C A N A D A’ S I N S U R A N C E A N D R I S K M A G A Z I N E . C A N A D I A N U N D E R W R I T E R . C A
JULY 2 0 1 7 PM#40063170
Pitch Perfected BY ANGELA STELMAKOWICH
Data’s Delicate Balance BY BRETT HANSEN
Into the Wind BY JATIN SHARMA
VISION ACTION
SCOR LAUNCHES ITS NEW STRATEGIC PLAN Thanks to its accelerated development in Life and P&C reinsurance, SCOR now belongs to the top tier of global reinsurers. The Group’s premium income will reach around EUR 13.7 billion in 2016, an increase of 34% since 2013. Shareholders’ equity reached EUR 6.3 billion at 30 June 2016, up 33% over the strategic plan, after the distribution of EUR 781 million in dividends. SCOR’s development has focused on the twofold objectives of profitability and solvency. All the targets of the “Optimal Dynamics” plan, which has come to an end, have been achieved. With the upgrade of its rating in 2015, SCOR is now rated AA–(1). Plan after plan, the SCOR group demonstrates its ability to find solutions to all the challenges posed by a difficult and shifting economic and financial environment. SCOR absorbs loss event shocks thanks to its active, state-of-the-art risk management policy. Today, SCOR launches its new three-year strategic plan, “Vision In Action,” which is fully aligned with “Optimal Dynamics.” Over the next three years, SCOR will pursue its dynamic combination of growth, profitability and solvency with ambition and determination, serving its clients and benefitting its shareholders.
›
›
2016–2019 TARGETS
HIGH RETURN ON EQUITY
OPTIMAL SOLVENCY RATIO
ROE ≥ 800 basis points above the five-year risk-free rate over the cycle (2)
Between 185% and 220% of the SCR (3)
(1) Standard & Poor’s and Fitch Ratings. (2) Based on a 5-year rolling average of 5-year risk-free rates. (3) Solvency Capital Requirement.
scor.com
SCOR_PUb_FI_206,375x273,05-CanadianUnder.indd 1
21/04/2017 16:33
CANADIAN UNDERWRITER
VOL. 84, NO. 7, JULY 2017 CANADA’S INSURANCE AND RISK MAGAZINE. PUBLISHED BY NEWCOM BUSINESS MEDIA INC.
www.canadianunderwriter.ca
COVER STORY
Pitch Perfected
22
Reinsurance pricing has hit a low note. Global conditions continue to put downward pressure on rates, but forces are in play that could foster improved efficiency and responsiveness. Will innovation and partnerships allow reinsurers to hit a higher note in future? BY ANGELA STELMAKOWICH
FEATURES
10 16
27
Cyber Security
Homeowner Satisfaction
Fort McMurray Reviews
The balancing act demanded of employees trying to meet the twin goals of efficiency and data safety makes the people side of data security critically important.
The lack of policy coverage understanding by consumers is a threat to home insurers’ reputations. Educating consumers now, in advance of an event, is recommended.
While the Fort McMurray wildfire, the subject of two new reports, is unlikely to change how reinsurers conduct business here, it may impact pricing for some.
BY BRETT HANSEN
BY ROBERT LAJDZIAK & VALERIE MONET
BY GREG MECKBACH
14
19
29
Accounting Standards
Wind Development
Toxic Data
Canadian insurers should expect that IFRS 17 will take work and investment. That said, any growing pains should be well worth it.
Canadian onshore wind development faces risks. Adopting measures to transfer risk will be key to maintaining safe and profitable operations.
Businesses have loads of stored data on their systems. With this potentially being fertile ground for hacking, a purge may be in order.
BY DANA CHAPUT
BY JATIN SHARMA
BY ANDRE BOYSEN
31 Canadian Insurance Financial Forum While reinsurance industry players must remain alert to an endless stream of change, they also need to take timely action on lessons learned. BY JASON CONTANT & ANGELA STELMAKOWICH
July 2017 Canadian Underwriter
3
(416) 510-6793 Twitter: @CU_Harmeet @InsuranceMedia Gary White the industry, providing marketers with aTwitter: range of specialized (416) 510-6800 astelmakowich@canadianunderwriter.ca steve@canadianunderwriter.ca hsingh@canadianunderwriter.ca -6793 Twitter: @InsuranceMedia Editor (416) 510-6800 (416) 442-5600 ext. 3652 ve marketing communications opportunities. the industry, marketers with a rangeService of specialized (416) 510-6760 (416) 510-6793 Twitter:providing @InsuranceMedia Associate Editor Subscriptions/Customer National (416) 510-6800 communications ckbach Art Director and highly effective marketing opportunities. Twitter: @CU_Harmeet Editor (416) 510-6800 Greg Meckbach Art Director h@canadianunderwriter.ca Gail Page Gerald Heydens and highly effective marketing Associate442-5600 Editor communications opportunities. ckbach (416) ext. 3652 Claims Art Director Associate Publisher gmeckbach@canadianunderwriter.ca Gerald HeydensSubscriptions/Customer Service CU_Greg Greg Meckbach Art Director gpage@bizinfogroup.ca h@canadianunderwriter.ca Gerald Heydens Art Consultation Twitter: @CU_Greg Paul Aquino -6796 gmeckbach@canadianunderwriter.ca Gerald HeydensGail Page Art Consultation Manual CU_Greg Sascha Hass (416) 510-6796 Associate Publisher (416) 510-5187 Art Consultation Twitter: @CU_Greg Sascha Hass gpage@bizinfogroup.ca paul@canadianunderwriter.ca Art Consultation -6796 tor InsuranceMarketer.com VOL. 84, NO. 7, JULY 2017 Paul Aquino Sascha Hass Canadian Underwriter’s Insurance Media Group is committed (416) 510-6796 Production Manager Online Editor Singh Sascha Hass Canadian Underwriter’s InsuranceManager Media Group 510-5187 is committed Twitter: @InsuranceCanuk Production (416) Circulation Manager tor Gary White Harmeet Singh to providing most timely and relevant news, information paul@canadianunderwriter.ca anadianunderwriter.ca Production Manager Onlinethe Editor Gary White to providing the most timely and relevant news, information Singh (416) 510-6788 (416) 510-6760 hsingh@canadianunderwriter.ca Production Manager Mary Garufi PROFILE to insurance from all segments of CU_Harmeet and resources Gary professionals White Harmeet Singh Managing Director, (416) 510-6760 Editor Twitter: @InsuranceCanuk Senior Publisher Circulation Manager anadianunderwriter.caTwitter: and resources to insurance professionals from all segments of @CU_Harmeet Gary White -5600 ext. 3652the industry, providing marketers with a range of specialized Insurance Mediamgarufi@bizinfogroup.ca Group (416) 510-6760 Angela Stelmakowich hsingh@canadianunderwriter.ca Subscriptions/Customer Service Steve Angela Stelmakowich Wilson National CU_Harmeet National (416) 510-6788 (416) 442-5600 ext. 3652the industry, providing marketers with Mary a range ofGarufi specialized (416) 510-6760 Account Manager Subscriptions/Customer National astelmakowich@canadianunderwriter.ca the Service insurance industry’s social network Ian Portsmouth Twitter: @CU_Harmeet Gail Page and highly effective marketing communications opportunities. astelmakowich@canadianunderwriter.ca steve@canadianunderwriter.ca Claims -5600 ext. 3652 Claims ext. 3545 (416) 442-5600 Publisher Subscriptions/Customer Servicemarketing ian@canadianunderwriter.ca (416) 510-6793 Gail Page and highly effective communications opportunities. Michael Wells (416) 442-5600 ext. 3652 Claims gpage@bizinfogroup.ca mgarufi@bizinfogroup.ca Associate Publisher (416) 510-6793 Subscriptions/Customer Service Twitter: (416)@InsuranceMedia 510-6800 uino Manual Gail Page Account Manager Manual gpage@bizinfogroup.ca Associate Editor Publisher (416) 510-5187 Paul Aquino Gail Page (416) 510-6800 Manual InsuranceMarketer.com (416) 442-5600 ext. 3545 Art Director nadianunderwriter.ca michael@canadianunderwriter.ca gpage@bizinfogroup.ca Print Production Manager Associate Publisher InsuranceMarketer.com Associate Editor (416) 510-5187 Greg Meckbach uino Michael Wells paul@canadianunderwriter.ca gpage@bizinfogroup.ca InsuranceMarketer.com Gerald Heydens InsuranceCanuk gmeckbach@canadianunderwriter.ca (416) 510-5187 Paul Aquino Circulation Manager Greg Meckbach Art Director 510-5122 Phyllis Wright nadianunderwriter.ca (416) Twitter: @InsuranceCanuk (416) 510-5187 Circulation Manager (416) 510-6796 michael@canadianunderwriter.ca -6788 Production Manager paul@canadianunderwriter.ca Print Production Manager Mary Garufi gmeckbach@canadianunderwriter.ca Gerald Heydens InsuranceCanukINSURANCE Circulation Manager (416) 510-6788 Mary the insurance industry’s social network Online Editor KarenGarufi Samuels Twitter: @InsuranceCanuk mgarufi@bizinfogroup.ca Twitter: @CU_Greg Circulation Manager (416) 510-5122 National Account Manager -6788 Phyllis Wright Manager President Mary Garufi industry’s social network the insurance (416) 510-5190 Art Consultation Jason Contant mgarufi@bizinfogroup.ca National (416) 510-6788 Claims (416) 442-5600 ext. 3545 (416) 510-6796 Account Manager Mary Garufi industry’s social network DIRECTORY the insurance jcontant@canadianunderwriter.ca Wells mgarufi@bizinfogroup.ca Sascha HassManager Claims (416) 442-5600 ext. 3545 Creighton Circulation Elliot Ford Manual Bruce Manager insBlogs Michael Wells mgarufi@bizinfogroup.ca (416) 442-5600, Ext. 6893 Account Manager InsuranceMarketer.com Manual canadianunderwriter.ca (416)Production 442-5600 ext. 3545 President Account Manager Mary Garufi Print Manager Online Editor Wells InsuranceMarketer.com michael@canadianunderwriter.ca INSURANCE eford@canadianunderwriter.ca (416) 442-5600 ext. 3545 Production Manager Print Production Manager Account gs mary@newcom.ca -5122 Michael Wells Phyllis Wright HarmeetManager Singh Elliot Ford Bruce Creighton insBlogs canadianunderwriter.ca Vice President DIRECTORY Print Production Manager (416) 510-5122 (416) 614-5831 Michael Wells Gary White instouch.com Phyllis Wright (416) 510-5117 NCE michael@canadianunderwriter.ca hsingh@canadianunderwriter.ca Print Production Manager instouch.com mike@canadianunderwriter.ca -5122 Manager Phyllis Wright President eford@canadianunderwriter.ca (416) 510-6760 INSURANCE Print ProductionAlex Manager Papanou (416) 510-5122 Twitter: @CU_Harmeet Account Manager TORY (416) 510-5122 Phyllis Wright President Insurance Blogs hosted by Canadian Underwriter rd Phyllis Wright Vice President Bruce Creighton insBlogs insBlogs DIRECTORY Ontario Manager (416) 510-5117 (416) 442-5600 ext. 3652 President Elliot Ford Service Bruce Creighton Account Manager insBlogs Subscriptions/Customer Ontario INSURANCE nadianunderwriter.ca Property & Casualty Insurance Newswire Account Manager PresidentInsuranceAlex Papanou rd Property & Gail Casualty Newswire Bruce Creighton INSURANCE eford@canadianunderwriter.ca Christine Hirst Vice Page President DIRECTORY -5117
instouch.com
insBlogs Ontario
instouch.com instouch.com instouch.com Ontario
Ontario insBlogs
the insurance industry’s social network
the insurance industry’s social network
Associate Publisher Elliot Ford gs nadianunderwriter.ca (416) 510-5117 insBlogs Paul AquinoAlex Papanou eford@canadianunderwriter.ca
Insurance Blogs hosted by Canadian Underwriter
Bruce Creighton Vice President christine@canadianunderwriter.ca DIRECTORY gpage@bizinfogroup.ca erwriter Vice President (416) 510-5114 insBlogs Alex Papanou -5117 Connect with Canadian insBlogs Underwriter (416) 510-5187 Insurance Blogs hosted by Canadian Underwriter Vice President urance Newswire paul@canadianunderwriter.ca (416) 510-5117 Papanou & Casualty InsuranceAlex Newswire Property Property & Casualty Insurance Newswire Alex Papanou Newswire Twitter: @InsuranceCanukProperty & Casualty Insurance Manager InsuranceCirculation Blogs hosted by Canadian Underwriter Connect with Canadian Underwriter with Canadian Underwriter twitter.com/CdnUnderwriter (416) 510-6788 facebook.com/CanadianUnderwriter Mary Garufi Connect with Canadian Underwriter insBlogs.com Insurance Blogs hosted by Canadian Underwriter insBlogs.com Insurance Blogs hosted by Canadian Underwriter mgarufi@bizinfogroup.ca with Canadian Underwriter tter.com/CdnUnderwriter facebook.com/CanadianUnderwriter Account Manager Insurance Blogs hosted by Canadian Underwriter Connect with Canadian Underwriter twitter.com/CdnUnderwriter facebook.com/CanadianUnderwriter twitter.com/CdnUnderwriter facebook.com/CanadianUnderwriter (416) 442-5600 ext. 3545 Canadian Underwriter Michael linkd.in/CanadianUnderwriter WellsUnderwriter Insurance Blogs hosted by Canadian instouch.com/group/CanadianUnderwriter tter.com/CdnUnderwriter facebook.com/CanadianUnderwriter InsuranceMediaGroup.com .ca michael@canadianunderwriter.ca twitter.com/CdnUnderwriter kd.in/CanadianUnderwriter instouch.com/group/CanadianUnderwriter facebook.com/CanadianUnderwriter Print Production Manager .ca MediaGroup.com linkd.in/CanadianUnderwriter instouch.com/group/CanadianUnderwriter InsuranceMediaGroup.com (416) 510-5122 Phyllis Wright InsuranceMediaGroup.com linkd.in/CanadianUnderwriter instouch.com/group/CanadianUnderwriter kd.in/CanadianUnderwriter instouch.com/group/CanadianUnderwriter
insBlogs.com Insurance Blogs hosted by Canadian Underwriter
Insurance Blogs hosted by Canadian Underwriter
insBlogs.com
gs.com insBlogs.com
.ca
InsuranceMediaGroup.com
.ca
InsuranceMediaGroup.com www.CanadianUnderwriter.ca/MediaGroup instouch.com/group/CanadianUnderwriter www.CanadianUnderwriter.ca/MediaGroup Published linkd.in/CanadianUnderwriter AccountbyManagerwww.CanadianUnderwriter.ca/MediaGroup President Elliot Ford Bruce Creighton erwriter iswww.CanadianUnderwriter.ca/MediaGroup published INESS MEDIA INC. thirteen times yearly (monthly + the Annual Statistical Issue) by SINESS MEDIA INC. Canadian Underwriter iswww.CanadianUnderwriter.ca/MediaGroup published thirteen timesthirteen yearly (monthly + the Annual(monthly Statistical Issue) NEWCOM BUSINESS MEDIA INC. Canadian Underwriter iswww.CanadianUnderwriter.ca/MediaGroup published times yearly + thebyAnnual Statistical Issue) by NEWCOM BUSINESS MEDIA INC. eford@canadianunderwriter.ca NEWCOM MEDIAM3B INC. 2S9 erwriter at thirteen 80 Valleybrook Drive,BUSINESS Toronto, Ontario, erwriter is is located published times yearly (monthly + the Annual Statistical Issue) by NEWCOM BUSINESS MEDIA INC. Vice President 451 Attwell Dr., Toronto, ON M9W 5C4 Published by
.ca
.ca
ranceMediaGroup.com (416) 510-5117 InsuranceMediaGroup.com Alex Papanou InsuranceMediaGroup.com
442-5600. SINESS MEDIA INC.
Canadian at thirteen 80 Valleybrook Drive,(monthly Toronto, + Ontario, M3B Statistical 2S9 Canadian Underwriter Underwriter is is located published times yearly the Annual Issue) by (416) 614-2200 • MEDIA (416) 614-8861 (fax) Phone: 442-5600. NEWCOM BUSINESS Canadian Underwriter is at thirteen 80 Valleybrook Drive,(monthly Toronto, + Ontario, M3B Statistical 2S9 Canadian Underwriter is located published times yearly the Annual Issue) by rved. Printed in Canada. The contents of(416) this publication may INC. not be reproduced or transmitted rved. Printed in Canada. The contents of this publication may not be reproduced or transmitted ither in part or in full, includingAll photocopying and recording, the written consent the rights reserved. Printed in without Canada. TheINC. contents of thisofpublication may not be reproduced or transmitted Phone: (416) 442-5600. NEWCOM BUSINESS MEDIA ither in may part any or inpart full,ofincluding photocopying andinrecording, without the written consent the All rights Printed The contents of thisofpublication may without not be reproduced transmitted Chairman and Founder President er. Nor this publication bereserved. stored apart retrieval system of any nature without in any form, either in orininCanada. full, including photocopying and recording, the written or consent of the er. Nor may any part of this publication be stored ininapart retrieval system any nature without and recording, without the written consent of the in any form, either or inpart full,ofincluding photocopying onsent. copyright owner. Nor may any this publication be stored in a retrieval system of any nature without All rights reserved. Printed inof Canada. The contents of this publication may not be reproduced or transmitted onsent. copyright owner. Nor may any part of this publication The be stored in a retrieval system of any nature without Allany rights reserved. Printed in Canada. contents of this publication may without not be reproduced transmitted prior written consent. monthly as a source of news, technical information and comment, and as a link between in form, either in part or in full, including photocopying and recording, the written or consent of the Connect with Canadian Underwriter prior written consent. monthly as a source of news, technical information and comment, and as a link between inPublished any form, either in may part or inpart full, including photocopying recording, without the written consent of the Vice President, Operations Controller of the insurance industry including brokers, agents, insurance andofreinsurance companies, © monthly asNor a source news, technical information and comment, andand as ain link between copyright owner. any of this publication be stored a retrieval system of any nature without ofmanagers the insurance industry including brokers, agents, insurance andofreinsurance companies, © Published monthly as a source news, technical information and comment, and as a linkcompanies, between and consultants. all segments of the insurance industry including brokers, agents, insurance and reinsurance copyright owner. Nor may any part of this publication be stored in a retrieval system of any nature without managers and consultants. all segments ofmanagers the insurance industry including brokers, agents, insurance and reinsurance companies, prior written consent. adjusters, risk and consultants. twitter.com/CdnUnderwriter facebook.com/CanadianUnderwriter prior written consent. adjusters, risk managers and consultants.
