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Ever been in a massive traffic jam and wonder what the heck was causing it? The citizens of one city actually got a (disturbing) answer — a cyber hack was the culprit. The Polish town of Olsztyn—a “Smart City” with automated traffic monitoring and Wi-Fi-equipped trams—ground to a halt in 2023 due to a cyber intrusion. Attackers infiltrated the transport authority’s systems, scrambling signals at nearly 100 intersections, sparking widespread gridlock on key arteries and blocking strap hangers from buying bus or tram tickets. To break the jam, city officials resorted to yanking server cables, isolating the network manually. This episode illustrates why cyber insurance for government, specifically for “Connected Cities,” has a compound annual growth rate (CAGR) of 15.4% according to a recent report.
Market in the Billions of Dollars?
The new report from Market.us forecasts the global smart-city cyber insurance market will race from $1.2 billion in 2024 to $5.1 billion by 2034. The market may be even larger according to Dataintelo, which pegs it at $10.2 billion for 2024 with an app. 20% CAGR, possibly due to the report’s wider scope, encompassing health and finance tie-ins. These policies addresses threats to technologies including smart energy grids and transportation systems to databases full of citizens’ personal data. The market is international, led by North America.
Drivers of Cybersecurity Insurance for Government
Catalysts for the market include stricter data protection mandates and the imperative to sustain vital services against mounting threats. 78% of local administrations now carry dedicated cyber policies, a jump from 61% the prior year, the Market.us report claims. We’ve reported on the growth in this sector, along with some good news about the value of cyber insurance when hackers target governments and the trend of government agencies creating risk pools to mitigate their risk. These developments signal increased awareness of critical infrastructure cyber insurance and security. Yet hurdles loom, from challenges assessing perils to heterogeneous technology networks to skill gaps in smaller locales.
Threats from Hostile Nation States
It isn’t just Poland’s roads that have been hit. Its rail network endured a separate 2023 assault where intruders hijacked radio channels to blast Russia’s anthem and Putin’s orations, stalling 20 trains near Szczecin amid suspicions of Russian-backed sabotage. Government infrastructure attacks are increasing across the world, according to media reports. In the US, a 2024 ransomware hit ravaged a municipality’s online portals, exposing records for 500,000 people. Jackson County, Missouri, shuttered operations that year from a similar onslaught, delaying public aid. Utilities globally faced 2025 spikes in intrusions, triggering blackouts in power and water ops.
Many such attacks are linked to nation-state hackers, working directly for or on behalf of governments such as Russia, China and Iran. Munich Re flags nation-state perils to energy and transit, with damages in the billions. “The energy, transport and telecommunications sectors have become key targets. Between January 2023 and January 2024, critical infrastructure worldwide was exposed to over 420 million attacks – an increase of 30% since 2022,” according to Munich Re.
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Who’s “Living Off the Land” in Your City?
Attacks against connected cities and government organizations come in all the the expected forms, from DDoS to ransomware. But there’s also what Munich Re calls one of the most common forms of national state threats: “(L)iving-off-the-land attacks (LoL), in which intruders use legitimate software and system-specific functions to carry out malicious operations on the system,” the insurance company reports. (See an overview of “LoL” attacks here.)
As global tensions continue to increase, so do the risks of massive attacks on connected cities, making cybersecurity insurance for government a growth sector in the broader cybersecurity insurance market.
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