Cyber Insurance for Canadian Municipalities
(Disponible en anglais seulement)
Although cyber insurance has existed for many years, the prominence of cyberattacks has made organizations realize why it is so critical to have.
In Canada, the volume of cyberattacks seems to be increasing and with a significant cost. According to a Grant Thornton report on Cybersecurity in Canada from 2023, there were 100 times more supply chain cyberattacks in 2022 than there were in 2023. Furthermore, the average cost of a data breach in Canada is significant at approximately $5.64 million.
Along with private companies, municipalities are also increasingly targeted by cybercriminals. These attackers can disable essential systems, steal confidential data, and demand hefty ransoms, leaving local governments vulnerable. In January 2023, the Association of Municipalities of Ontario as art of their Cyber Security Toolkit commented that:
Cyber criminals do not distinguish their targets and no municipality – whether urban, rural, small urban, northern – is immune from a potential attack.
Luckily, cyber insurance policies can be specifically tailored to help municipalities handle the fallout from these incidents, covering a range of expenses such as legal fees and network recovery costs.
This article explores the importance of cyber insurance for municipalities, common cybersecurity risks they face, and how these policies provide financial protection during incidents.
Ransomware: the cybersecurity phenomena attacking municipalities across Canada
Municipalities serve as appealing targets for cybercriminals because they deliver essential services to the public. One of the most common types of attacks faced by municipalities are “ransomware attacks”. A 2023-2024 report from the Canadian Centre for Cyber Security highlights ransomware as the most disruptive type of cybercrime affecting North America today. This is a type of attack whereby malicious software locks users out of their systems until a ransom is paid – quite literally, it involves holding local governments to ransom.
Below are some examples of cyberattacks that Canadian municipalities have faced in recent years.
City of Hamilton attack
On February 25, 2024, the city of Hamilton in Ontario fell victim to a cyberattack that disrupted several of its IT systems.
The incident forced the suspension of nearly all municipal phone lines and brought city council operations to a standstill, impacting key services such as permit applications, the public transit app and public library resources like Wi-Fi.
In an official statement, the city emphasized swift action to minimize the effects on both their systems and the community.
The city spent over $5.7 million in response to the attack. This figure comprised of:
- External experts
- Infrastructure
- Staffing
- Autres coûts
City of Ponoka attack
In March, 2024, the town of Ponoka in central Alberta experienced a cyber incident that disrupted its networks. According to an announcement on the town’s website, the breach was carried out by an unauthorized external third party.
Once the breach was identified, swift action was taken to reduce its impact. Cybersecurity specialists were engaged to conduct a thorough investigation.
City of Huntsville attack
Again in 2024, the city of Huntsville suffered a ransomware attack in March 2024 which took months to recover from.
Huntsville’s municipal office temporarily closed after a cybersecurity breach was identified over a weekend in March. While initial findings revealed no evidence of compromised sensitive data, the town swiftly implemented its incident response plan to protect the network from additional unauthorized access.
These events highlight that cybersecurity, especially for municipalities and governments generally, is more than a technical challenge – it is integral to maintaining public trust and ensuring safety.
How cyber insurance can protect Canadian municipalities
A problem that municipalities in Canada face is that, no matter how much you invest in cybersecurity, an unexpected data breach is always going to be a risk. And unfortunately many local governments lack the budget to implement cutting-edge cybersecurity measures, leaving them vulnerable to breaches.
Cybercriminals will find new and creative ways to exploit vulnerabilities within the infrastructure of local governments, which ultimately has limited resources and may, in the worst-case scenarios, be forced to comply with hacker demands.
Therefore, given the increasing frequency and intensity of cyberattacks, cyber insurance has become a critical risk management tool for municipalities.
What does municipality cyber insurance cover?
These insurance policies are designed to mitigate the financial impact to municipalities by covering various costs associated with cyberattacks. Below are some key features of what these policies tend to cover.
The costs of investigating and responding to a cyber incident
First party cyber insurance includes access to specialized incident response teams that provide guidance in diagnosing and recovering from breaches.
This is essential, because it can often be most costly expense a municipality will spend in the event of a data reach. A policy can cover costs such as public breach notifications, credit monitoring services for affected parties, and, in some cases, ransom payments.
The cost of interruption
Cyber insurance can help to mitigate financial losses from operational disruptions caused by cyberattacks, software glitches or system failures.
Policies typically cover the costs of restoring network functionality, compensating for lost income during downtime, and addressing other financial impacts resulting from these interruptions.
Costs associated with legal claims arising from a data breach
Policies often address the financial and legal repercussions of privacy and security breaches. This includes legal fees, regulatory fines, and compensation costs that are associated with such incidents.
While this is not an example in the context of municipalities, a $9.8 million settlement was approved in 2023 after victims of the LifeLabs’ IT breach compromised the personal health information of up to 15 million people.
How much does cyber insurance cost for a municipality in Canada?
The cost of cyber insurance depends on factors such as:
- the size of the municipality
- its cybersecurity resources and posture
- the scope of coverage
Compounding this is challenges that municipalities have faced with the pricing and available of cyber insurance. As such, we recommend that municipalities consult licensed insurance professionals to find tailored solutions to suit their needs.
Learn what insurance policy is right for your government
Cyber insurance is a critical component of any municipality’s risk management strategy. As cyber threats like ransomware become more sophisticated, and amounts demanded by hackers and cybercriminals rise, municipalities must reassess their vulnerabilities and ensure adequate coverage.
For guidance on the best policy to safeguard your organization, consult a team of experienced conseillers en assurance spécialisés who specialize in cyber risk management.
At Axxima, our experienced actuaries and brokers can help you determine the most cost-effective and practical insurance solution for your organization.
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