Jim Glionna
Joe Glionna
Melissa Summerfield
Peter Fryters
8 Pressing Forward Further exploration of the use of technology, while continuing to reach out to like-minded groups, will be top of mind for Monica Kuzyk as she takes on the role of president for the Canadian Independent Adjusters’ Association. BY GREG MECKBACH
Director of Circulation © Published monthly as a source of news, technical information and comment, and as a link between time we make our subscription list companies organizations whose technical information and comment, and as a link between Privacy Noticeto select © available Published monthly asand a source of news, Pat Glionna all segments of insurance industry including brokers, and agents, insurance vice may interest you. If you do From not wish contact information to be made available, timeyour to time we the make our subscription list available toinstouch.com/group/CanadianUnderwriter select companies organizations whose and reinsurance companies, linkd.in/CanadianUnderwriter all segments the insurance industry including brokers, agents, insurance and reinsurance companies, t us via one of the following methods: adjusters, riskof managers and consultants. product or service may interest you. If you do not wish your contact information to be made available, adjusters, risk managers and consultants. -668-2374 Fax: 416-442-2191please contact us via one of the following methods:
-668-2374 Fax: 416-442-2191Canadian Underwriter is published thirteen times yearly (monthly + the Annual Statistical Issue) by r@businessinformationgroup.ca NEWCOM BUSINESS MEDIA r@annexnewcom.ca Phone: 1-800-668-2374 Fax:INC. 416-442-2191 www.CanadianUnderwriter.ca/MediaGroup y Officer, 80 Valleybrook Drive, E-mail: Toronto,jhunter@businessinformationgroup.ca Ontario, Privacy NoticeM3B 2S9 jhunter@annexnewcom.ca All rights reserved. Printed in Canada. The contents of this publication may not be reproduced or transmitted Mail to: Privacy Officer, 80 Valleybrook Drive,subscription Toronto, Ontario, M3Bavailable 2S9 From time to in time wein make our companies in any form, either part or full, including photocopying andlist recording, withoutto theselect written consent of the and organizations whose GST Registration number 890939689RT0001 ates: 2013 2016 Canada Canadian Underwriter is published times yearly (monthly the Annual Statistical Issue) without by copyright owner. Nor may any partinterest ofthirteen this publication be stored a+retrieval system of any nature product or service may you. IfRegistration you doinnot wish your contact information to be made available, Second Class Mail Registration Number: 08840 GST number 890939689RT0001 Subscription Rates: 2013 Canada 5 plus applicable taxes NEWCOM BUSINESS MEDIA INC. 2016 prior written consent. Publications Mail Agreement #40063170 Second Class Mail Registration Number: 08840 please contact usis located via #40069240 one methods: 1 Year $49.95 plus applicable taxesof the following 5 plus applicable taxes $51.95 Canadian Underwriter at 80has Valleybrook Drive,ofToronto, Ontario, M3Bindustry 2S9 - a monthly magazine © Since 1934, Canadian Underwriter been the voice Canada’s insurance Publications Mail Agreement #40069240 #40063170 2Phone: Years undeliverable $73.95 plusCanadian applicable taxes to: $75.95 Return addresses (416) 442-5600. $10 plus applicable taxes providing the highest quality and most relevant news and insight to insurance professionals from all segments of Phone: 1-800-668-2374 Fax: 416-442-2191 Circulation Dept. Return undeliverable Canadian on addresses to: Canada’s property casualty insurance market. Theof magazine is delivered direct-request basis Single Copies $10and plus applicable taxesThe All rights Printed in Canada. contents this publication may nota be reproduced circulation or transmitted Canadian reserved. Underwriter Circulation Dept. E-mail: jhunter@businessinformationgroup.ca jhunter@annexnewcom.ca to senior decision nationally, including insurance riskwithout managers, insurance and reinsurin 15,000 any form, either in part makers or in full, including photocopying and brokers, recording, the written consent of the 80 Valleybrook Drive, Toronto, Ontario Elsewhere 5 Canadian Underwriter ance company personnel, claims managers and adjusters. Since its beginnings, Canadian Underwriter has been a Mail to: Privacy Officer, 80 Valleybrook Drive, Toronto, Ontario, M3B 2S9 copyright owner. Nor may any part of this publication be stored in a retrieval system of any nature without M3B 2S9 80 Valleybrook Drive, Toronto, Ontario with award-winning coverage 1prior Year $73.95 $71.95 link between all segments of the insurance industry, providing insurance professionals written consent. cal Issue M3B 2S9 ofWe industry issues, trends, news, personalities and events written by Canada’s leading insurance journalists. acknowledge the financial support above subscription) Annual Statistical Issue © Published monthly as a2013 source Canada of news, technical information GST and comment, and as anumber link between Registration 890939689RT0001 Subscription Rates: of the Government ofsubscription) Canada through 2016 We acknowledge the financial support $38 $39 plus applicable taxes (included withofabove all segments the2017 insurance industry includingSubscription brokers, agents, insurance and reinsurance companies, Subscription Canada Inquiries/Customer Service the CanadaRates: Periodical Fund of the of the Government of CanadaClass through Second Mail Registration Number: 08840 or separately $38 plus applicable taxes $39 1 Year $49.95 plus applicable taxes $51.95 risk managers and consultants. 1adjusters, Year $51.95 applicable taxes Mary GarufiPeriodical (416) 614-5831 quiries/Customer Service Department of plus Canadian Heritage the Canada Fund of the ISSNmary@newcom.ca Print: 0008-5251 Publications Mail Agreement #40069240 #40063170 2 $75.95 plus applicable taxes 6) 442-5600 ext 3552 16) 614-5831 Subscription Inquiries/Customer Service 2Years Years $73.95 plus applicable taxes Department of Canadian Heritage $75.95 ISSN Print: 0008-5251 ISSN Digital: 1923-3426 roup.ca m.ca Bona Lao (416) 442-5600 ext 3552 Privacy Notice Mary Garufi (416) Single Copies $10 614-5831 plus applicable taxes Return undeliverable Canadian addresses to: GST Registration number 890939689RT0001 ISSN Digital: blao@bizinfogroup.ca From timeCopies to time we make our subscription listtaxes available to select companies and organizations whose1923-3426 mary@newcom.ca Single $10 plus applicable Second Classcontact Mail Registration 08840 Elsewhere product or service may interest you. If you do not wish your informationNumber: to be made available, Circulation Dept. Publications Mail Agreement #40063170 1Year please$71.95 contact us via one of the following methods:
Elsewhere 1-800-668-2374 Fax: 416-442-2191 Annual Statistical Guide 1Phone: Year $73.95 $71.95 E-mail: jhunter@businessinformationgroup.ca (included with above subscription)
Canadian Underwriter
Return undeliverable Canadian addresses to: Circulation Dept.80 Valleybrook Drive, Toronto, Ontario Canadian Underwriter M3B Mail to: Privacy 80 Valleybrook Drive, Toronto, Ontario, M3B 2S92S9 or separately $44Officer, plus shipping and 80 Valleybrook Drive, Toronto, Ontario Annual Statistical Issue applicable taxes M3B 2S9 We the financial support 890939689RT0001 Subscription Rates: Canada (included with2013 above subscription)GST Registration numberacknowledge Second Class Mail Registration Number: 08840 of the Government of Canada through 1 Year $49.95 plus applicable taxes or separately $38 plus applicable taxes $39 Publications Mail Agreement #40069240 2 Years $73.95 plus applicable taxes
the Canada Periodical Fund of the Return undeliverableDepartment Canadian addresses Subscription Inquiries/Customer Single Copies $10 plus applicable taxes Service of to: Canadian Heritage Circulation Dept. Bona Lao (416) 442-5600 ext 3552 Mary Garufi (416) 614-5831 Elsewhere Canadian Underwriter Member 80 Valleybrook Drive, Toronto, Ontario blao@bizinfogroup.ca 1 Year $73.95 mary@newcom.ca Annual Statistical Issue (included with above subscription) or separately $38 plus applicable taxes
M3B 2S9
We acknowledge the financial support of the Government of Canada through the Canada Periodical Fund of the Subscription Inquiries/Customer ISSN Service Department Canadian Heritage Print: 0008-525 ISSNofDigital: 1923-34 Bona Lao (416) 442-5600 ext 3552 blao@bizinfogroup.ca
4
Canadian Underwriter July 2017
ISSN Print: 0008-5251 ISSN Digital: 1923-3426
ISSN Print: 0008-5251 ISSN Digital: 1923-3426
SPECIAL FOCUS
5 Editorial 6 Marketplace 38 Moves & Views 4 0 Gallery
Photo: Peter Tym
rio
INSURANCEINSURANCE – – we have it covered. we have it covered.
EDITORIAL
Cat Claws Can a single catastrophic event turn the reinsurance market? With the influx of capital, excess capacity and competition for business high — perhaps as high as it has ever been — is the notion that an event can right the ship a possibility anymore? Likely not; a shift has occurred, bringing with it the new normal. In concert with that is another shift, namely what peril is most likely to move the reinsurance pricing needle away from year-uponyear of lows to something more reflective of the risk. Clearly, this space has been dominated by natural Cats — deservedly so. Still, there seems to be a new entrant. Surely, it is not a stretch to think a well-conceived, expertly delivered cyber attack on connected systems could unleash true devastation, albeit solely on the financial front. Cyber could invade this fertile ground, particularly since coverage is still finding its feet and many customers are still weighing its worth. Enter the new Petya — or GoldenEye, NotPetya, Petrwrap and ExPetr — said to encrypt a computer’s hard drive and make it inoperable until ransom is paid (though paying may provide no remedy), encrypt the computer’s master boot record and launch malware to look for usernames and passwords. Whatever its name, the malicious software delivered a hard disruptive hit to businesses and governments in June, initially with an ap-
parent focus on Ukraine and then spreading to Europe and beyond. Downed networks, compromised systems and intrusions involving banks, governments, power grids, natural resources firms and shipping operations resulted. That Petya unleashed holy hell about a month after the WannaCry ransomware attack is a concern — and should be. RMS cyber expert Tom Harvey called the WannaCry assault “arguably the first-ever cyber catastrophe,” noting it spurred the infection of hundreds of thousands of machines in 150-plus countries. One cannot help but feel recent attacks represent test runs to see how much damage can be done when the bugs are worked out and a bit more venom injected. Or perhaps, hopefully, it is merely a trial balloon — harshly demonstrating what could be done — in a bid to encourage concerted action and commitment to advance a collaborative, world view of security. Clearly, connectedness will continue to increase. Graeme Newman, chief innovation officer at CFC Underwriting Ltd., pointed out in late June that though WannaCry spread like wildfire, it inflicted relatively little damage. Petya “looks much more dangerous” and early indications suggest it “could cost organizations 10 times more than WannaCry.” Claims of this sort “can quickly spiral out of control when the costs of system damage and business interrup-
tion are tallied, Newman said. Consider what policies might come into play. But also consider the exclusions. Reports out the United Kingdom are that a survey of 250 insurance broking firms found 73% of respondents have seen no increase in cyber cover demand in the wake of the WannaCry attack. As it stands, it seems the status quo has won out — a strategy that could hardly be considered forward-looking. “There is a commonality that exists across software and hardware as many businesses use similar systems, which make global attacks possible,” reports Matthew Webb, group head of cyber at Hiscox. “Every business is a technology business these days and so we are unlikely to see the frequency of these attacks reduce,” Webb says. It may be that the best defence is a good offence. A new Bugcrowd report found organizations paid out more than US$4 million to a global crowd of 60,000-plus security researchers in the past year, a 200% hike over the prior year. Financial services is among the top five sectors embracing bug bounty programs. Traditional security assessment is no longer enough, notes Casey Ellis, founder and chief executive officer of Bugcrowd. “The combination of broken status quos, a ballooning attack surface, a dearth of defenders and the increasing proof of active, efficient adversaries are accelerating this trend.”
One cannot help but feel recent attacks represent test runs to see how much damage can be done when the bugs are worked out and a bit more venom injected. Angela Stelmakowich Editor Canadian Underwriter angela@canadianunderwriter.ca
July 2017 Canadian Underwriter
5
MARKETPLACE
Reinsurance SLIGHTLY INCREASED ATLANTIC HURRICANE SEASON FORECAST Aon Benfield’s May outlook for the 2017 Atlantic season forecasts 14 named storms, six hurricanes and three major hurricanes between June and November. This is an increase from the previous projection — 12 named storms, six hurricanes and two major hurricanes — including April’s Tropical Storm Arlene. “The projected activity is expected to be close to average when compared to both the long-range norm since 1950 and the recent 2007 to 2016 period.” The projection reflects a 33% probability the 2017 Atlantic Hurricane Season ACE (Accumulated Cyclone Energy) Index will be aboveaverage, a 40% likelihood it will be near-normal, and a 27% chance it will be below-normal.
SUCCESSFUL PILOT OF BLOCKCHAIN FOR CAT SWAP Allianz Risk Transfer AG (ART) and Nephila Capital Limited report successfully piloting blockchain smart contract technology for transacting a natural catastrophe swap, an approach they contend also offers benefits for other types of insurance transactions. Cat swaps and bonds are financial instruments to transfer specific set of risks, typically natural disaster risks, from an insurer to investors or other insurers using triggers with defined 6
Canadian Underwriter July 2017
parameters, explains ART, part of Allianz Group. “The test run not only demonstrates that transactional processing and settlement between insurers and investors could be significantly accelerated and simplified by blockchain-based contracts, but also points to other benefits such as increased tradability of Cat bonds and wider opportunities to apply this technology in other insurance transactions.”
MARKET ACCESS, CLOUD RISK ACCUMULATION CITED Reduced market access, regulatory fragmentation, cloud risk accumulation, and growing water stress are among the key risks with the highest potential impact on the (re)insurance industry, notes Swiss Re’s new SONAR report. “Ignoring emerging risks is not an option, neither for political decision-makers, the insurance industry, nor society as a whole,” says Patrick Raaflaub, Swiss Re Group’s chief risk officer. “Sharing knowledge through a proactive risk dialogue across stakeholders can help the insurance industry create a proactive and pre-emptive risk management culture that enables disciplined risk-taking,” Raaflaub risks.
Risk NEW WILDFIRE GRADING INDEX LAUNCHED Fire Underwriters Survey (FUS), a division of Opta Information Intelligence, has developed a new model for
insurers to better understand the risk of wildfire losses. The model was developed after FUS studied wildfire losses in Kelowna, Slave Lake and Fort McMurray and gained a deeper understanding of wildfire urban interface fire risk in Canada, Opta Information reports. It will be released in British Columbia and Alberta in mid-2017; nationwide by year’s end. The system offers standardized risk benchmarks for all areas of Canada using technologies such as geographic information system, geodatabases, weather databases, historical data, digital satellite imagery and advanced analytics tools.
36% OF POLLED CANADIAN FIRMS HAVE NO CYBER SECURITY INSURANCE: FICO More than a third of surveyed Canadian firms do not have cyber security insurance, a concerning situation made worse by an incomplete understanding of how premiums are priced and failure to do everything possible to guard against breaches, FICO notes. In all, 36% of polled Canadian security executives say their firms have no cyber security insurance, it reports. The phone survey by Ovum involved senior officers and senior security executives at 350 companies in Canada, the United States, the United Kingdom and the Nordics. The percentage of Canadian businesses with cyber security insurance is lower than the 50% for surveyed respondents in the U.S. and the 40% globally.
Overall, 80% of respondents say insurers could do more to help decision-makers understand how risk price structure is calculated. As well, 26% say they feel the “introduction of an established industry standard to benchmark cyber security risk would be beneficial.”
Canadian Market DEALERSHIPS IN ALBERTA CAN SELL GAP INSURANCE The Alberta Insurance Council reports its General Insurance Council has approved the issuance of a restricted certificate of authority authorizing vehicle and equipment dealerships to sell gap insurance. Gap insurance is property insurance that covers all or a portion of the difference between the recovery received on primary automobile insurance in the event of a total loss and the manufacturer’s suggested retail price of a current-year replacement vehicle, or the difference between the recovery on a primary automobile insurance policy and an outstanding loan or lease obligation in the event of total loss. To sell gap insurance, motor vehicle dealerships and equipment dealerships will first need to obtain a certificate of authority.
DATA BREACH PRODUCT FOR SMALL BUSINESSES Gore Mutual Insurance Company has announced the
MARKETPLACE
availability of a cyber and data response product for Canadian small businesses. For the cyber and data breach response product, the insurer partnered with international reinsurer Beazley. Among other things, the new product covers the cost of lost data and lost business income in the event of a cyber attack or computer failure, as well as for fines and penalties from payment cards and extortion payments.
