MSP insurance is a market term for the insurance a managed service provider (MSP) may arrange for claims connected with managing client IT systems. In Australia, two covers an MSP may assess are technology professional indemnity (Tech PI) insurance and cyber insurance.
Tech PI insurance is designed to cover claims that your advice, service or work caused a client financial loss. It may include legal defence costs, compensation and any settlement you are legally liable to pay, subject to the policy terms.
Cyber insurance is designed to cover costs after a data breach or cyber attack. First-party costs may include incident response, forensics, notifying affected people and data recovery. Third party cover may respond to claims from customers or regulators.
Cover depends on the policy and insurer you choose. Check the policy wording and its terms and conditions for what is and isn't included.
Key takeaways
- One incident at an MSP may lead to claims from several clients.
- Australian Signals Directorate guidance links privileged access to intrusion risk.
- A master services agreement may add liability that Tech PI commonly excludes.
What do MSP insurance claims look like?
MSP insurance claims may follow a ransomware attack or an outage. These managed IT service provider claims examples show how the two events can differ.
| Claim |
Hypothetical claims example |
Cover to check |
| Ransomware Spread Incident |
A threat actor compromises an MSP's remote management tool and deploys ransomware across multiple client environments. Several clients suffer data loss and business interruption and bring claims alleging inadequate security controls. |
Claims arising from ransomware, malware transmission or security failures may be covered under Cyber and Privacy Liability, with related liability claims potentially covered under Technology Liability |
| System Outage After Update |
A routine software update is deployed across a client's systems. The update causes unexpected downtime, disrupting operations and revenue. The client alleges the service error caused financial loss and seeks compensation. |
Claims arising from system outages or errors in IT services may be covered under Information Technology Professional Indemnity where the insured is legally liable. |
Swipe left or right to see the full table.
Important: These claims are examples only. Cover is subject to policy terms, conditions and exclusions. Policy wordings vary between insurers. Always refer to the policy wording and its terms and conditions for details. If you have questions about a particular possible claim or would like assistance about whether a certain claim might be covered it is always best to speak to an upcover team member or your insurance broker.
You can start a claim through the make a claim page. Admitting liability, incurring costs or agreeing to a settlement before you notify your insurer may affect your claim. Starting a claim does not confirm that your claim is covered; your insurer assesses it under the policy terms, conditions, exclusions and limits.
What is MSP aggregation risk?
MSP aggregation risk is the chance that one incident at a managed service provider reaches many client networks at once. An Australian Signals Directorate (ASD) joint advisory says threat actors "can use a vulnerable MSP as an initial access vector to multiple victim networks".
Claims from several clients may follow. Related events may be treated as separate claims or aggregated as one claim, depending on the policy wording.
Why does privileged access matter for MSP insurance?
Privileged access matters because an MSP may hold administrator-level access to client systems, including through remote monitoring and management (RMM) tools. As at the time of writing (October 2026), ASD's MSP guidance says: "Without proper controls, this high level of privileged access … can leave customer networks and data vulnerable to intrusion."
Underwriters may ask about controls such as privileged access management and multi-factor authentication. See cyber insurance requirements for the wider underwriting checklist.
What might MSP tech professional indemnity and cyber policies exclude?
An MSP's Tech PI and cyber policies each commonly exclude some losses, so holding both policies may still leave gaps.
Tech professional indemnity
Exclusions commonly include, but are not limited to:
- service credits, liquidated damages and other liability you take on under a contract that would not otherwise exist under the law (contractual liability exclusion)
- claims and circumstances you knew about before the policy started
- physical injury or property damage
Cyber insurance
Exclusions commonly include, but are not limited to:
- incidents a senior executive knew about, or could reasonably foresee, before cover started
- outages at third party utilities or telecoms providers, unless the provider's own security failure directly caused them
Important: These lists are not exhaustive. Exclusions vary between insurers. Always refer to the policy wording and its terms and conditions for the exclusions that apply to you, and if you have questions you should speak to your insurance broker or the upcover team.
How does an MSA affect managed service provider insurance?
A master services agreement (MSA) may affect MSP insurance through its liability cap, indemnities and service credits.
A broad indemnity may extend your liability beyond what you would owe at law; see Tech PI and breach of contract. See service level agreements for how service credits differ from damages claims.
How upcover can help
upcover arranges Tech PI and cyber insurance for managed IT service providers. upcover works with 80+ insurance partners and can arrange quotes from a range of insurers.
- 70,000+ businesses covered across Australia
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Frequently asked questions
Is MSP insurance the same as IT liability insurance?
MSP insurance describes the covers an MSP may arrange. IT liability insurance may describe a combined technology liability package, depending on the insurer; Tech PI can be one component.
What affects the cost of MSP insurance?
Your price may depend on factors including your industry classification, your revenue and the stage of your business.
How do limits apply when one incident affects many MSP clients?
How your policy limit applies to claims from several clients depends on the policy wording. An aggregate limit is the total ceiling on what the insurer will pay across multiple claims in a policy period.
Does the Essential Eight affect MSP insurance?
Alignment with the Australian Signals Directorate's Essential Eight does not by itself determine whether cover will be offered. See cyber insurance requirements for other underwriting factors.
Do clients ask MSPs for a SOC 2 report?
A client may ask an MSP for a System and Organization Controls 2 (SOC 2) report. See SOC 2 and cyber insurance for how a controls report differs from insurance.
Written by upcover's editorial team.
This article provides general information only and does not take into account your objectives, financial situation or needs. It is not legal advice: get legal advice about the liability cap, indemnity and service level terms in your client contracts. Guidance described is as at the time of writing (October 2026) and may change. Insurance availability and cover are subject to underwriting and the terms, conditions, limits and exclusions of the relevant policy. Read the policy wording and its terms and conditions before deciding. upcover arranges insurance products with selected insurers and underwriters and does not compare all general insurers or insurance products available in the market.
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