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Cybersecurity is not simply an IT problem anymore, and it is especially challenging for local governments. In fact, the majority of the publicized ransomware attacks in the United States last year targeted local governments.
  
Hackers use ransomware to hijack government computer systems and hold them hostage until their victims pay a ransom or restore their system using backups. In 2021, the FBI issued a public service announcement stating that “state and local governments have been particularly visible targets for ransomware attacks.”  

It doesn’t look like attacks against governmental entities will abate any time soon. There was a 150% increase in ransomware attacks over the previous two-year period. Along with the spike in ransomware attacks, cyber coverage premiums have increased significantly.  

Cyber Risk Threatens Municipal Services, Not Just IT Systems 

Ransomware affects more than just a city's computer systems. It can also be used to interrupt a water supply or suspend the operations of a water treatment plant. 

For example, a hacker gained access to the operations system of a water treatment plant in Florida. There was an attempt to poison the water supply by increasing the amount of sodium hydroxide, also known as lye, into the water system. A water operator noticed the increase and was able to reverse the change before the toxic levels reached the water supply. 

Will Coverage Be Available? 

Cyber losses continued  rise in 2021, particularly from an influx of ransomware incidents. While cyber premium rates are rising sharply, concerns remain whether cyber carriers can continue to successfully provide cyber coverage in the future. Insurers are taking underwriting action by eliminating coverage for items such as social engineering, which includes impersonating an individual or company through fraudulent emails. 

What Does Cyber Insurance Cover?

Cyber insurance began as a secondary line and an endorsement on an insurance policy, but now cyber security is a primary component and essential ingredient of a municipality's risk management program. 

Great American Fidelity Insurance Company is the cyber carrier for the SC Municipal Insurance and Risk Financing Fund for the 2022 program year. For eligible members, Great American provides $1 million in liability expense coverage and a $5 million pool aggregate. Coverage is not provided for perils such as fraudulent instruction including written or electronic instructions used to commit fraud; telephone fraud and funds transfer fraud.  

Great American provides coverage for first party losses, including forensics, notification, identity monitoring, breach coaching, data restoration, systems restoration, extortion costs and business interruption. 

The coverage also provides for third-party liability, which includes defense expense, damages, pre-judgment interests, judgments, and post judgment interests and settlements.  

For questions about cyber liability coverage, contact Robert Collins, underwriting manager at 803.933.1279.