STANDALONE CYBER POLICY FOR CANADIAN COMPANIES ENCON Group Inc. has issued a standalone cyber insurance policy providing coverage for network business interruption, e-commerce trading exposure, crime and intellectual property risks. The product is being offered in association with Ascent Underwriting, a specialist managing general agent underwriting on behalf of several Lloyd’s syndicates. ENCON Group will provide the new policy to current and new insureds on a standalone basis or in conjunction with its professional liability and specialty insurance products. Coverage is provided on a modular basis and available with limits from $250,000 to $5 million. Firms can also tailor coverage based on need.
Regulation DRAFT OF 2018 FEDERAL MCT RELEASED The federal Office of the Superintendent of Financial Institutions (OSFI) has
published the draft 2018 version of its Minimum Capital Test (MCT) for federally regulated property and casualty insurers. The guideline, effective January 1, 2018, provides clarification with respect to inquiries received during the year. It also relocates the accident and sickness insurance worksheet from the guideline to the quarterly statutory return as a separate exhibit. Stakeholder comments on the draft are due August 4.
NO LINK TO PSYCHIATRIC DIAGNOSIS NECESSARY The Supreme Court of Canada has rejected an argument by Insurance Bureau of Canada (IBC) that a court should not award damages for psychological or emotional damage unless the plaintiff shows the tort caused a “recognizable psychiatric illness.” In a unanimous ruling, the court concludes expert evidence, while helpful, is not actually required in determining whether a claimant “has proven a mental injury.” IBC, which had intervenor status, had argued in its factum that not having compensation linked to “recognizable psychiatric illness” would “expand the scope of liability in tort law to an indeterminable extend, triggering a reallocation of risk in the insurance industry and higher premiums passed on to insureds across Canada.”
NO MORE FEDERAL FARMING, FISHING TAX EXEMPTION Ottawa has passed a law
eliminating the tax exemption for insurers covering farming and fishing properties. Among other things, Bill C-44, omnibus legislation, sought to repeal the exemption under the federal Income Tax Act, which dates back to the 1950s. Certain mutual insurance companies still exist “to provide affordable insurance protection to farmers and fishers on an at-cost basis, without a profit motive,” Normand Lafrenière, president of the Canadian Association of Mutual Insurance Companies, told the House of Commons finance committee in May. “The large majority of active food-producing family farms and fishing enterprises across Canada continue to be insured by their small mutual insurance company.”
Technology CANADA AN EXPENSIVE PLACE FOR DATA BREACHES Canada was the second most expensive polled country for data breaches, costing an average of $255 per lost or stolen record in 2017, notes a new report written by the Ponemon Institute and sponsored by IBM Security. Of the $255, $147 pertained to indirect costs, including abnormal turnover or churn of customers, and $108 to direct costs incurred to resolve the data breach, such as investments in technologies or legal fees. Canada was also found to be the second most expensive
country of those surveyed for malicious/criminal breaches at $156 per record. The Canadian research report examined the costs incurred by 27 Canadian companies from 12 different industry sectors following the loss or theft of protected personal data and the notification of breach victims as required by various laws. Among other things, IBM Security reports that, in Canada, organizations that can contain a breach in less than 30 days save $1.79 million ($4.88 million compared to $6.67 million); and, on average, Canadian organizations took 173 days to identify a breach and 60 days to contain one.
MULTIPLE ACCESS POINTS FOR CONSUMER A HURDLE Creating multiple access points for a single consumer to obtain electronic communications, including e-documents, could be detrimental to the consumer, notes a paper by the Insurance Brokers Association of Ontario (IBAO). Ontario’s 2017 budget noted that “insurers offer a discount to policyholders who choose to receive documents electronically.” While IBAO applauds moves by insurers in Ontario to launch consumer service portals and mobile applications to provide their policyholders access to information electronically, “we must ensure that the primary vehicle for electronic communication with consumers is provided by insurance brokers,” says IBAO president Traci Boland. July 2017 Canadian Underwriter
7
PROFILE
Pressing Forward Greg Meckbach Associate Editor
Exploring the use of technology and reaching out to like-minded groups will be top of mind for Monica Kuzyk, the incoming president of the Canadian Independent Adjusters’ Association. As an insurance professional who was instrumental in establishing an independent adjusting firm, Monica Kuzyk understands the importance of collaborating with like-minded firms and making the most of the latest technologies. “Each of our firms is challenged by staffing models that consider variable work forces to provide for the peaks in claim volumes,” Kuzyk says of the Canadian Independent Adjusters’ Association (CIAA), for which she currently serves as first vice president and will become president this fall at CIAA’s Annual General Meeting and conference. “One of the key priorities 8
Canadian Underwriter July 2017
that remains outstanding that we will continue to press forward with at the CIAA in the year ahead, as a strategic priority, remains our commitment to examine the digital platforms that the insurers have and find an effective way to integrate with those new virtualized environments,” she reports. Kuzyk currently works as vice president at Curo Claims Services in Waterloo, Ontario, an adjusting company that is the dedicated claims service provider for OTIP/RAEO Insurance Brokers Inc. and T.W. Insurance Brokers — all of which are in the Ontario Teachers Insurance Plan group of companies. Born and raised in the Kitchener-Waterloo area, Kuzyk began her insurance career in 1983 as a claims clerk with Prudential Assurance, where she remained for about a decade before moving on the OTIP. “In 1994, I got a call to come up and meet with the folks at OTIP,” she says, adding that she started in a supervisory capacity at that time, became a manager in 1998 and then assistant vice president in 2002. “Then we determined the need to set up an independent adjusting company to provide for our growth strategy,” recounts Kuzyk. The result was the
founding of Curo Claims Services, which handles personal lines property and casualty claims, including home, auto, accident benefits and bodily injury. Kuzyk credits her team’s involvement in the evolution of the adjusting firm, which became a CIAA member in
“I think that is a future state for all of us, for insurers, in particular — understanding how injuries happen in car accidents.” 2009. “We started it as part of our strategic plan. They are the ones that worked with a consultant to develop the name, which is Latin for ‘to care for, to provide for,’ which we thought very much aligned with our corporate culture and what we were endeavouring to do,” she adds.
BENEFITS OF MEMBERSHIP “As a new adjusting company, being part of a trade association, I thought, was important,” Kuzyk says. “We wanted to make sure that we were creating those professional relationships, that we were connecting with the right people, that we were
learning relevant information to broaden our knowledge and, of course, establish best practices and, for me, in dealing with the insurer stakeholders,” she reports. In 2012, Kuzyk decided to join the national executive of CIAA after what she describes as “a very interesting conversation” with John Seyler, who was then CIAA’s national president and is now its treasurer. “At that time, I was looking at budget and doing strategic planning for my own organization and wanted to ensure the CIAA was adding value for Curo,” Kuzyk says. “When I spoke to John, it was very evident that he was very passionate about the CIAA. He valued the association for elevating the work that independent adjusters do and he talked about how the CIAA was necessary to sustain the culture of claims excellence,” she recalls. “Being part of the CIAA instilled that level of trust and integrity, which was critical to the work we do, through the code of ethics,” suggests Kuzyk, who has also served as its secretary and has taken part in strategic planning. “It just re-affirmed to the stakeholders that, from our perspective, every policyholder would be treated with fair and co-operative and courteous claims-handling.”
Kuzyk’s presidency will not be about CIAA erecting something completely new, but, rather, building on the solid foundation that has already been established, particularly in the digital space. The association website has been refreshed; the CIAA is providing more timely, relevant information; it is connecting with the membership more regularly; and it is doing so through different channels. Also key is “we need to start looking at what we can provide to our member companies in the digital space,” Kuzyk reports. The road ahead has been paved by association efforts under past presidents, including Albert Poon, now president of Cunningham Lindsey Canada and Heather Matthews, senior vice president of the National Claims Management Centre for Crawford & Company (Canada). “Poon talked about how we needed to reach out to other like-minded associations, which I think is imperative as we continue to grow,” Kuzyk says, while Matthews talked “about change and disruption.”
PREPARING FOR DISRUPTION Among the innovations that are disrupting the insurance industry are driver-assist
Photo: Peter Tym
PROFILE
technologies, Kuzyk says. “Cars are smarter,” she observes, citing among other features automatic emergency braking and lane change avoidance. “We know that technology within cars is going to continue to go forward and we have got to be in a
position to be able to understand how that affects claims,” Kuzyk makes clear. Information gleaned from telematics may be useful for claims adjusters, she says. In Insurance Telematics in Europe and North America, released in June, Rickard Andersson, a senior analyst
for Berg Insight A.B., forecasts telematics policies in force in North America will increase from 4.2 million at the end of 2014 to 32.5 million by 2019. Although Ontario, for example, does not currently allow data from telematics programs to be used during claims adjudication, there are already available telematicsrelated products that collect information about things like when the vehicle is driven, hard braking events, rapid acceleration events, distance and location. Kuzyk notes, however, the use of telematics for human injury analysis is one area of technology that adjusters “can explore more fully.” As it stands, “we are not in that space, but we have to find a way to get there,” she says. “I think that is a future state for all of us, for insurers, in particular — understanding how injuries happen in car accidents.” Kuzyk adds that CIAA can “explore more fully” the possibility of setting up “strategic partnerships with vendors” in order to deliver technology services to members. “In executing our responsibilities to the membership, nothing is off the table,” she points out. “We will re-visit structure. We will re-visit staffing. We will look at how we deliver service.” July 2017 Canadian Underwriter
9
On Balance
Brett Hansen Vice President, Endpoint Data Security and Management, Dell
The balancing act demanded of employees trying to meet the twin goals of efficiency and data safety makes the people side of data security critically important. Organizations must design security programs that implement a mix of solutions to address security awareness, enablement and protection in the workforce. As cyber security technology continues to evolve at breakneck speed, so do the threats businesses face every day. Part of the challenge of this new reality is that the amount of data organizations deal with is growing daily. The more data companies create — and they create a lot — the more risks there are that data can be compromised. Add the growing complexity and need for data mobility in a modern workplace, and it is a recipe for disaster. The Dell End-User Security survey, released in
10
Canadian Underwriter July 2017
April, discovered some revealing facts about how workers around the world approach data security on the job. Globally, the survey of 2,608 professionals who handle confidential data at companies with 250-plus employees, found that 72% of respondents are willing to share confidential, regulated or sensitive data under certain circumstances. What could cause such a high number of people to share data inappropriately? Are 72% of polled employees careless, or have they simply “gone rogue” without reason? Of course not. Rather, these are workers who simply face a number of scenarios in their dayto-day jobs in which it makes good business sense to share sensitive data. But how can that be the case?
ROCK AND A HARD PLACE Today’s workforce is caught between two imperatives: be as productive and efficient as possible on the job, while maintaining the security of company data. Put simply, as data volumes increase, so does the need to access and share that data in different ways on the job. And while workers need to, in theory, maintain a high standard of data security, that is not always the case. To ease the friction between these competing goals, companies must focus on educating employees and enforcing policies and procedures that secure data wherever they go, without hindering productivity. Many companies understand the need to protect their information where it is stored, but if it is not also being protected when it is being shared or used, that opens up organizations to the risk of disastrous and expensive breaches.
What is troubling is not so much that employees are sharing data, but how they are going about it. Today’s workforce is more mobile and collaborative than ever, and employees are engaging in risky behaviours not to be malicious, but to get their jobs done. More than half of surveyed employees (56%) use public cloud services such as Dropbox, Google Drive, iCloud and others for sharing or backing up their work. These are all great services, but used incorrectly and not aligned to IT security protocols, they create major gaps in data security. Similarly, when sharing confidential files with third-party vendors or consultants, nearly half (45%) of respondents report using email, while one-third (31%) say these outside parties have access to their company’s intranet or other internal information system. In most cases, there are no repercussions for employees sharing data, as security teams may not even be aware of the protocol breach and nothing untoward happens. This lack of immediate action, however, makes it all too easy for employees to dismiss the risks and continue breaking security protocol. Add to that the concerning finding that even employees who have been educated on the risks of sharing confidential data without following security protocols have not fully “bought into” the consequences that can arise from this behaviour. To address data security issues, companies must focus on educating employees, and creating and enforcing policies and procedures that secure data wherever they go — all without hindering productivity. Beyond education, though, organizations must accept that employees really want one thing: to get things completed as quickly and efficiently as possible. Employees are measured by how efficiently they get their jobs done and often have targets to hit. For data to be most effective, it needs to move and be shared. The solution is to provide tools that do not inhibit employee productivity, but, rather, embrace it, while also still allowing the company to maintain a security data posture that is aligned to its risk.
CANADIAN CONTENT But what about Canada? Are Canadian workers any more educated and cautious with company data? It turns out that Canadians taking part in the survey are slightly savvier than workers globally when it comes to data security and safe sharing practices. That said, survey findings also show that Canadian respondents are struggling to adapt to the new digital workforce and how to safely handle data. In all, 22% of Canadian workers polled say they cut corners on data safety to get their jobs done, while a quarter do not even know when they are doing something wrong. Source: 2017 Dell End-User Security survey July 2017 Canadian Underwriter
11
Fortunately, only 1% of Canadian respondents say they had malicious intentions when conducting unsafe behaviours, compared to 3% globally. The results are clear: workers around the world now regularly handle and transfer data in unsafe ways, and Canada is no exception. Even management struggles with how to safely handle data in the workplace: 40% of polled Canadian workers cite direction from management when asked why they share sensitive data under certain circumstances, the most common reason given (others included determining the risk to their companies was low and the potential benefit high, and feeling it would help them do their jobs more efficiently). It seems that training in data safety needs to happen at almost all levels of business in Canada. STEADY GROWTH Despite investment, data breaches are growing year over year. Historically, companies followed the data loss protection method, where no data could be shared outside the corporate network. But with the new digital workforce — where employees can work from home or bring their own devices — this simply is not sustainable. So in addition to employee carelessness, one of the reasons data breaches occur so frequently is because companies still rely on legacy security technology that is not equipped to deal with today’s advanced ransomware and malware threats. WannaCry recently exposed this vulnerability firsthand when it infected computers around the world. The future of cyber attacks is directly tied to the future of where data will travel as employees become more and more mobile. The Internet of Things and constant connectivity means that data will be pivotal to more areas of both corporate and personal lives. As data becomes more vital, the ransoms placed using ransomware will be proportionate to the value of that data. Not only does this mean more opportunities for data to be held hostage, but it 12
Canadian Underwriter July 2017
As data becomes more vital, the ransoms placed using ransomware will be proportionate to the value of that data. Not only does this mean more opportunities for data to be held hostage, but it potentially raises the dollar value organizations are willing to pay. potentially raises the dollar value organizations are willing to pay for recovery. Operational costs for repairing damages following a cyber attack are also increasing and employers are feeling the impact. Heavily mandated compliance industries such as healthcare, finance, insurance and oil and gas could have fines associated with an end-user attack, not to mention the reputational costs. To better prevent against cyber attacks, organizations need to strive for higher
levels of awareness, enablement and protection simultaneously. This includes doing the following: • establish a cyber security strategy and practices that are aligned to business strategy and objectives; • identify critical data, understanding who, how and where it is accessed to accurately define the risks; • understand the needs of the entire workforce (not just full-time employees), including defining and communicating policies that are aligned to their needs; • provide regular, practical employee education that covers the why as well as the what; and • understand that employees will not be able to protect themselves, so it is necessary to market policy and education with technology that focuses on protecting company data, as well as embraces business requirements and the digital workforce. While the majority of polled employees report feeling it is their responsibility to protect company information, they face hurdles. For example, 21% of survey respondents say security put in place slows down their work and 21% report that they feel it is difficult to keep up with changing security guidelines and policies. Results further show that organizations have to accept two truths: confidential data will be sent, stored and accessed on a daily basis; and employee training alone is not going to keep corporate information secure. It is imperative that organizations design their security programs to implement a combination of solutions that address security awareness, enablement and protection among the workforce. If companies are going to keep their data truly safe amid an ever-evolving threat landscape, clear protocols must be in place. Further, these protocols must be backed by a realistic understanding of employees’ day-to-day responsibilities, as well as technology that protects sensitive data wherever employees go — whether at rest, in motion or in use.
The impact of change Ryan Jones, member of the TSSA Boiler and Pressure Vessel advisory council and Claims Relationship Manager at RSA Canada, outlines the impacts of changes to the Boilers and Pressure Vessels Regulation in Ontario. A number of significant changes have been proposed to the Boilers and Pressure Vessels Regulation in Ontario. These changes will not only impact brokers’ customers, but also insurers and brokers themselves. Periodic boiler and pressure vessel inspections are not only mandatory, they are essential to a comprehensive maintenance program and a matter of public safety. Effective risk management practices such as this can improve business performance, and protect physical property and revenue streams. As a member of the Technical Standards & Safety Authority (TSSA) Boiler and Pressure Vessel advisory council for the last 10 years, and through my experience working at RSA – one of the largest direct
boiler machinery insurers in Canada – I’ve seen the need for updates to the The Ontario Boiler and Pressure Act. The Act has not seen any changes since it was codified in 2000. The major changes were developed by the MGCS and TSSA in an effort to resolve: n A structural financial deficit; n Non-compliance with regard to TSSA’s issuance of Certificates of Inspection; n Inspection requirements for piping and fittings; n Data challenges impacting TSSA’s ability to conduct safety analysis; and n Administrative definition changes.
What are the changes? There are five key changes that will be made to the Boilers and Pressure Vessels Regulation starting in Q4 2017.
1
Upon insurer’s periodic inspection of a boiler or pressure vessel, the owner or operator of the device would be required to apply for authorization from TSSA to operate their device (Certificate of Inspection) with the payment of a fee and a copy of the Record of Inspection. With this change, owners of a boiler or pressure vessel will be required to apply a Certificate of Inspection (COI) authorization from the Technical Standards and Safety Authority (TSSA). As part of the certification, they will be required to pay a new fee of $15 per object. While it may not sound like a significant charge per object, the costs can really add up, particularly for an operator with thousands of objects to inspect. This is a cost that brokers would need to advise their clients to take note of and plan accordingly for.
