British SMEs’ uptake of cyber insurance is not keeping pace with the ever-increasing risk, according to a report by research and consulting group GlobalData.

Uptake has grown from 2.1% of SMEs taking out cyber cover in 2014 to 13.7% last year, but this is low compared with other commercial products.

UK businesses are increasingly dependent on the digital space, creating a greater need for cyber insurance as criminals move online, the report says.

Any business that holds personal information that can be sold on or used for identity fraud is vulnerable, analyst Danielle Cripps says.

“SMEs are increasingly threatened by cyber criminals or system failures, which a cyber insurance policy could help protect against,” she said.

“Indeed, SMEs could be argued to be most in need, because they have the fewest resources to recover from financial losses.”

Businesses’ focus should be on improving cyber security, while insurance will help organisations recover from attacks and mitigate the impact on business continuity.

Cyber insurance uptake in the UK is expected to improve once the EU General Data Protection Regulation takes effect on May 25 next year. It requires companies to notify regulators and customers put at high risk due to data breaches.

“Businesses will also have more accountability and conditions to comply with, making them more liable under the new regulation,” Ms Cripps said.

“The additional risk this creates means businesses are more likely to seek cover, which will help drive the market.”

Security is also expected to improve under the UK Government’s new National Cyber Security Strategy.

Ms Cripps says cyber insurance not only provides financial support, but could give companies access to extra technical expertise.