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Reading time: 5 minutes

Welcome to the Pride,

Every week, we review 200+ insurance articles to highlight what matters most.

This week we’re getting political. Why? Because we can. And your board needs to know what all the cyber noise is about. They want it from all sides. No fluff. No Spin. And no BS.

Three developments caught our attention this week:

• The budget of CISA, the federal cybersecurity dept., is getting slashed
• Cyber defense being pushed from federal to state/local governments
• The frothy cybersecurity landscape is creating asymmetric vulnerabilities for financial institutions

The common thread? Partisanship. And a fundamental redistribution of cyber risk that requires immediate reassessment of your institution's security posture and insurance coverage.

Washington's Cybersecurity Apparatus Under Partisan Pressure

“The Left Leaning View,” Summary

Trump's retaliatory budget cuts threaten federal cyber defenses, Politico is reporting.

Leadership churn at CISA and allied agencies is hollowing out institutional expertise.

Public-private coordination is fracturing precisely when China and Russia are ramping up attacks on U.S. critical infrastructure. Morale collapse and talent flight are shifting defensive capacity away from the federal core into siloed private enclaves.

Insurers now brace for more frequent, complex claims amid a degraded national response capability.

Regulatory volatility further magnifies coverage exclusions and premium volatility for financial institutions. (source)​

So what?

Financial institutions must factor a weakened federal backstop into their risk management strategies.

Board-level conversations should address heightened systemic exposure that may not be fully covered in existing policies.

Risk managers should anticipate insurance carriers adjusting underwriting guidelines to account for diminished government support during cyber incidents.

CFOs should prepare for potential premium increases as insurers reassess the risk landscape without robust federal cyber defenses.

​Contact LION Specialty for a comprehensive review of your cyber coverage

National Cyber Defense Shifting to Private Hands

“Down the Middle View,” Summary

The cybersecurity community has broken decades of apolitical tradition, according to reporting from GovTech.

Federal cyber capabilities face significant restructuring.

The LION Lens:

• What happened: President Trump's March 2025 executive order shifts cybersecurity duties from federal bodies to states and localities, even as CISA faces up to 1,300 job cuts and the State and Local Cybersecurity Grant Program lapses.
• Why it matters: With daily intrusions targeting police, health systems, courts and schools, only 22 of 48 participating states meet baseline security standards, and local governments grapple with acute IT talent shortages.
• Practical implications: Agencies must centralize IT oversight, reallocate budgets to cyber defenses, accelerate multi-factor authentication and ".gov" domain adoption, and pursue alternative funding or public-private partnerships to prevent service outages.

Jurisdictional fragmentation is creating easily exploitable "soft targets" for organized cyber adversaries.

Political and regulatory divergence among states is producing a patchwork of standards that complicates compliance for multi-state operators. (source)

So what?

The federal retreat represents a fundamental risk transfer to private sector institutions.

Organizations with multi-state footprints now face navigating inconsistent compliance requirements, varying enforcement mechanisms, and uneven security capabilities across jurisdictions.

Financial institutions holding data across multiple states must understand the varying capabilities of each state's cyber defenses.

This new fragmentation creates operational risk that must be addressed at the board level with jurisdiction-specific risk mapping.

Our Advice

• Conduct a critical systems audit immediately, prioritizing data repositories and essential service infrastructure across all states where you operate.
• Establish resource-sharing agreements with regional partners to pool cybersecurity expertise when operating in states with limited capabilities.
• Implement multi-factor authentication across all client-facing systems within 90 days, regardless of varying state requirements, to establish a consistent security baseline.

​Contact LION Specialty for a comprehensive review of your security posture

Cybersecurity's New Federalism Creates Defense Gaps

“The Right Leaning View,” Summary

CISA's $491M budget cut eliminates its disinformation work.

The agency's refocus on infrastructure marks the most significant redistribution of cyber defense responsibilities in a generation.

This shift is creating an uneven patchwork of protection capabilities across states and critical industries.

Sophisticated foreign adversaries could methodically exploit these vulnerabilities through the weakest links in the system.

The administration has quietly reduced nearly half of the election-security budget without establishing contingency plans for state-level gaps.

Bipartisan warnings suggest next year's midterm elections could unfold as a live-fire exercise for adversaries probing these new defense gaps.

So what?

Financial institutions must prepare for an environment where adversaries will target jurisdictions with the weakest cyber defenses first.

When these attacks succeed, the effects will cascade across interconnected systems regardless of your own security measures.

Governance fractures in the national cybersecurity posture will invite probing attacks specifically calibrated to exploit uneven defenses.

Institutions must strengthen capital reserves specifically earmarked for cyber resilience to withstand systemic shocks when these vulnerabilities are weaponized.

​Contact LION Specialty to assess your institution's exposure across state lines

The Bottom Line

If you're a director or officer at an FI - your personal assets are on the line if your company faces a major claim.

That's why we created the D&O Contract Vigilance Blueprint. It’s a 5-day email course to help you:

• Secure better D&O insurance: Learn how to avoid common policy mistakes and identify overlooked coverage gaps.
• Protect your personal assets: Understand your potential liability and take steps to mitigate your risks.

​>>> Get the D&O Contract Vigilance Blueprint​

Don't wait until a claim hits to find out your institution is under-protected.

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Stay Covered,

Natasha & Mark

Co-Founders and Managing Partners

LION Specialty