2
Insurers to submit device inspection information and attest to the accuracy of this information in the form and frequency specified by TSSA. Currently, insurers must submit device inspection information to the TSSA within 21 days of an inspection. With the changes to the regulation, insurers will complete a form and attest to the accuracy of the information at a frequency determined by the TSSA. With that, insurers will be subject to an audit to verify information that they provided. With the TSSA determining the structure of the information submitted, many insurance carriers may be required to make internal updates to accommodate the submission form.
3
Insurers to file information and to attest to the accuracy of that information. Insurers will be subject to an audit by TSSA to verify information provided by insurers as well as determine compliance with regulatory requirements. The TSSA’s regulatory oversight will increase in three main new areas: authorization, attestation and audit (performed by third party agencies). Based on these additional mechanisms, insurers will also see an increase in costs that is not currently considered in their cost modelling. It’s estimated that these additional mechanisms could have a net impact in the range of $690,000 - $6,900,000 for insurance carriers.
4
Provide flexibility for TSSA to differentiate between high-risk and low-risk piping and fittings based on research and analysis conducted through a standards development organization. With the old regulation, in theory the intervals of periodic inspection of piping and fittings were to be set out in the code adoption document. However, the code adoption document (CAD) did not set out any intervals. As a result, there was no inspection frequency requirements for periodic inspection of piping and fittings. With the new regulation, the TSSA and MGCS proposed the inspection requirements be eliminated from the regulation in order to address the lack of periodic inspection frequency—an additional liability exposure that risk managers will have to consider.
Who will be impacted? 1. Building Owners and Managers 2. Dry Cleaners 3. Hospitals 4. Insurers and Third-Party Inspectors 5. Manufacturers and Processors 6. Municipalities 7. Operating Plants, including power plants, heating and cooling plants 8. Schools 9. Universities and Colleges
5
Third party inspection agencies will be added to the regulation, which may lead to the commoditizing of periodic inspection and repair work. The old regulation does not allow for third party inspection agencies. However, the Director of the Boiler and Pressure Vessel Safety Program at the TSSA adopted the utilization of third party agencies through the Authorized Inspection Agencies process. To date, the TSSA has issued ‘Authorized Inspection Agency’ certificates to two separate organizations. The aforementioned organizations are limited to performing in-service (periodic) and repair inspections of boilers, pressure vessels and pressure piping, on behalf of insurance companies (and cannot perform inspections on uninsured objects). RSA Canada is a Canadian leader in Equipment Breakdown Insurance (EBI, also known as boiler and machinery insurance), and an Authorized Inspection Agency which allows the company to offer the market periodic inspection and certification of boilers and pressure vessels.
Pain and Gain Canadian property and casualty insurers should expect that the adoption of the new financial accounting standard, International Financial Reporting Standard 17, will take some work and investment. That said, any growing pains should give way to greater comparability with global jurisdictions and, in many cases, more helpful financial reporting. Dana Chaput Insurance Accounting Change Lead, KPMG in Canada
14
On January 1, 2021, Canadian insurers will be subject to a new International Financial Reporting Standard (IFRS) designed to enforce a fundamental overhaul of insurance accounting. Announced in May 2017 by the International Accounting Standards Board (IASB), IFRS 17 will replace IFRS 4 Insurance Contracts with new guidelines governing the recognition and measurement of insurance contracts, as well as presentation of operating results. Its intent is to give investors and other stakeholders a better understanding of an insurer’s risk exposure, drivers of profitability and financial position by bringing greater clarity and transparency to the financial reporting processes. “The insurance industry plays a vital role in the global economy; high-quality information to market participants on how insurers perform financially is, therefore, extremely important,” board chairman Hans Hoogervorst said in a recent IASB press release. “IFRS 17 replaces the current myriad of accounting approaches with a single approach that will provide investors and others with comparable and updated information.” In broad strokes, the new standard will require companies to do the following: • report insurance contracts on the balance
Canadian Underwriter July 2017
sheet as the sum of the fulfillment cash flows and the contractual service margin; • update the fulfillment cash flows at each reporting date, using current estimates of the amount, timing and uncertainty of cash flows and of discount rates; and • provide greater clarity and information about profitability on financial statements.
IMPACT ON P&C INSURERS Property and casualty insurers will naturally be among those bound by IASB’s new standard. Fortunately, most will also qualify for a simplified measurement model — the premium allocation approach — which deviates somewhat from how insurers currently value their insurance liabilities. Still, IFRS 17 will require p&c insurers to be more granular in their note disclosures than they have been in the past. They will also have less leeway to perform their accounting processes at the high level of aggregation than they may be used to. Also worth highlighting are several IFRS 17 changes that may not be as well-known, but are significant, nonetheless. Today, where Canadian insurance companies discount their liabilities,
they typically use an asset-based rate or the yield earned on the assets backing their liabilities. By 2021, this will no longer be allowed. Instead, insurers will need to use a discount rate that reflects the timing, duration and currency of their liability cash flows, thereby requiring them to track and manage potentially a large volume of discount rates on an ongoing basis. As well, there are insurers who offer multiple lines of business and different products. Where these risks offset one another, insurers now get to take that diversification benefit into account when determining their risk margins. This is a more holistic alternative to current margins for adverse deviation. By and large, the biggest difference between today’s standards and IFRS 17 is the granularity of information that insurers will be required to manage and present. This will, no doubt, make processes like period-end closes more onerous — especially for insurers offering more specialized products with longer-term timelines (for example, mortgage insurances, title, surety and warranty business) who will see significant changes in the actual numbers that end up not only in their financial statements, but also their profit emergence patterns. For insurers who rely on earnings before interest and taxes and depreciation and amortization (EBITDA) as a key performance metric, they will need to pay particular attention to these changes as it may alter the way their profits emerge over time.
GLOBAL COMPARISONS One of the most common concerns related to IFRS 17 is that it will move Canada’s accounting practices further away from its neighbour to the south. While many p&c companies have the option of using a premium allocation approach that retains existing similarities to the Generally Accepted Accounting Principles (GAAP) in the United States, there are some who will see greater disparities. Particularly, that includes insurers with longer duration contracts, who will fall under the general measurement model,
and those who report to a U.S. parent (or vice versa). For them, IFRS 17 will require more adjustments; meaning more work, more energy and a wider margin of error. And on the investor side, IFRS 17 will make it more difficult for some to compare their financial statements to their U.S. GAAP peers. Comparisons across the pond are also worth exploring. Once issued by the IASB, IFRS is required in Canada. However, in some jurisdictions, a new IFRS is only required once endorsed and subjected to a cost-benefit analysis. For example, IFRS 17 is not required for European insurers until the European Financial Reporting Advisory Group has endorsed it to the European Union
Lastly, any major transformation presents an opportunity to “clean house.” Many insurers are taking this opportunity to update business practices, properly implement legacy books or correct Band-Aid solutions from their past. (EU). Then, and only then, will European insurers be required to comply with IFRS 17. Depending on how long this process takes, the EU could adopt IFRS 17 well after Canada’s January 2021 deadline, and that time gap will likely cause comparability issues. The good news is that it is not a matter of if the EU will adopt IFRS 17, but when.
UPSIDES TO IFRS 17 It is true that IFRS 17 will require more time, investments and manpower from insurers. If done correctly, however, the IASB contends that the advantages will outweigh these expenses. Canada will become more comparable to global jurisdictions; financial forecasts will be more accurate; and enhanced reporting standards will paint a clearer picture for
all stakeholders in regards to how money is being earned, what is working well and how they compare to their peers. Lastly, any major transformation presents an opportunity to “clean house.” Many insurers are taking this opportunity to update business practices, properly implement legacy books or correct Band-Aid solutions from their past. Since the road to IFRS 17 requires a review of everything from the initial recognition through to financial reporting, now is the time to identity where improvements can be made.
PREPARING FOR IFRS IFRS 17 has been in development for nearly 20 years, so its arrival is far from a surprise. Nevertheless, it will require large-scale company changes that will, no doubt, be subject to hiccups, delays and human error. For that reason, it is best to prepare for these changes early. Begin with a highlevel impact assessment to determine what changes need to be made and then draft a project plan outlining how they will be made, who will make them and the key milestones along the way. Given the granular focus of IFRS 17, that plan should include stronger collaboration among all insurer departments. It will also need to identify systems that will require upgrades or replacements and keep IT professionals in the loop. After all, whether a p&c or life insurer, there are going to be changes to the general ledger and journal postings that will require greater automation. That means making sure that IT has enough time and money to bring the company up to speed. Ultimately, IFRS 17 will mean more work and investments for Canadian insurers. Done right, however, the benefits of stronger financial accounting standards will more than make up for these growing pains. And with companies expected to begin testing IFRS 17 as of January 1, 2020, the time is now to ensure a solid plan, the right people and access to the best resources to help get the company where it needs to be, when it needs to be there, are in place. July 2017 Canadian Underwriter
15
Close to Home Robert Lajdziak
Insurance Business Consultant, Insurance Practice, J.D. Power
Valerie Monet Senior Director, Insurance Practice, J.D. Power
16
The lack of policy coverage understanding by consumers represents a major threat to home insurers’ reputations. Educating consumers now, in advance of damaging perils like flooding, could encourage policyholder understanding and discourage dissatisfaction with insurers should such an event occur. The recent flooding in Quebec, coupled with the gap between homeowners’ perceptions related to their insurance coverage and what is actually covered under their policies, poses a unique threat for Canadian insurers in terms of customer satisfaction, loyalty and, perhaps most important, their reputations.
Canadian Underwriter July 2017
While it is too early to assess the impact that the most recent flooding events are likely to have on customer satisfaction, insurers must be mindful of brand reputation in their responses to consumers. This includes their responses to both those who were affected and potential prospects on the sidelines waiting to see how that response unfolds, as one in five customers (21%) taking part in the 2017 J.D. Power Canadian Home Satisfaction Study say they select their insurance provider based on the insurer’s overall reputation. Released in June, responses from the 7,422 homeowner insurance customers polled indicate there is a notable disconnect between people’s perceived coverage and their actual coverage when it comes to overland flood insurance — the particular coverage that applies to the flooding that recently occurred in Quebec and other parts of the country. Nearly half (48%) of respondents in Quebec say they have overland flood coverage; however, Insurance Bureau of Canada has reported that only 10% to 15% of Canadian homeowners actually have such coverage. That disconnect in
perceived versus actual coverage is likely to have a profound impact on customer satisfaction as homeowners contact their insurance carriers attempting to make claims, only to find their policies do not include such coverage. Overland flood coverage is relatively new to the Canadian market. However, the southern Alberta floods in 2013 forced more than 100,000 people from their homes as a result of flooding following catastrophic wind and thunderstorms. Insured losses are reported to have totalled $1.827 billion, making it the second most costly disaster for Canadian insurers after the Fort McMurray wildfires. Since insurers varied widely in their responses to the flood in terms of what they would cover with current homeowners’ policies, that led to massive confusion and frustration among customers. As a result, insurers began offering additional overland flood coverage in policies for homeowners. In the aftermath, the study shows that customer satisfaction declined in the Western Region, particularly in Alberta, for two consecutive years as homeowners rebuilt their homes and others not directly impacted witnessed the frustration of affected customers via media coverage and social media channels. The sentiment that something should be covered, but is not, certainly contributes to customer satisfaction when a loss is experienced. Intuitively, satisfaction is highest when customers have a loss that is fully covered by their insurers. From there, satisfaction declines if the damage was less than the deductible, the customer dropped the claim and if the claim was completely denied. What is interesting is that customer satisfaction is actually lowest among customers who say that only part of the claim was denied. The finding highlights the frustrations customers experience when they believe something is covered only to find out that their policies are not going to cover the full amount of their losses. Even customers who had to negotiate with an insurer or a repair company
over what was covered were 33 points less satisfied than those who did not.
OPPORTUNITY TO EDUCATE While overland flood coverage is now widely available, the disconnect between the percentage of customers who believe they have coverage and those that actually do may mean that customers in Quebec are next to experience the same frustration as those in Alberta. However, the real threat to insurers may be to their reputations since the majority of customers will not personally experience a loss, but may, as was the case in Alberta, hear the worst experiences in the media and online. Insurers have an opportunity to get ahead of these situations by taking steps to mitigate the potential negative halo
effect on customer satisfaction by further helping educate customers on their policies. The key is to make sure that customers completely understand their policies, know exactly what is covered and ensure they are fully aware of additional products, services and policy offerings that are available. Only 31% of customers surveyed say an agent or representative contacted them in the past 12 months to inform them of additional products or services available — a figure that has remained stable for the past three years — both regionally and nationally. Policy reviews are a great opportunity to not only help customers understand what is covered, but to inform them about potential gaps in coverage that they should consider. Study results further reveal just over
July 2017 Canadian Underwriter
17
one-third of customers (37%) who had a policy review in the past 12 months and 33% of customers informed about new products/services report that they made changes to their home insurance policies as a result of that interaction compared with only 10% of customers who made a change independently. Another step insurers can take to help improve customer understanding of what is covered in their policies is continuing to advance online access to policy information. Many Ontario insurers are building customer-facing websites and mobile apps to access policy information online in response to the provincial government’s 2017 budget announcing “discounts to policyholders who choose to receive documents electronically.” Polled customers who report that they have online access to policy information are 61% more likely to say they “completely” understand what is covered
At the end of the day, most customers just want to trust their home insurers and believe that in the event of a disaster, their insurers will cover the loss in a fair and transparent manner — neither more nor less, but simply what is fair. than those who do not have online access (53% versus 33%, respectively). Perhaps a greater understanding of exactly what customers’ home policies cover will insulate insurers from the negative backlash following events like that in Alberta and now in Quebec. At the end of the day, most customers just want to trust their home insurers
and believe that in the event of a disaster, their insurers will cover the loss in a fair and transparent manner — neither more nor less, but simply what is fair. Catastrophic events affect all customers and oftentimes the best way for insurers to avoid the negative impact on customer satisfaction has less to do with the claims experience and more to do with improving the overall customer experience ahead of a major loss. This is relevant particularly in events such as flooding where there is enormous confusion among Canadian customers about what is actually covered between sewage back-up and overland flooding. Insurers that can close the gap between perceived coverage and what is actually covered can avoid dissatisfaction when a loss occurs, reduce the potential for a negative impact on their reputations and, in the meantime, win new customers by increasing customer advocacy through transparency.
Make your name stand out. The Chartered Insurance Professional (CIP) designation is recognized as the hallmark of professionalism in the property and casualty insurance industry. Employers across Canada know that a CIP has completed several years of rigorous study, adheres to a strict code of conduct and has the experience to offer clients fully qualified professional service. If you want to be assured employers will take note of your resumé—earn your CIP.
Learn more at www.insuranceinstitute.ca/CIP 1-866-362-8585 Follow the Insurance Institute
18
T L
Canadian Underwriter July 2017
THIS AD PREPARED BY: CLIENT:
RYAN EDWARDS INSURANCE INSTITUTE
Be assured.
Second Wind Canadian onshore wind development faces a number of major threats — many the same as those globally, but some unique to the country. Throwing caution to the wind is not advised. Instead, keeping abreast of the latest technological developments and adopting measures to transfer risk are imperative to maintaining safe and profitable operations.
Jatin Sharma
Head of Business Development, GCube Insurance
As onshore wind energy continues to make ground in the Canadian market, with an aim to meet 20% of total electricity needs by 2025, it is increasingly important to root ongoing and upcoming developments in an effective risk management strategy. The expansion of capacity from the current level of 12 gigawatts (GW) — about 5% of electricity demand — to 55 GW in a short period will magnify existing challenges. Achieving a better grasp of a constantly changing renewable energy risk landscape, therefore, is a must for the developers and operators of Canadian projects. An understanding of the most pressing threats to successful wind energy generation will enable stakeholders to take preventive measures and adopt strategies that safeguard future financial security.
SHIFTING WINDS GCube recently compiled a list of five of these most pressing threats in the report, Risky Business: Assessing Future Threats in Onshore Wind Development, Financing and Operations. It documents a major shift in the way risks are perceived and managed by project stakeholders and the insurance community. Specifically, the impact of resource underperformance has, for the first time, surpassed mechanical and electrical breakdown as the number one threat to wind energy profitability.
Low wind speeds, often the result of unanticipated climatic phenomena, mean that actual energy production frequently falls short of output forecasts. For example, unexpected weather patterns linked to the last El Niño cycle in 20152016 led to a dramatic fall in wind speeds — up to 40% below long-term averages — and severely impacted project performance across many parts of the United States. Moreover, many regions of Mexico experienced reductions in average wind speed by as much as 20% in 2015. Failure to adequately transfer weather risk has resulted in a number of high-profile cases of poor project performance. Crucially, these have not only had financial implications, but, in some cases, have also led to damaging ratings downgrades. Though wind speeds in Canada may have been comparatively favourable in recent years, it remains, like any other market, vulnerable to the caprices of such a fair-weather friend as the wind. It is estimated that low wind levels are accountable for a combined shortfall in project value of as much as US$56 billion for stakeholders around the world. The insurance market has responded with the development of increasingly robust Weather Risk Transfer (WRT) and Proxy Revenue Swap (PRS) mechanisms to mitigate revenue volatility faced with fluctuating wind speeds and prices. It is
July 2017 Canadian Underwriter
19
critical that the Canadian wind market takes the opportunity to safeguard its financial performance as installed capacity increases.
