap: physical damage from a digital cause. The gap isn't a hole someone forgot to fill. It's the space between two well-defined shapes that were never designed to meet, and it's widening as IT and OT converge. Every connection between a corporate network and a plant floor is a new pathway for a digital event to become a physical one, which means the population of losses that fall into the seam grows as industrial digitization accelerates.

How big, and why it's growing

The scale is substantial and understated. The traditional cyber insurance market — built around IT liability since 1999 — is now roughly a $16 billion global market [3], but very little of that capacity is shaped for OT cyber-physical loss. Industry estimates put the broader cyber protection gap in the hundreds of billions of dollars annually. The Jaguar Land Rover incident is not an outlier; it's a preview of what the gap looks like when a cyber-physical event hits an operator at scale.

The driver is digitization and convergence. As industrial environments deploy new technologies and connect OT to IT for efficiency, monitoring, and remote operation, they inherit IT's threat exposure while retaining OT's physical consequences. A breach that starts in the IT layer can now cascade into power loss, cooling failure, or a safety event in ways that were architecturally impossible when control systems were isolated. Data centers are a vivid current example: as AI workloads turn them into tightly coupled cyber-physical systems, an IT-origin breach can trigger power, cooling, and safety failures that no data-breach policy was ever written to cover.

Why this is an underwriting problem, not just a wording problem

It's tempting to see the gap as a drafting issue — write better clauses, add affirmative cyber-physical coverage, and the problem closes. Wording is part of it, and the market is moving there. But the deeper reason the gap persists is that carriers can't confidently price what they can't confidently assess, and OT cyber-physical loss has been genuinely hard to assess.

Consider what pricing this risk actually requires. You need to understand the physical process, map how a cyber event propagates to a physical consequence, estimate the financial impact of that consequence including downtime and equipment loss, and do it fast enough to fit an underwriting timeline. Most cyber underwriters weren't equipped with an OT loss model, and building one submission by submission, by hand, wasn't practical. So the rational response was caution: exclude it, sub-limit it, or price it so conservatively that operators didn't buy. The gap is partly a wording gap, but underneath it is an assessment gap.

This is the part of the problem that's changing. When OT cyber-physical risk can be quantified at submission speed — the physical pathways understood, the loss scenarios modeled, the exposure expressed as a loss curve rather than a guess — the barrier to affirmative coverage drops. Carriers can price the risk they previously had to avoid. This is where AI-assisted, OT-specialist underwriting enters the story: not as a product feature, but as the thing that makes a previously unpriceable risk priceable.

What closing the gap looks like

Closing the gap takes movement on both sides of the problem. On the product side, affirmative cyber-physical coverage is emerging — endorsements and standalone structures that explicitly cover physical damage and business interruption from a cyber cause, rather than leaving it to fall between policies. On the assessment side, the market needs the ability to quantify OT cyber-physical loss credibly enough that underwriters will deploy capacity against it and capital will flow toward it.

Those two moves reinforce each other. Better wording without better assessment produces coverage that carriers are afraid to price. Better assessment without better wording produces analysis with nowhere to go. The gap closes when the market can both word cyber-physical loss into coverage and underwrite it with confidence.

The OT Cyber Insurance Gap: Why Standard Policies Miss Cyber-Physical Loss