City hall plans to upgrade its insurance coverage by spending nearly $350,000 to ensure its physical and digital assets are protected from threats like fire or cyber hackers.
During its recent budget meeting, city council voted unanimously to authorize the finance department to hire a consultant for $180,000 for property valuation services to appraise buildings to ensure the appropriate insurance coverage is applied to those venues.
This is a one-time expense; there will then be an annual update expense of $6,000.
Council also authorized the department to obtain cyber insurance for $169,600, which would provide $3 million in coverage.
These two items total $349,600 and will add 0.99 percentage points to the proposed municipal taxation increase for 2024.
Building insurance
Property insurance values require updating so claims on buildings under coverage types other than guaranteed replacement cost have sufficient coverage, a budget report said. Professional valuation services would mitigate risks on structures with insufficient values.
The city carries property insurance on 163 buildings, with the venues falling under three categories, the report continued. This includes guaranteed replacement cost (GRC), of which there are 26 buildings; replacement cost (RC), of which there are 108 venues; and actual cash value (ACV), of which there are 29 structures.
Under GRC — the highest coverage — insured buildings would be replaced exactly as before at full funding if a disaster destroyed them.
Under RC — medium coverage — these buildings would be replaced up to the amount of the liability limit. The city must insure up to 90 per cent of the venue’s value, otherwise, it becomes a co-insurer and shares in the loss.
Under ACV — lowest coverage — the payout on a destroyed building would see a deduction for depreciation.
City hall is concerned that should it make a claim on a non-GRC-protected building, it may be vulnerable to risks that affect its ability to repair or replace, the report added. The highest-priority buildings to revalue are those under the RC category that are being reclassified soon.
“A guaranteed replacement cost building will be valued, but if it drops off the list, the insurer no longer values it and hikes rates,” finance director Brian Acker told council. “We do have a significant number of buildings that are undervalued and thus underinsured. We may have a significant issue there.”
It’s the provider that moves the buildings into lower categories because as structures age, providers don’t want them in the GRC level due to the risks they carry, he continued. Yet, updating the valuations on older buildings should protect them for five to seven years.
The city receives comprehensive insurance coverage for that $3 million value, although that’s a cap because insurers want to limit their losses, the finance director added. Also, city hall pays $600,000 annually on its insurance premiums.
Cyber insurance
City hall does not possess cyber insurance, which is concerning since there are daily reports of organizations — including municipalities — suffering a virtual attack or breach, said Acker.
Administration was unable to acquire such insurance during the last few years because the requirements changed so much, he continued. However, if they purchased coverage, not only would they have financial protection, but a professional team would remedy the breach.
“It’s only a matter of time before it happens to us,” Acker added.
IT director Wade McKay said all city staff are trained to watch for phishing emails and scams, while education is the top area of focus. Providers require such training before they will even provide coverage.
Another protective method the department promotes is using multifactor authentication when accessing online accounts.
Coun. Crystal Froese agreed with the cyber insurance, pointing to world events and, closer to home, the virtual attack on Saskatchewan Polytechnic a few years ago. She noted that that institution is tight-lipped about how the situation happened and how much money it cost to rectify.
“I think it’s really important that we’re properly insured. If a building goes down, we’re in big trouble insurance-wise,” she added.
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