WIND BLOCKERS Despite this global shift in focus, mechanical and electrical breakdown continues to hinder successful operations. Though advances in technical expertise and operations and maintenance (O&M) procedures might help to counterbalance these threats, the rapid expansion of wind energy infrastructure and capacity makes the task ever more difficult. GCube, for its part, has seen the following pattern in claims over the past five years: • a yearly average of 3,800 incidents of blade failure, each costing as much as US$1 million to resolve; • an average of 1,200 incidents of gearbox failure each year, usually resulting in insurance claims of between US$200, 000 and US$300,000; and • approximately 50 turbine fires each year, with an average claims cost of US$4.5 million. The market in Canada is characteristic of the scale of the problem; mechanical breakdown and electrical failure are leading root causes of insurance claims by Canadian firms. A number of trends are driving increased claims severity — and these are particularly pertinent in the Canadian market, where the scale and remote locations of projects pose developmental
A number of trends are driving increased claims severity — and these are particularly pertinent in the Canadian market, where the scale and remote locations of projects pose developmental and operational challenges.
and operational challenges. Onshore turbines are increasingly large — often taller than 200 metres, with correspondingly sizeable rotor blades — and complex, presenting particular problems to their transportation and erection in geographically remote locations, such as moving cranes and other heavy equipment. Monitoring and maintenance, for the same reason, pose challenges. These issues look set to intensify as the industry expands into more isolated areas, and will be especially important after mature assets move into the post-warranty period, when maintenance becomes more urgent. At the same time, pressure on the supply chain, propelled by the increased scale of components and industry cost-cutting, is expected to result in more cases of serial defect in future years. While comprehensive Construction All Risks (CAR) and Operations All Risks (OAR) policies can mitigate the impact of these problems to a certain degree, the onus is on project owners to take proactive measures to manage mechanical and electrical failures. More regular inspection of blade components, with a greater frequency after storms and lightning strikes, and incorporating a range of techniques, is advised. Likewise, more freSource: Risky Business: Assessing Future Threats in Onshore Wind Development, Financing and Operations quent checks of gearbox 20
Canadian Underwriter July 2017
performance in the early stages of its lifespan are recommended, with the role of online condition monitoring systems (CMS) growing in importance. Furthermore, transformer failure can be disastrous for operations, with lead times of as long as 18 months for replacement. The insurance and risk management firm, Hugh Wood Canada, reports that a majority of claims in the Solar P.V. (photovoltaic) market in Ontario are associated with the failure of transformers, with significant loss of revenue for every day of non-operation. As with blade components and gearboxes, more maintenance checks are recommended.
ILL WINDS In combination with geographical inaccessibility, extreme weather events present significant challenges to the Canadian wind energy market. As the industry develops in more isolated and disasterprone regions, these challenges will only become more widespread. Last year’s wildfires in Alberta, a province with a considerable wind industry presence, reveal the intrinsic hazards of operations in markets susceptible to dry conditions and forest fires. Though financial losses from forest fires are far outstripped by those from mechanical and electrical failures, their high-profile nature has negatively impacted the brand reputations of stakeholders. The effect of wildfires that recently struck Arizona and Western Australia demonstrate that, while uncommon, the results of such incidents can be severe, with near-total wind farm losses. Storms and lightning strikes present further extreme-weather threats to successful energy production. Canada’s cold climate is the cause of more predictable weather-related challenges. Extreme cold regularly results in ice forming on turbine blades, inhibiting efficient turbine motion and triggering shutdown mechanisms, which, in turn, halt production. This has been identified as an emerging problem, and cold weather presents additional difficulties in terms of monitoring and maintaining turbines. The
successful operation of wind farms in Canada will, as the industry develops, require a more meticulous analysis of the effects of a cold climate than is necessary in other markets. Overall, natural hazards have fed the amplification of claims severity during the past five years. As the industry develops in high-risk regions, more effective mitigation strategies may be necessary. Political and regulatory risks are, perhaps, less significant in the Canadian
market, given ongoing government commitments to the development of renewable energy sources. Throwing caution to the wind, however, is ill-advised, in view of the unpredictable nature of energy subsidies in the U.S. and leading European markets, which periodically hamper investment there. Industry stakeholders should also keep an eye on emerging hazards. The threat posed by cyber attack, for example, is currently minimal, but, as recent highprofile incidents worldwide have illustrated, has the potential to increase in scope in the future. As wind farms become an increasingly integrated and sophisticated component in the grid, risks of illegal access will proliferate, because it may be posSource: Risky Business: Assessing Future Threats in Onshore Wind sible to access large secDevelopment, Financing and Operations
SURPASSING INDUSTRY STANDARDS
tions of turbine infrastructure — and, indeed, the national grid — from a single entry point. Interference is particularly pertinent in the wind energy industry, given that farms are typically remotely operated and, especially in isolated regions, there are fewer staff members on hand. Robust cyber security is crucial in preventing initial breaches, along with measures to limit access to the system as a whole. Despite encouraging progress in Canada’s rapidly expanding wind energy market, Canadian developers, owners and investors are not immune to the risks faced by the industry worldwide. As the risk landscape continues to change, keeping abreast of the latest technological developments is imperative to maintaining profitable operations. Similarly, adopting measures to transfer weather risk and to protect the industry from the effects of unforeseen dangers are essential, as insurers and stakeholders collaborate to limit long-term financial damage.
30+ Years Superior Disaster Restoration Services With the strength of our team, leading technology, and an eye to the future, FirstOnSite surpasses restoration industry standards for our insurance partners and commercial and residential property owners. To learn more about how we can help reduce cycle times and enhance customer experience, Call the restoration industry leader, FirstOnSite.
Visit us at firstonsite.ca or call 1.877.778.6731 Follow us:
q030_FOS_Ad_CU_HalfPageHoriz_02.indd 1
21 July 2017 Canadian Underwriter 2017-04-27 10:45 AM
COVER STORY
Pitch Perfected
Pitch Perfected
Reinsurance pricing has hit a low note. Global conditions continue to put downward pressure on rates, but forces are in play that could foster more effective and efficient response. Will innovation and partnerships both within and outside the industry allow reinsurers to hit a higher note in future? BY ANGELA STELMAKOWICH
22
Canadian Underwriter July 2017
COVER STORY
Pitch Perfected
I
f 2017 was a song, surely it would sound like the same old tune to reinsurers: fewer catastrophic events, low interest rates, tepid pricing, a gush of new capital and higher customer knowledge and demand. The persistent hits have combined to produce a familiar din, punctuated by the occasional sour note. While reinsurers would surely agree there is little encouraging about the persistent conditions, those very drivers are encouraging new arrangements that may be able to coax a bit of harmony from all that noise. Fundamental changes are unfolding, but that is not necessarily a bad thing. The past is no longer the reliable predictor that it once was, meaning that new ways of addressing current conditions — including perils that have previously been underestimated — need to be explored and implemented. Potentially, there is great creativity in disruption. Doing things differently could, perhaps, be completed on one’s own. More likely is that it will involve forging partnerships that allow for exploring how to be more responsive, efficient and customer-centric. The overriding positive may be that reinsurance as a destination of choice continues to remain strong. That said, remaining relevant by being value-driven and focusing squarely on customer need may serve as a way to orchestrate a more positively sustainable future for the industry. The imperative for reinsurers, if they have not already done so, is to start taking the lead now. Following is not an option in such a hyper-competitive and evolving space; that is an approach that will surely fall on deaf ears.
July 2017 Canadian Underwriter
23
COVER STORY
Pitch Perfected PRICE LOW DOWN There is little argument: reinsurance rates are low. And despite the apparent logic of thinking that decreases must end at some point, global conditions offer few hints of relief. “For the past few years, speculations were made that reinsurance rates have bottomed out. However, the market kept going lower on a year-over-year basis, outside of the Cat loss contracts,” reports Joseph El-Sayegh, president and chief executive officer of SCOR Canada Reinsurance Company. When people try to explain pricing today, “they always tend to look at the past and try and extrapolate forward. There’s an assumption that the industry will respond in the same way, or a similar way,” notes Michael Van Slooten, head of market analytics at Aon Benfield Analytics in London. “And, actually, I think some quite fundamental things have changed and that, perhaps, things won’t necessarily play out in the way that has been seen in the past,” suggests Van Slooten. Buyers of reinsurance today are usually operating in solvency regimes that require them to have a better understanding of the risk they are facing and the exposures they are carrying, he says. “Rates continue to be challenging as competition to maintain market share continues,” notes Philipp Wassenberg, president and chief executive officer of Munich Reinsurance Company of Canada. “Surplus capacity is enabling cedants to negotiate discounts to expiring reinsurance rates, but they are still dictated somewhat by their past performance and size.” Geoffrey Lubert, executive vice president and managing director of Willis Re Canada, sees negatives and positives. “Globally, the risk-adjusted rate reductions on short tail classes of business continued for both the January 1, 2017 and April 1, 2017 renewals,” Lubert says. “However, the rate reductions were mid single-digit rather than the low double-digit rate reductions experienced in 2015 and 2016.” While “reinsurers are encouraged that buyers are purchasing more reinsurance 24
Canadian Underwriter July 2017
capacity,” he notes, “reinsurance rates will continue to soften in the absence of a market capital event.” Wassenberg says future cycles are expected to be more shallow. “This will
“It’s all about relevance to clients at the end of the day,” emphasizes Aon Benfield Analytics’ Michael Van Slooten. “It’s a very competitive market and it places a lot of pressure on reinsurers to provide bespoke responses in a way that hasn’t really been required in the past.” challenge reinsurers to earn back large losses. Our continuing focus will be on insurance risks, safeguarding sustainable value creation,” he emphasizes. “Reinsurance does not behave differently than other services/products in the market,” El-Sayegh points out. It follows “the law of supply and demand. As long as there is an abundance of capital, translated into capacity in the market, the supply was driving the prices low.” Lubert would likely agree reinsurers will need to settle in for low rates continuing. Citing findings in a Willis Re study of a subset of 25 reinsurers, “20 markets experienced positive share price development in 2016 and through the first quarter of 2017,” he says. “At the same time, the expense ratio for this subset of reinsurers increased
modestly from 33.1% in 2015 to 33.2% in 2016,” notes Lubert. “Thus, with buoyant share prices and reasonable returns on equity, reinsurers will (grudgingly) support modest rate reductions to the benefit of reinsurance buyers.” When overall demand is stagnant and capital continues to build, Van Slooten says the pressure is all one way. “The downward pressure on pricing, very low interest rates since the financial crisis and new forms of capital coming into the industry have combined to create a very demanding situation for reinsurers and some are proving much more resilient to what’s going on than others,” he suggests. “It’s all about relevance to clients at the end of the day,” he emphasizes. “It’s a very competitive market and it places a lot of pressure on reinsurers to provide bespoke responses in a way that hasn’t really been required in the past.” Veronica Scotti, president and chief executive officer of Swiss Re Canada, says her company believes in differentiation and focusing its “efforts on value, not price. Despite continued attempts to commoditize our business, many clients have responded strongly to our trusted advisor model and the bespoke services and covers we can afford to extend to them,” Scotti reports.
ON THE HOME FRONT Rates are generally low and going lower, but what is happening here at home? Are there particular developments that offer some hope of positive change? With regard to excess of loss (XoL) Cat reinsurance, “market rates appear to have stabilized or hardened during the January 1, 2017 renewals,” Scotti says. “We view this as a sign that the market at large is contemplating the increased financial risk in Canada due to previously underestimated perils such as wildfires, but also the apparent increase in frequency of climate change-related perils such as floods and hail storms,” she says. “Canadian insurers continue to be cautious in growing their exposure of earthquake risk in light of potential
COVER STORY
Pitch Perfected accumulation and contagion risk. In the casualty market, we continue to see margin contractions and remain concerned with the underlying profitability of this line of business,” Scotti adds. “I don’t believe the reinsurance market at large will be exiting the Canadian market,” says El-Sayegh. “It remains that Alberta presents the highest frequency of Cat losses and has the least diversification within the country. Having said that, the severity remains in the earthquakeprone zones,” he points out. “Reinsurers need to look outside the box to find profitable business; to look beyond the current RI (reinsurance) model is the challenge. This could include non-modelled solutions for wildfire or flooding,” Wassenberg suggests. El-Sayegh’s take is that reinsurers need to look at the underlying products rather than the reinsurance market. “In Canada, the personal lines are under stress and the margins are shrinking.The insurance companies should react and improve their profitability in order to see their impact on the reinsurance results,” he says. “All parts of the reinsurance value chain are feeling the pressure. Operational efficiencies and disciplined underwriting are no longer enough — something has to give,” Wassenberg says.
NEW VIEW OF BUSINESS “Over the last few years, we’ve seen people come into the market with some new ideas, some new business models, more of the sort of total-return reinsurer, where they’re trying to make money on both sides of the balance sheet,” says Van Slooten. These reinsurers are “looking to make more money on the investment side than a traditional reinsurer would typically make,” he explains. “Reinsurers are getting closer to the risk, either by writing directly or understanding better,” El-Sayegh suggests. “Given the low reinsurance rates, we have been investigating more and more the primary market to understand where the losses are coming from and working closer with our key clients to manage these exposures by various mitigation
measures,” he says. “The need to understand the primary market, its terms and conditions is becoming a bigger necessity than prior years,” he suggests. “With more capital in the market, the ultimate winner should be the insured
“Given the low reinsurance rates, we have been investigating more and more the primary market to understand where the losses are coming from and working closer with our key clients to manage these exposures by various mitigation measures,” says Joseph El-Sayegh of SCOR Canada Reinsurance Company. client as this drives down the cost of insurance,” Robert DeRose, vice president of A.M. Best, notes in a statement releasing Best’s Special Report: Innovation: The Race to Remain Relevant. “But it is the long-term value proposition that really matters for all parties involved and that outcome is still very unclear,” DeRose contends. Scotti’s view is that “the Canadian insurance and reinsurance market is on the verge of a number of considerable transitions, which, ultimately, benefit the insureds.” These transitions include the following: • digital distribution channels are start-
ing to make the consumer experience more flexible to individuals’ needs; • new analytical abilities have started to enhance risk-adequate rate-setting and make risk drivers more transparent, thereby creating incentives for consumers and businesses to put in place measures that reduce their vulnerabilities; and • development of new, competitively priced, on-demand and customized insurance products where insurance assumes more service-like characteristics will eventually lead to higher insurance penetration and help make society more resilient. “These are all value-driven, customercentric and non-cannibalizing sources of growth for insurers and reinsurers alike,” Scotti says. “The closer insurers and reinsurers partner on these endeavours, the more promising the outcome will be as investment can be material and skills complementary,” she adds. “As reinsurers try to adapt to changing market conditions, we’re seeing more firms looking into more advanced business intelligence and modelling solutions, and replacing core systems,” Mitch Wein, vice president of research and consulting for Novarica, says in a company report on business and technology trends, released this past January. “As the saying goes, ‘Necessity is the mother of invention,’ or perhaps in our case, the driver of innovation,” says Wassenberg. He sees adopting disruption and innovation concepts as crucial to redefining the RI business model. “Embracing new technologies and redeveloping core capabilities in partnership with clients and non-traditional entries (insurtech, data analytics) will guide future success,” Wassenberg says. “But, again, it’s all about being relevant to clients. You’ve got to be able to deliver something different to what’s out there at the moment, because there are a lot of very strong companies doing a pretty good job in terms of bringing product to the market and selling it at an attractive price,” Van Slooten adds. July 2017 Canadian Underwriter
25
APPOINTMENT NOTICE
COVER STORY
Pitch Perfected
“Our business is about risk,” says Philipp Wassenberg of Munich Reinsurance Company of Canada. “It will always be about risk. But risk changes, evolves, grows and shrinks. We have to be nimble and respond to these changes.”
TD’s Kenn Lalonde appointed Chair of the Board of Directors for Insurance Bureau of Canada Insurance Bureau of Canada (IBC) is pleased to announce that its Board of Directors has elected Kenn Lalonde to serve as Chair of the Board. Mr. Lalonde is President and CEO of TD Insurance. He has also served on IBC’s Board of Directors as Deputy Chair. Mr. Lalonde has over two and a half decades of experience in the financial services sector in both Canada and the United States and holds his Director’s Certification (ICD.D) from the Institute of Corporate Directors. He has been serving in his current role at TD since September 2012 and was named to the bank’s Senior Executive Team in January 2016. Prior to joining TD, Mr. Lalonde held executive roles at CUNA Mutual Group, CUMIS Group and CIBC where he led multiple business lines including its insurance business.
IBC is the national industry association representing Canada’s private home, auto and business insurers. Its member companies make up 90% of the P&C insurance market in Canada. For more than 50 years, IBC has worked with governments across the country to help make affordable home, auto and business insurance available for all Canadians.
26
INNOVATION DRIVER El-Sayegh reports that SCOR has been active in insurance technology for many years, including having roles in initiatives focused on open-source modelling, process automation and blockchain. “As we move deeper into digitalization,” Wassenberg points out, “roles will change. The insurance value chain will be disrupted. Creativity in developing customized, client-specific products will push increasingly specialized know-how as well as improved responsiveness.” There is plenty of interest and investment — including from reinsurers — in insurtech right now, Van Slooten says. “They want to see the technology and the people behind these companies and what they’re trying to achieve,” he says. “Not since the Industrial Revolution has insurance seen such rapid change in risk and new technology. Understanding how these risk trends will affect your portfolio is crucial to understanding how to measure your risk,” Wassenberg says. Driverless vehicles, the Internet of Things, blockchain, wearable technologies, robotics and artificial intelligence are all trends that will have an impact on the industry, he says. “As much as we think these trends are futuristic, that future is here — and it is imperative we understand how these will impact our risk.” Likely the biggest driver of insurtech, though, is “that the industry has a cost issue,” Van Slooten maintains. “There is
Canadian Underwriter July 2017
IBC_Appointment-Underwitters-Vertical-Lalonde_v02.indd 2 1017-07-05 10:14 AM
a big problem with cost in the industry and I think a number of these insurtech initiatives are aimed at driving cost out of the industry in a way that maybe the industry hasn’t really come up with itself,” he says. “The reality is that there is still a lot of paper-chasing and formfilling and process that sits behind the insurance and reinsurance industry.”
HOLD THE COURSE “Fundamentally, what’s going on here is you’ve got a client base that is being more demanding because they’re operating in a much more complicated world, and that’s forcing reinsurers to raise their game,” Van Slooten says. “It’s one of the reasons we’re seeing consolidation in the industry, because it’s about ending up with an organization that is equipped to respond to changing client demands,” he points out. “Our business is about risk,”Wassenberg says. “It will always be about risk. But risk changes, evolves, grows and shrinks. We have to be nimble and respond to these changes,” he notes. “It’s no longer enough, as a reinsurer, to be a following market, just supplying capacity,” Van Slooten contends. Rather, people are “looking for answers to strategic issues that their organization is facing and they’re looking for technical support and know-how from strategic partners that can help them to accomplish their goals.”
Fire Stopper The Alberta government reports it is currently implementing most of the 31 recommendations contained in two commissioned reports exploring what worked and what did not in the wake of the massive Fort McMurray wildfire. And while Canada’s most costly natural disaster ever will not necessarily change how reinsurers here conduct business, there are rumblings of its potential impact on pricing. Greg Meckbach
Associate Editor
A year after Canada’s most expensive natural disaster, reinsurance experts suggest that the Fort McMurray wildfire was not financially significant worldwide, yet still “captured the attention” of the global reinsurance industry and highlights the need to manage risk through programs such as FireSmart. The Horse River wildfire was detected on the evening of May 1, 2016 when it was about two hectares in size and approximately seven kilometres southwest of Fort McMurray, Alberta; two days later, the city was evacuated, consulting firm MNP LLP states in its recently released report, A Review of the 2016 Horse River Wildfire, commissioned by Alberta Agriculture and Forestry. In a separate report, KPMG LLP’s May 2016 Wood Buffalo Wildfire Post-Incident Assessment Report — dated May 2017 and commissioned by Alberta Emergency Management Agency — cites figures released by Insurance Bureau of Canada that the financial and economic impact is estimated at $8.9 billion, with insured losses about $3.6 billion. About 85% of the insured losses from the wildfire were covered by reinsurance and most of that was covered by European reinsurers, analysts for A.M. Best Company Inc. noted last
year during the rating firm’s annual Insurance Market Briefing Canada in Toronto. That estimate had not changed as of June 2017, says Gordon McLean, senior financial analyst for A.M. Best. “While it was a significant event, I don’t know that it’s a catalytic event that is going to change the manner in which business is conducted,” McLean recently told Canadian Underwriter. AXIS Re Canada, for example, reports that “we have not changed our strategy or approach to reinsuring natural catastrophe risks as a result of the Fort McMurray wildfire.” In general, McLean states, “it was an earnings event and not a balance sheet event.” Among the affected reinsurers were Munich Re, Swiss Re and Hannover Re, which noted in their 2016 annual reports the event cost them 404 million euros, US$229 million and 128 million euros, respectively. To that, the Corporation of Lloyd’s reports the wildfire was one of two events in 2016 for which the net incurred loss to the Lloyd’s market exceeded 250 million pounds. The wildfire “was largely financially insignificant to the reinsurance industry on a global scale,” concur Riley Doolittle, vice president of Guy Carpenter and Company LLC, and Kevin Kerno-
July 2017 Canadian Underwriter
27
han, the firm’s assistant vice president. “However, this wildfire event in a small, remote Canadian city still managed to capture the attention of the reinsurance industry worldwide,” Doolittle and Kernohan say, suggesting that one reason for this is it was a non-modelled peril at the time of the event. “The forest fire hazard is a modelling challenge due to a variety of influencing characteristics and conditions, such as temperature, humidity, precipitation trends, phase in the [El-Nino Southern Oscillation] cycle, winter snowpack and snowmelt rates, wind and cause of ignition,” they explain. “Reinsurance companies will need to re-evaluate exposure concentrations and accumulations and how they charge for non-modelled perils, particularly wildfire,” they add. “Being the largest reinsured catastrophe in Canadian history, there was certainly a lot of concerns about reinsurance from affected clients,” says Paul Cutbush, senior vice president of catastrophe management at Aon Benfield Canada. “Certainly, price was affected by the fire,” Cutbush says, but adds it affected Cat programs “differently depending on how much loss was for each client.” That said, price increases “were not as severe, probably, because of the overcapitalization of the global reinsurance.” However, the disaster “tested the appropriateness of insurance companies’ reinsurance programs in relation to limits purchased and contract language,” say Doolittle and Kernohan. For example, they report that an Alberta-based insurer informed its reinsurers that it intended to collect on two policy limits as a result of “contract language that allows for an event which exceeds a specified duration to be split into two separate events.” That insurer’s collection was “still being negotiated” as of late June, they told Canadian Underwriter. “That fire could have burned for six months and not gotten near anything,” Raymond Thomson, associate director for A.M. Best, points out. “It just happened to close in on Fort McMurray.” Cutbush reports that, including oil company property, there was probably 28
Canadian Underwriter July 2017
about $50 billion in property value exposed in the Fort McMurray area. “I really do think it was one of the worstcase scenarios we could ever see,” he says, adding “we had 88,000 people literally living in the middle of the woods.”
IMPROVING RESPONSE What was and could have been are among the risk management issues being explored and that will demand response to prevent or mitigate similar losses. Of the 10 recommendations made by MNP, seven “are in process,” while the other three have been completed, a spokesperson for Alberta Municipal Affairs (AMA) reports in an email. Of KPMG’s 21 recommendations, work is under way on 16 and starting on the remaining five, the Alberta government noted in early June. For example, the latter report recommends that Alberta’s Office of the Fire Commissioner “be given authority and appropriate resources to work with local authorities to create a provincial inventory of municipal firefighters (including wildland-urban interface-trained professionals) that can be deployed during an emergency.” The AMA spokesperson writes a provincial inventory of municipal firefighter equipment and specialty training that the province could call upon in support of communities is already in place and was used in the Wood Buffalo fire. In accordance with KPMG’s recommendation, however, the inventory “requires better technology support to make it more efficient,” she notes. With regard to the MNP recommendations, one calls on the government to “emphasize a long-term vision for FireSmart within the province that includes community responsibility, multi-agency collaboration and an outcome-based approach to implementing FireSmart projects.” The spokesperson writes Alberta “nearly quadrupled” funding available for the program this year. Despite Alberta being a leader in developing and applying FireSmart principles, MNP notes the Fort Mac fire could not have been stopped even if more pro-
gram work or more vegetation management had been done. “When you look at the intensity of the fire, how quickly it escalated,” says McLean, “it was escalating despite the fact that they were applying resources against it.” Even so, the Alberta government should work to apply or deploy aspects of the FireSmart program in communities vulnerable to wildfire damage, argues Blair Feltmate, head of the Intact Centre on Climate Adaptation at the University of Waterloo. Although supporting recommendations in both reports, “if anything, I thought they underplayed the utility of the application of the FireSmart program,” Feltmate says. “Under extreme conditions, it may very well be that there is nothing you can do by way of prevention, but there is an awful lot between zero and extreme events,” he points out. Noting that he has spent time with both insurers and reinsurers since the Fort McMurray wildfire, “almost universally there is a feeling, and I happen to agree with it, that the bulk of the emphasis going forward should be on prevention and the application of the FireSmart program and other aspects of preventive maintenance that might limit the probability of major fires causing pervasive damage in communities, particularly throughout the boreal.” To address wildfire risk, Feltmate predicts reinsurers will be “more engaged on the side of the equation of investing in preventive measures, like being part of the solutions equation.” Citing the insured losses from the event, “for the square root of the square root of that number, we could have applied the FireSmart program and maybe not eliminated the Fort Mac fire, but certainly limited the amount of damage realized by it,” he argues. Some options for limiting damage, he says, include focusing on firebreaks around vulnerable communities, particularly on the boreal; fireproof shingles, siding and decking material; not storing firewood along and in close proximity to houses; and keeping brush away from homes.
Security Blanket Businesses have plenty of stored data on their systems, some of it not currently being used and unlikely to be used in future. This information could prove fertile ground for hacking and potentially expensive breaches. A well-conceived purge may be necessary in order to ensure stored data does not turn toxic.
Andre Boysen Chief Identity Officer, SecureKey Technologies
Each and every company has a number of valuable assets. These range from tangible assets such as cash, product inventory, buildings and property to intangible assets such as corporate intellectual property like patents or copyrights.Yet one of the most valuable assets — and oftentimes, most dangerous — frequently goes under-protected. In an increasingly digital society, data has become a currency of its own for companies. However, with publicized data breaches and leaks now becoming commonplace, one could argue large databases of saved information that are not necessary to keep are rapidly becoming the most toxic asset that a company holds. The term “big data” has been a buzzword for years, as companies worldwide are racing to collect and analyze excess amounts of information to make more informed business decisions. With organizations increasingly conducting business online and storing consumers’ information for long periods, perhaps permanently, it is clear that data will continue to be a toxic asset. As long as data continues to be stored, both companies and their customers remain vulnerable and at risk of a major breach. Its importance can be compared to oil — when the flow of data goes as intended, it is hidden from sight and fluid. But when the flow is interrupted, resulting in a breach, the consequences are potentially catastrophic. Breaches can expose
passwords, SIN numbers and birth dates. Leaks can prove expensive, their stain persistent and if made public, could have long-lasting effects. So, if the risks associated with digital data are so high, why do companies and organizations hold on to toxic data? Why are businesses not doing more to protect against the risks associated with doing business in a digital age?
FINANCIAL IMPLICATIONS The 2017 IBM X-Force Threat Intelligence Index, released this past March, noted that 4 billion data records were leaked last year. With an estimated average global cost of a data breach per lost or stolen record being US$158, IBM reported last year, that translates to more than US$600 billion worth of leaked data in 2016 alone — a figure that is likely to continue increasing each year. There has been no shortage of big-name companies that have seen just how toxic data that serves little purpose can be when the target of a malicious hack. No doubt, such events have an impact on the business, including from a reputation and trust perspective. But for those customers whose personal information is leaked — many of whom may not have been active for some time — threats like fraud and stolen identity become very real concerns. The 2017 CPA (Chartered Professional Accountants) Canada Fraud Survey, conducted January 31 to Feb-
July 2017 Canadian Underwriter
29
ruary 8 by Harris Poll for CPA, found that 3% of the 1,001 respondents report being concerned that businesses are vulnerable to cyber attacks involving personal information. As well, less than half of polled companies provide consumers with privacy features that allow them to opt in or opt out of data collection (47%) or enable them to have absolute full control over information (46%). However, there finally appears to be movement towards a more secure digital space. With major organizations such as Yahoo!, Ashley Madison, Bell, LinkedIn and countless others suffering large and highly publicized breaches, organizations are beginning more and more to explore various avenues to protect themselves. The first is obvious: strengthening internal technology to protect against hackers. The second — an emerging trend that is becoming increasingly common — is companies’ adoption of cyber insurance. In 2015, PwC estimated that the global cyber insurance market could grow to US$5 billion in premiums by 2018 and at least US$7.5 billion by 2020. In addition, a 2016 report published by Allied Market Research notes that the global cyber insurance market was expected to generate US$14 billion in gross premiums by 2022, having a compound annual growth rate of almost 28% from 2016 to 2022.
CYBER CRIME “SECURITY BLANKET” A company can take steps to guard against hacking, but once a data breach has occurred, there is no predicting what damage — whether financial or reputational — the company may, ultimately, experience. Cyber insurance provides organizations with various types of coverage related to cyber attacks, ranging from protection for information and technology-related risks to reimbursement for restoring data and negotiating and paying a ransom. Statistics suggest small to large businesses alike are vulnerable, with security firm Symantec reporting two years ago that small businesses are targeted by 30
Canadian Underwriter July 2017
attackers 43% of the time, while large businesses are targeted 35% of the time. This growing insurance area is becoming a must-have, particularly for businesses with no in-house security or IT professionals. In Canada, while it is too soon to tell how often cyber insurance policies are being used and the associated costs, what is known is that addressing cyber security is becoming more of a priority. Citing information from A.M. Best, the Insurance Institute of Canada noted two years ago in Cyber Risks: Implications for the Insurance Industry in Canada that the majority of companies in the country, including most insurers, do not purchase cyber insurance. That said, the situation is expected to change over the next five to 10 years.
So, if the risks associated with digital data are so high, why do companies and organizations hold on to toxic data? More recently, United States-based analytics firm FICO reported 36% of polled Canadian security executives said their firms have no cyber security insurance. Conditions could be of concern given that, later this year, the parts of the new Digital Privacy Act that will require organizations to disclose data breaches are expected to take effect. Under the current federal legislation, there is no obligation to report the data breaches that are taking place. With the new measures being introduced, companies will need to disclose any “real risk of significant harm” to users. Organizations have two options in advance of the new requirements: continue to store information that has the potential to become toxic if breached and prepare to disclose to consumers when their data is stolen, or take proactive approaches to protect against data breaches by considering the vulnerable data they have and determine how best to prevent it from becoming toxic.
DATA CAN BECOME A LIABILITY Large databases of saved information have become dangerous liabilities for both businesses and consumers. Yet, there is a simple solution to avoid data becoming toxic if a leak or breach occurs. In addition to strengthening internal technology and investing in cyber insurance, companies need to evaluate the data they store and for how long, and purge any unnecessary data. One strategy to do this is to create tiers of data importance to indicate what is vital to collect and store, what is important to collect and store and what is of little importance — purging the least important. Companies are also well-advised to conduct a risk assessment of the information they now hold to determine the risk exposure should the data be leaked or breached, either in part or in full. Weigh the pros and cons of continuing to store data deemed high risk — by doing so, is there the potential to jeopardize the organization’s reputation, financial stability and/or relationships with customers? The value of holding the data will never outweigh the risk of losing it. New technologies and services are emerging that could help improve attempts to mitigate risk and exposure. Today, business confidence is measured by the volume of corroborating data meant to support that people registering for a service are, in fact, who they say they are. In the absence of in-person transactions, the default practice to increase confidence seems to be to submit more data. However, this comes with added risks. If the claims presented could be verified as true from the source, and the person presenting the data is the person to whom the data belongs, business confidence could be assured, all while using less data. This would result in a better experience for customers, lower customer/data acquisition costs and lower breach risks. Digital information is easy to copy, and can be easy to exploit when falling into the wrong hands. It is time organizations begin to implement measures and controls to combat that possibility.
Canadian Insurance Financial Forum Toronto
Reinsurance Reset Jason Contant
Online Editor
Angela Stelmakowich Editor
While reinsurance industry players must remain alert to what seems an endless stream of change, that focus needs to be maintained in step with taking timely action on lessons that have already been learned. The 8th annual Canadian Insurance Financial Forum (CIFF), presented by MSA Research Inc., provided actuarial, accounting, finance, compliance, regulatory and investment professionals with need-to-know information on topics from earthquake to black swans, cyber and insurtech.
RELIANCE COURTS PROCRASTINATION The potential for procrastination to address the consequences of a large earthquake in Canada are persistent, demanding implementation of a tactical plan that could see “the issue dealt with, one way or another, in the next 12 months,” Senator Scott Tannas argued during CIFF. For both the property and casualty insurance industry and government, “I submit that we have
enormous potential for procrastination,” said Tannas, keynote luncheon speaker at the forum. “I don’t think that we will ever see a solution if we wait for the government to proactively try and solve this problem for us. It’s that simple.” There is strong evidence that the financial damage of a “big shake” — likely in British Columbia; possibly in Quebec — could produce overwhelming losses for insurers and threaten “our country’s entire financial system,” he said. “In aggregate, the whole of the industry could likely handle a $20 billion event. This is roughly where insurers are prepared with capital and reinsurance resources today,” Tannas said. Consider, though, that recent Cat models have generated losses from a big shake of as much as $95 billion. Currently, in the event of a large earthquake, Ottawa would need to provide a significant and unknown financial commitment. “I submit to you that this situation is the perfect recipe for many, many more years of talk, study and inaction.” Developing a staged tactical plan “puts the onus on our industry and our leaders to propose a clear and detailed plan that is fair to all stakeholders.” The plan to get the quake concern “onto the agenda and see the issue dealt with one way or another in the next 12 months” would involve a number of steps: industry leaders acknowledging
July 2017 Canadian Underwriter
31
the current situation is not sustainable; creating a blueprint of what a proposed mechanism would look like; and forming a task force that is given six months to develop “a detailed, down to the penny” plan to present to the finance minister. Ottawa would then be asked to engage with the task force within 90 days.
BLACK SWANS NEED ATTENTION The (re)insurance industry would do well to pay more attention to unanticipated and tough-to-model black swan events, Monica Ningen, Swiss Re’s managing director and chief property underwriter for the United States and Canada, suggested during a CIFF panel discussion. “When you look back at the major events around the world, there is always something notable about them that we didn’t anticipate. They are sort of in the ‘black swan’ category,” Ningen told those attending Perspectives on the Canadian Reinsurance Scene After a Rough Year. She cited a California earthquake to illustrate an atypical event. People could “walk away from their mortgages,” Ningen said, noting there are more people owing money on their mortgages than for what the homes have been insured. This would default back to the mortgage company, which buys default covers, often from reinsurers, she said. The scenario does not even take into account if municipalities can get infrastructure back open and communities rebuilt. “Just sit back and think about how many black swans happened in your lifetime,” Ningen said, pointing out the Quebec ice storm could certainly be considered one.
CYBER POLICIES COULD CONVERGE A lot more convergence in cyber insurance policies is expected within the next few years, as policies, exclusions and wording get tested and case law develops, John Elbl suggested at CIFF. “Right now, because of the soft market, everyone wants a piece of the pie, so the exclusions are diminishing,” the vice president of AIR Worldwide noted in response to a question about whether he sees future policies addressing particular needs or a growth in exclusions. 32
Canadian Underwriter July 2017
As case law develops, “I believe, say, easily five years from now, we’ll see a lot more similar cyber policies than a lot more divergent,” Elbl said during Pricing and Reserving Cyber Risk Products. “It probably won’t be as similar as, say, the homeowners’ market for policies wording, but I think there will be a lot more convergence.” The vast majority of the cyber market today is commercial, he noted. For personal lines, Milliman consulting actuary Elizabeth Bart suggested that consideration must be given to how something like the Internet of Things, or IoT, could influence personal lines. “Even though it was your toaster that (allowed the hacker) in, you still need your ID theft protection,” Bart advised.
MODELLING THE PROCESS The future is more around modelling the process than the data, Kevin Huang, founder and chief executive officer of Huang & Associates Analytics, suggested during CIFF’s Data Analytics, Data Science, Big Data panel discussion. While the focus previously was on modelling financial catastrophes, there is now the ability to model human behaviour, man-made Cats, terrorism and even casualty Cats, Huang told attendees. “If you have a very complicated process and you have a lack of data, you have scarcity of data, then modelling the process is the way to go so you can complement your lack of data with your better understanding of the process,” he said. In the reinsurance space, “the quantity of data is always a challenge,” said Jonathan Frost, senior vice president of G.C. Analytics at Guy Carpenter, adding the space is trying to acquire more data. In certain cases, Jeff Turner, Beach & Associates’ senior vice president and managing director, Toronto, said there may not be enough data to develop credible results. “There’s a ton of information that’s out there that isn’t necessarily being captured by primary insurers that would be helpful for the reinsurers.” In the actuarial space, Huang would like to see a “centralized place” where industry partners could team up with a provider “who can digitize every single
piece of information.” Global users could then search for and extract the data, perhaps providing the source some money per search, he suggested.
INDUSTRY WARMS TO INSURTECH Change in the insurance industry will unfold regardless of what those in the value chain do, but a new view of how insurtech can help enhance customer and consumer engagement seems to be forming, Nigel Walsh said during CIFF. Walsh, a partner with Deloitte’s financial services practice in the United Kingdom, said both fintech and insurtech are witnessing tremendous growth. Still, Walsh told those attending InsurTech: Here and Now that he sees a big difference between fintech and insurtech, one that could fuel growth for the latter. “I don’t think insurers are sitting there with a pin trying to burst it (insurtech bubble),” he said. Rather, they are asking, “‘How do we work together? (to get a better outcome for customers).” Pointing out “there’s a really tidy space to go after,” he suggested “all we’re doing is squeezing more and more companies into the space that can address this.” Something like half of the US$8.5 billion of investment in this space in recent times is targeting distribution, he said. “That, to me, says we want a better way to engage. As consumers, we’ve built our expectations; we’ve increased our bar.”
MUNICIPAL COLLABORATION KEY The consequences of poor land use policies is but one of the lessons learned from the Fort McMurray wildfire, Michael Brisebois, global head of reinsurance at TD Insurance, suggested during CIFF. “Society as a whole is still living with the consequences of poor land use policies,” Brisebois said during the reinsurance panel discussion. For example, some houses are being rebuilt on known floodplains despite there being no robust flood mitigation in place, he noted. After Fort McMurray, it became “pretty clear that both insurance companies and reinsurance companies now look at wildfire a little differently,” Brisebois said. “It’s not a one-off event.”
REGISTER TODAY!
Tuesday, August 29, 2017 SHERATON CENTRE TORONTO
Insurance: Connected
The 2017 Insurance-Canada.ca Executive Forum Digital technologies and innovative processes are enabling new products enhanced customer experiences and reduced friction costs. How can an insurance business capitalize? Our expert faculty will discuss: KEYNOTE
Matteo Carbone
Founder & Director, Connected Insurance
Mark Dowds
Craig Weber
Co-Founder, Trov
CEO, Celent
The Future of Insurance is InsurTech
Enabling On-Demand Insurance
Matteo’s analysis will describe a completely changed insurance environment, yielding four main benefits: frequency of interaction; bolstering the bottom line; knowledge creation; and sustainability.
Mark will provide insights into Trov’s disruptive, on-demand insurance proposition, and the rapidly changing insurance technology landscape.
Ido Segev
Partner, McKinsey Insurance Practice
The Art of Customer Connection: Opportunities in the Happiness Halo Craig will discuss recent research aimed at applying the principles of behavioural science to customer experience.
InsurTech: A Threat that Inspires Ido will describe how to engage digitally savvy customers while driving opportunities with new business partners.
PRESENTED BY
DETAILS AND REGISTRATION:
www.insurance-Canada.ca/ICEF Join your colleagues at the 2017 Insurance-Canada.ca Executive Forum to discuss strategies to win tomorrow’s customers. Thank you to our sponsors! GOLD SPONSORS
SILVER SPONSOR
BRONZE SPONSORS
MEDIA SPONSOR
Recent Insurance Press Releases featured on insPRESS.ca CEP Forensic’s Nicolas Geoffroy to present at the COM 2017 – conference of metallurgists in Vancouver, BC June 23 — by CEP
30 Forensic Engineering transportation safety group to present at the Human Environments Analysis Laboratory Symposium June 22 — by -30- Forensic Engineering
First annual Ronald McDonald Charities Atlantic PJ Walk for Kids a success June 21 — by ServiceMaster of Canada Limited
Kernaghan Adjusters: We’re busy, we’re hiring, and we want you! June 21 — by Kernaghan Adjusters
30 Forensic Engineering strengthens geotechnical and mining group with the appointment of Xiangyu Li June 21 — by -30- Forensic Engineering
New location for STRONE Bracebridge at 345 Ecclestone Drive June 21 — by STRONE-Itech
CSIO welcomes David Gambrill as communications manager
June 19 — by CSIO (Centre for Study of Insurance Operations)
ARAG appoints CFO and head Underwriter as expansion continues June 15 — by ARAG Services Corporation
ENCON Group Inc. announces stand-alone cyber insurance for companies in Canada June 15 — by ENCON Group Inc.
Xpera launches improved technology platform to enhance service to clients June 14 — by SCM Insurance Services
Lloyd’s invites you to attend 1 hour RIBO accredited MGA Roadshow in Barrie, Ontario June 13 — by Lloyd’s
VIDÉO : Célébrons les 145 ans d’histoire canadienne de La Garantie et les 150 ans du Canada June 13 — by The Guarantee Company of North America
VIDEO: The Guarantee celebrates 145 years of its Canadian history & Canada 150 June 12 — by The Guarantee Company of North America
Opta Information Intelligence launches Fire Underwriters Survey’s wildfire grading index June 8 — by SCM Insurance Services
Last chance to register: Free 1 hour marine fire and explosion claims webinar June 7 — by Origin and Cause
SouthEastern Mutual Insurance Company joins Mutual Concept Computer Group Inc.’s (MCCG) client community by ‘kicking-off’ their Insurance Business Solution (IBS®) implementation project for their insurance back-office solution. June 6 — by MCCG
CSIO announces industry solution for digital delivery of proof of auto insurance cards June 6 — by CSIO (Centre for Study of Insurance Operations)
Farewell to Mena Costandi June 6 — by Origin and Cause
Automate your payments with FIRST Canada at the IBABC conference June 6 — by FIRST Insurance Funding of Canada
LRI executives and CEP Forensic Inc. buy LRI Engineering Inc., a leading Canadian fire protection consulting firm June 6 — by CEP
Finalists for the Insurance Nexus Canadian Awards 2017 announced June 6 — by Insurance Nexus
30 Forensic Engineering strengthens construction services group with the senior appointment of Jiwan Thapar June 6 — by -30- Forensic Engineering
ServiceMaster Restore continues to grow with new Alberta location June 5 — by ServiceMaster of Canada Limited
Sharp Mobile integration with Power Broker promotes broker channel June 5 — by Kirby Ryan
Lee Powell named vice president for Vericlaim Canada June 2 — by Sedgwick
30 Forensic Engineering’s Jiwan Thapar presents advanced construction claims management course at Toronto Construction Association June 2 — by -30- Forensic Engineering
New location for Halton (Oakville) Collision Reporting Centre June 1 — by Accident Support Services
FIRST Canada | The ultimate best-dressed Canadian competition June 1 — by FIRST Insurance Funding of Canada
Free 1 hour webinar – marine claims June 1 — by Origin and Cause
FIRST Insurance Funding of Canada and Clearpay exclusive partners in payment transfers May 31 — by FIRST Insurance Funding of Canada
To Read the Full Story for Each Press Release, visit insPRESS.ca
Update to the original print edition
2017 NEW
Exclusive data + analysis
STATS GUIDE Oops — we goofed. Subscribers to Canadian Underwriter’s print edition might have noticed that the same set of tables appeared under two headings in Stats Guide 2017. The following two pages of “Underwriting Results: Property” are what should have appeared on pages 70-71 of the original print edition. We’ve made other minor corrections to Stats Guide 2017; download the associated pages at canadianunderwriter.ca/sg17update
July 2017 Canadian Underwriter
35
36
Canadian Underwriter July 2017
Stats_2017_p16-p75.indd 70
2017-07-06 11:13 AM
0 3 592
Kings Mutual Insurance Company (The) ........................................... 9,486
Legacy General Insurance Company ..................................................... 44
Liberty Mutual Insurance Company ................................................ 83,932
†Totals include out-of-country business
39
57,732
Intact Financial Corporation ...................................................... 2,996,795
Jewelers Mutual Insurance Company ............................................... 5,973
0
Industrial Alliance Auto and Home Insurance Inc. ........................ 114,892 265
0
Heartland Farm Mutual Inc. ............................................................. 62,674
601
67
HDI Global SE Canada Branch ....................................................... 31,148
Ironshore Insurance Ltd................................................................... 13,334
0
Hartford Fire Insurance Company ................................................... 10,193
International Insurance Company of Hannover SE ......................... 46,439
0 90
68
Great American Insurance Company .............................................. 21,532
Guarantee Company of North America (The) ................................ 125,085
92
Gore Mutual Insurance Company ................................................. 180,184
Groupe Estrie-Richelieu Compagnie D’Assurance (Le)................... 42,658
7,375
Echelon Financial Group ................................................................. 35,254
FM Global - Group ........................................................................ 354,596
135
Economical Mutual Insurance Company ...................................... 712,197 61
1,745
Ecclesiastical Insurance Office plc .................................................. 53,703
704
1,797
Desjardins General Insurance Group Inc. .................................. 1,462,459
Everest Insurance Company of Canada........................................... 35674
2,428
Continental Casualty Company....................................................... 93,017
First North American Insurance Company ...................................... 21,150
0 498
Commonwell Mutual Insurance Group (The) ................................... 72,483
0
1,321
Chubb Group................................................................................. 412,106 37,615
0
Capitale assurances générales inc. (La) ........................................ 392,987
Co-operators - Group................................................................. 1,169,108
0
CAA Insurance Company ................................................................ 52,369
Clare Mutual Insurance Company ..................................................... 2,669
0
0
BCAA Insurance Corporation ........................................................ 151,515 6
0
Ayr Farmers’ Mutual Ins. Co. ........................................................... 12,883
Boiler Inspection and Insurance Co of Canada (The)........................ 5,885
0
AXA Art Insurance Corporation ......................................................... 3,410
Berkley Insurance Company ............................................................. 2,152
36,813
Aviva Canada Group ................................................................. 1,615,919
1,009
American Bankers Insurance Company of Florida ........................ 118,907
-3
0
Allstate Insurance Company of Canada ........................................ 355,888
Associated Electric & Gas Insurance Services Limited ................... 10,614
801
Allied World Specialty Insurance Company .................................... 20,378
0
977
Allianz Global Risks US Insurance Company ................................ 181,463
127
0
Algoma Mutual Insurance Company ................................................. 5,581
Arch Insurance Canada Ltd............................................................. 28,037
0
Antigonish Farmers’ Mutual Insurance Company ............................. 5,222
7,259
Nfld. $
Alberta Motor Association Insurance Company.............................. 83,762
Totals† $
AIG Insurance Company of Canada.............................................. 482,410
Numbers reported in 000’s of dollars
23
0
7
14
0
48
2,983
0
0
2
0
168
0
64
4
902
93
37
1,960
2,136
543
892
173
0
7,886
0
189
0
193
4
10
0
0
0
5,003
16
105
0
440
0
25
259
0
0
1,594
P.E.I. $
230
2
9,479
39
0
429
79,728
0
0
1,252
0
1,373
0
555
245
3,776
582
383
2,918
26,028
4,195
12,115
3,639
0
36,106
2,669
1,142
0
1,221
74
27
0
0
36
52,797
866
550
5,222
2,216
15,276
136
2,225
0
0
6,095
N.S. $
1,014
2
0
76
186
569
40,935
0
0
229
2
1,023
0
235
43
8,740
421
215
2,867
24,595
2,931
22,617
2,047
0
30,531
0
1,870
0
1,374
306
4
0
0
46
35,529
250
398
0
1,488
17,884
1,089
2,242
0
0
5,794
N.B. $
PROPERTY 2016 All Private P&C in Canada by Direct Written Premiums
5,514
10
0
442
825
3,939
985,524
114,892
0
6,183
12
30,919
42,658
254
0
78,043
3,682
12010
2,337
64,972
3,374
697,578
7,783
0
62,624
0
55,977
362,620
0
1,086
644
0
0
972
178,275
667
2,857
0
17,369
40,052
782
17,647
0
0
60,813
Quebec $
15,064
13
0
4,002
2,904
3,859
926,669
0
62,674
6,225
2,020
69,573
0
9,680
106,337
98,134
7,154
9139
600
336,038
16,636
614,292
19,087
72,483
430,837
0
198,130
30,341
42,366
2,780
1,046
0
12,883
1,868
698,854
3,212
11,099
0
48,669
229,525
4,940
57,762
5,581
0
130,567
Ontario $
1,116
2
0
94
43
701
64,764
0
0
228
938
1,879
0
1,600
152
9,805
681
566
226
9,550
2,555
7,758
7,683
0
49,966
0
4,113
0
4,884
12
12
0
0
47
64,810
52
2,338
0
2,332
0
5,784
5,628
0
0
23,951
Manitoba $
2,652
2
0
183
617
891
11,097
0
0
3,243
1,716
134
0
1,510
138
8,834
822
325
338
5,016
1,787
2,018
4,716
0
85,978
0
6,330
0
2,331
403
3
0
0
21
35,418
139
761
0
3,244
0
2,698
4,006
0
26
23,623
Sask. $
14,344
5
0
585
5,951
9,496
448,858
0
0
6,621
5,012
8,263
0
5,954
3,583
26,599
3,857
6198
7,380
93,362
9,598
93,257
22,430
0
291,944
0
53,456
26
0
256
100
0
0
110
254,045
2,220
3,746
0
22,947
53,151
2,632
21,624
0
83,556
129,583
Alberta $
7,267
5
0
491
2,207
25,516
372,192
0
0
6,904
493
11,403
0
1,609
69,585
46,121
2,938
6699
16,477
148,756
9,914
8,485
23,330
0
125,812
0
82,254
0
0
883
306
151,515
0
304
243,022
1,680
5,809
0
19,122
0
1,375
51,918
0
180
85,966
B.C. $
52
0
0
1
0
26
1,514
0
0
0
0
0
0
3
5
65
36
20
8
0
51
326
35
0
3,199
0
122
0
0
0
0
0
0
0
3,246
159
112
0
25
0
116
921
0
0
1,566
Yukon $
37
0
0
6
0
124
4,030
0
0
2
0
0
0
0
0
188
53
5
8
-1
228
560
317
0
3,548
0
292
0
0
75
0
0
0
0
7,444
400
17
0
35
0
0
1,138
0
0
2,305
N.W.T. $
10
0
0
1
0
259
769
0
0
0
0
0
0
0
0
162
2
16
0
0
94
133
371
0
234
0
1,032
0
0
0
0
0
0
6
663
0
4
0
11
0
0
452
0
0
1,589
Nunavut $
UNDERWRITING RESULTS
July 2017 Canadian Underwriter
Stats_2017_p16-p75.indd 71
37
2017-07-06 11:13 AM
6 0
SGI CANADA ................................................................................. 379,080
Sompo Japan Nipponkoa Insurance Inc. .......................................... 3,778
4,061
Zurich Insurance Company Ltd. .................................................... 304,636
†Totals include out-of-country business
274,011
675
XL Specialty Insurance Company .................................................... 59617
................................................................................ 19,328,874
1,254
Wynward Insurance Group .............................................................. 78,134
TOTALS
0
171
Triton Insurance Company .............................................................. 11,863 396
4
Trisura Guarantee Insurance Company ............................................. 6,174
Westport Insurance Corporation .................................................... 103612
0
Trillium Mutual Insurance Co. .......................................................... 28,068
Wawanesa Mutual Insurance Company (The) ............................ 1,130,494
56 10,315
Travelers - Group ........................................................................... 508,737
Temple Insurance Company (The) ................................................... 84,069
Tokio Marine and Nichido Fire Insurance Company, Limited (The) . 20,725
0 1,705
T.H.E. Insurance Company ..................................................................... 52
0
11,342
Security National Insurance Company ....................................... 1,030,117
27
7
SCOR UK Company Limited ............................................................. 7,212
Starr Insurance & Reinsurance Limited ........................................... 43,163
0
Saskatchewan Mutual Insurance Company .................................... 54,124
SSQ Insurance Company Inc. ......................................................... 97,426
0
138
RBC Insurance Company of Canada ................................................ 9,015 54,817
0
Prince Edward Island Mutual Insurance Co. ................................... 19,766
RSA Canada Group (See Profile Notes) ..................................... 1,172,205
0
Poultry Insurance Exchange Reciprocal of Canada .......................... 3,159
Red River Valley Mutual Ins. Company ........................................... 92,632
0
Portage la Prairie Mutual Insurance Company (The) ..................... 115,322
Orion Travel Insurance Company .................................................... 24,533 0
61
Optimum - Group .......................................................................... 103,518
650
0
Ontario School Boards’ Insurance Exchange ................................. 15,647
Petline Insurance Company ............................................................ 54,281
0
Omega General Insurance Company .............................................. 50,285
Peace Hills General Insurance Company ...................................... 152,072
77 905
Old Republic Insurance Company of Canada ................................... 9,937
11,370
0
Municipal Electric Association Reciprocal Ins. Exchange ................. 3,459
Northbridge Financial Corporation ................................................ 540,982
1
Mitsui Sumitomo Insurance Company, Limited ................................ 7,014 0
0
Millennium Insurance Corporation .................................................. 42,236
376
0
Mennonite Mutual Fire Insurance Company ................................... 18,161
National Liability & Fire Insurance Company................................... 13,834
0
Mutual Fire Insurance Company of B.C. (The) ................................ 77,039
15,380
Nfld. $
MAX Canada Insurance Company .................................................. 15,977
Totals† $
Lloyd’s Underwriters................................................................... 1,138,552
Numbers reported in 000’s of dollars
66,591
38
107
304
2026
1,579
30
0
0
5,283
45
298
0
7
0
0
2
1,427
2
0
2,838
0
29
19,766
0
777
158
0
123
0
0
87
1
1,761
0
0
0
1
0
0
0
4,129
P.E.I. $
463,477
1,503
343
3,496
569
23,853
334
7
0
19,725
133
2,651
1
299
0
2
3
32,496
8
0
57,359
0
300
0
0
12,346
2,498
0
358
0
0
622
73
10,003
85
0
0
2
0
0
0
20,782
N.S. $
341,152
471
269
2,668
2131
32,883
233
4
0
10,538
204
2,613
0
149
0
17
5
18,719
443
0
26,940
0
159
0
0
3,931
731
0
307
0
0
346
113
10,554
203
0
0
7
0
0
0
18,962
N.B. $
PROPERTY 2016 All Private P&C in Canada by Direct Written Premiums
3,608,687
69,268
7740
2,315
7883
28,073
0
145
0
17,916
3,368
12,020
10
1,325
97,426
196
3
100,368
78
0
146,336
0
0
0
0
0
3,091
0
57
20,314
0
569
7
88,842
529
0
0
462
0
0
0
137,010
Quebec $
6,430,285
94,789
20114
15,019
24153
182,931
5,752
238
28,068
279,559
6,607
18,923
5
10,941
0
2,119
14,522
507,030
348
0
378,951
1,305
3,824
0
2,871
13,113
22,540
0
14,302
16,945
15,647
15,612
8,926
181,504
4,946
8,306
3,459
4,121
0
0
4,261
225,491
Ontario $
702,994
10,629
1003
10,492
1215
125,465
520
890
0
8,678
198
3,700
0
775
0
139
20,618
7,417
279
5,588
11,812
83,811
374
0
0
54,537
1,638
17,071
127
6,259
0
186
4
14,615
150
4,143
0
18
421
0
4,238
31,714
Manitoba $
855,527
11,782
878
13,908
3925
136,684
330
3,993
0
4,224
136
3,855
0
1,517
0
123
290,069
4,748
396
33,166
11,686
6,823
382
0
61
9,181
838
7,571
1,924
306
0
217
7
35,757
781
4,214
0
20
115
18,161
1,127
35,602
Sask. $
3,278,024
52,733
21032
12,043
12009
353,449
2,352
526
0
72,282
3,707
11,599
1
8,921
0
546
50,013
304,144
4,573
15,370
170,354
672
1,741
0
227
19,813
9,777
81,397
7,194
5,629
0
17,949
708
88,999
4,949
11,829
0
1,510
41,190
0
2,342
195,695
Alberta $
2,995,339
48,308
7425
16,216
23653
242,880
2,035
366
0
76,926
6,072
19,354
35
18,949
0
636
3,836
35,702
220
0
294,595
21
2,022
0
0
1,624
12,191
43,323
66
54,065
0
13,722
21
91,747
1,770
48,547
0
836
510
0
4,009
393,119
B.C. $
24,758
17
17
164
1
2,697
68
1
0
289
-1
-26
0
120
0
0
0
3,704
0
0
1,791
0
18
0
0
0
87
821
1
0
0
34
0
566
0
0
0
36
0
0
0
2,745
Yukon $
41,572
8,200
12
255
398
0
38
0
0
1,548
195
431
0
61
0
0
0
2,600
315
0
1,318
0
28
0
0
0
70
1,151
3
0
0
27
0
1,928
45
0
0
0
0
0
0
2,138
N.W.T. $
19,466
426
2
0
1558
0
0
0
0
1,289
5
586
0
0
0
0
0
420
0
0
1,542
0
0
0
0
0
12
738
1
0
0
9
0
2,009
0
0
0
0
0
0
0
5,061
Nunavut $
MOVES & VIEWS
UPCOMING EVENTS: FOR A COMPLETE LIST VISIT
www.canadianunderwriter.ca
AND CLICK ‘MY EVENTS CALENDAR’ ON THE HOME PAGE
1
Arch Reinsurance Company is appointing François Dagneau as chief executive officer of its Canadian branch, replacing Patrick McGuiness, who is retiring from the company. With 25-plus years of experience, Dagneau joins Arch Re’s Canadian operations fresh from his duties at Aon Benfield Canada. Also at Arch Reinsurance, Rhonda Harvey will assume the role of chief agent for its Canadian arm. This will be in addition to Harvey’s current responsibilities as chief underwriting officer, reporting to Dagneau.
2
Managing general agent April Canada, part of France-based April Group, has appointed three new vice presidents. Kent Pitkin, with April Canada for two years, has taken on the role of vice president, Ontario; Russell Morrison, described as “one of the founding fathers” of April Canada, has been named vice president, Western Region; and Sebastien Gabez, is now vice president, Quebec and Atlantic Canada. With offices in Toronto, Calgary, Montreal and Laval, Quebec, April Canada places a variety of commercial and personal coverages, including product recall, short-term housing rentals and environmental impairment liability.
38
Canadian Underwriter July 2017
3a
3b
5
8a
8b
8c
3
The Co-operators General Insurance Company announced in June that it has acquired Assurance Auclair, a Quebec City brokerage that places personal and commercial insurance policies. “This is another step on our journey to expand our agency distribution system throughout the province,” reports Rob Wesseling [3a], president and chief executive officer of The Co-operators. Still at the company, it plans to offer its insurance products to clients of Aldergrove Insurance Services, which has locations in the British Columbia communities of Aldergrove, Abbotsford, Langley and Mission. The Co-operators
“will be the exclusive provider” for Aldergrove Insurance Services, a subsidiary of Aldergrove Credit Union. “This strategic alliance ensures that our insurance operations will be at the forefront of delivering insurance services in Canada through the integration of The Co-operators omni-channel systems,” says Aldergrove Credit Union chief executive officer Gus K. Hartl [3b].
4
Scott Williams has been named chief financial officer of ARAG Services Corporation and will also act as the company’s principal broker. Williams has more than 25 years of experience in the Canadian insurance industry,
working in financial and operations management. Graham Martin also joins the firm as assistant vice president, responsible for leading underwriting operations. Martin has legal expenses insurance experience in the United Kingdom and Canada.
5
Gillian Van Kempen [5], former president of the Insurance Brokers Association of Ontario’s Durham affiliate, succeeds her father, Kip Van Kempen, as president of Best Buy Insurance. Gillian Van Kempen “is the fourth generation of the Van Kempen family to join the insurance broker side of the business.” In his capacity as chairman, Kip Van Kempen will
MOVES&&VIEWS VIEWS MOVES
of Calgary; Gordon Adams; Robert Cartwright, Jr.; Al Gorski; Leslie Lamb; John Phelps; Michael Phillipus; Frederick Savage; and Lori Seidenberg.
3
5
6
7a
9 positions have included general 9adjuster, branch manager, vice president of operations continue to Division serve special and Lloyd’s leader. clients and develop new programs, the brokerage reports. Macdonald Chisholm Lynn Insurance Oldfield [6], Trask (MCT) president and chief announced in early officer of Januaryexecutive that it will join propAIG and Insurance Company of erty casualty brokerage Canada, hasThe received BrokerLink. terms the of the Greater Toronto Fellow transaction were Area not disof Distinction from closed, notes aAward statement the Insurance Institute of from BrokerLink. BrokerLink Canada. Presented yearly companies, subsidiaries of to a holder of the Fellow Intact Financial Corp., Chartered include 84Insurance offices serving Professional designation, clients in Atlantic Canada, Oldfieldand hasOntario. also received Alberta Datingthe Established Leader Award. back more than 60 years, MCT has more than 110 inCanada, a suranceVericlaim professionals in 18 subsidiary of Sedgwick offices. Michael Brien, who Management has ledClaims MCT over the last 12 Services Inc., has appointed years, joins BrokerLink as Lee Powell [7a] as operations. vice head of its Atlantic
6 6
7
10
7
Carolyn Snow [7] will lead RIMS as president president complex for of theits2014 term,loss division andeffect Mike January Alywn [7b] which took 1. as senior vice Snow, who haspresident been on of the specialty services. Alwyn’sfor RIMS Board of Directors specialties include mining, seven years, is currently dicommercial rector of riskproperty, management for course of Inc. construction and Humana She previously jeweller’s arts. served as block/fine RIMS’s treasurer, Powell’s include secretaryspecialties and director of construction, petrochemical external affairs. The RIMS and oilfor and gas, also boiler and board 2014 includes machinery, equipment vice president Richard breakdown andJr.; product liability. Roberts, treasurer Julie Pemberton; corporate secreCEP Forensic and tary Nowell Seaman,Inc. director three of for of global riskexecutives management Engineering PotashLRI Corporation of Inc. are acquiring the latter, an Saskatchewan Inc.; Gloria engineering firmPottle, specializing Brosius; Steve director in and fire code of building risk management services consulting, fire protection at York University; Jennifer engineering and Stein, emergency Santiago; Janet direcplanning. executivesand are tor of risk The management chief executive Eric insurance at theofficer University
11
8
8
As of January 8, Toronto insurance broker Jones DesLauriers Insurance Management Inc. 7b (JDIMI) had acquired Whitley Insurance and Financial Services. Whitley Insurance has offices in Belleville, Ontario and the nearby communities of Trenton, Deseronto and Stirling. “The acquisition is expected to build a solid presence for JDIMI in Eastern Ontario and position the firm to12 better service their clients, with strengthened commerEsselink [8a], chief operacial and personal insurance tions officer Jonregion Wintonand [8b] offerings in the a and financial officer new chief financial services diviMichael Devine [8c]. sion,” notes a statement from JDIMI. President and CEO Paquette [9],the ShawnSylvie DeSantis will lead president and teams former from both companies. chief operating Loris Clarke [8] has been officer Desjardins General namedof successor to Paul Insurance Group, has been Whitley, president of Whitley elected to the of Insurance, whoBoard will remain Directors of Intact Financial during a transition period. Corporation. Paquette is a former Insurance Institute of Canada Kenchair. Rayner [9] has joined Anderson Toronto-based McTague & Associates Approved Ltd. as its director ofSurety busiand Casualty ness development, Central Inc. has “Ken launched Approved Region. brings a wealth Capital, which is intended of experience to our comto let contractors pany, having heldqualify variousfor higher bonding limits. With senior management positions its capital disbursement with insurers and other MGAs,”
9
9
10
says Chuck McTague, president of Anderson McTague & Associates, a familyprogram, thebased company owned MGA in New reports it can help insurance Brunswick. In January, Anbrokers, contractors and derson McTague & Associates surety partners secure suretyannounced it was expanding, ship andanalternative options.to adding office in Toronto The program is currently service the brokers of Ontario being launchedRayner’s with Echelon and Manitoba. Surety as an initial client. appointment confirms the company’s “commitment to XL Catlin has the Ontario/Manitoba marketa political place, and toopened the building of risk,team credit a local support to and assist bond practice in Canada, brokers with their surplus appointing Marvin to Azzopardi lines and difficult place [11] as senior underwriter. business,” McTague adds. Toronto-based Azzopardi, who has the Canadian Risk ManagementThe (CRM) designaGuarantee tion, joins XLCompany Catlin from of Zurich Canada, where he led North America the creditthat andTara political has Canada announced risk underwriting team. Wishart [10] became vice president of claims for the Scottbranch Banda on insurer’s Toronto chief December 2,[12], 2013. Having executive 21 years of experienceofficer in The of Federatedclaims Co-operatives Guarantee’s Limited (FCL), has been department, Wishart will be appointed thethe Board responsibletofor operations of Directors of Branch Desjardins the Toronto Claims. General and She firstInsurance joined TheGroup Guaranits subsidiaries. teeinsurance in 1995 as an adjuster Banda FCL in as and hasjoined held roles of 2002 increaslegal affairs manager before ing seniority with the combecoming the company’s pany, including, most vice president corporatefor recently, claimsofmanager and legal lines. affairsWishart in 2004, specialty is a and then of itsboth chiefthe executive member Surety officer in 2010. Association of Canada and the Canadian Association of Women in Construction.
11
10
12
Follow @CdnUnderwriter on http://twitter.com/CdnUnderwriter
July 2017 Canadian Underwriter February 2014 Canadian Underwriter
39 57
GALLERY
Whistler provided a spectacular backdrop for the 69th annual Conference & Tradeshow of the Insurance Brokers Association of B.C. Highlights included: a gala dinner capped with a performance by Juno Award-winning R&B group The Philosopher Kings; a keynote presentation on personal growth techniques by Amazing Race Canada host and Olympic gold medalist Jon Montgomery; and executive presentations by Jean-Franรงois Blais of Intact Insurance, Martin Thompson of RSA Canada and Rowan Saunders of The Economical. More than 600 people attended the event from June 14 to 16 at the Fairmont Chateau Whistler.
40
Canadian Underwriter July 2017
Page 51 Starlight Gala
Meet Jamus MacPherson, our newest team member in Alberta.
GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery
Jamus MacPherson joins Wawanesa Insurance as Manager, Business Development in the Alberta region. Jamus brings more than 20 years of combined experience in leadership, business development, sales, and customer service in the industries of insurance and finance, property restoration, and recruitment and consulting.
Jamus is expert in building and managing high performing teams across multiple locations and achieving exceptional results. In his previous roles, Jamus provided oversight to more than 250 staff and cultivated many business relationships in cities and rural locations in western Canada. He holds a bachelor’s degree in commerce, major in human resource management from the University of Alberta.
Fast Forward was the name and theme of Gore Mutual’s invitationonly conference designed to help the insurer’s brokers and business partners prepare for the future of insurance. Held June 6 at the Toronto Centre for the Arts, the program fittingly opened with motivating presentations by celebrity scientist David Suzuki, retired astronaut Chris Hadfield and futurist Jim Carroll, and closed with informative panel discussions among industry executives and experts.
Jamus will lead the business development team in the Alberta region and will drive efforts to enhance the service provided to brokers. He will play a pivotal role in growing our broker network, expanding the availability of Wawanesa products in the market.
“My passion is in helping businesses grow and develop. When serving my clients, I follow a simple formula: provide high quality service; develop strong and meaningful relationships and create an authentic experience. I am thrilled to start in my new role with Wawanesa and look forward to serving you.”
Jamus MacPherson, B.Comm. Manager, Business Development, Alberta Region | (780) 643-3545 jamusmacpherson@wawanesa.com July 2017 Canadian Underwriter
41
GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery
On June 16, Downsview Park played host to the Toronto Relay for Life, an annual fundraising walkathon organized by the Canadian Cancer Society in partnership with Women in Insurance Cancer Crusade (WICC). The 101 participating teams – comprising more than 1,000 walkathoners – had raised $533,000 at press time. Donations can still be made in the name of your favourite team at convio.cancer.ca.
See all photos from this event at www.canadianunderwriter.ca/gallery
More than 400 attended Music Heals 6 on May 24, raising $47,000 for the Biggar Endowment for muscular dystrophy research at Toronto’s Holland Bloorview kids’ rehab hospital. Insurance lawyer Kadey Schultz created the annual event when her son Emery Gelissen was diagnosed with a severe form of the disease. Held at Hard Rock Café, this year’s event featured a silent auction, music from The Doubts and a performance by Emery’s sister Lily, Adam Wagman and Jack Simon.
42
Canadian Underwriter July 2017
Putting the pieces together.
Events and Seminars Calendar CIP Society Events and Seminars give you the opportunity to learn, to network, to catch up on industry developments and to advance your professional and career development. CIP Society Seminars
CIP Society Events
Hamilton—D&O…Get in the Know! .......................................................August 24 Kitchener—Assessing Commercial Risks............................................. September 6 Sudbury—Desktop Investigations Lunch & Learn .............................. September 7 Webinar—Life Leases ......................................................................... September 8 Ottawa—The Sharing Economy and the Internet of Things ............. September 12 Toronto—Risk Forum 2017 ................................................................ September 19 Ottawa—Managing Broker Errors & Omissions .................................... October 17 Winnipeg—Farm Insurance..................................................................November 7
Moncton—Golf Tournament ....................................................................August 10 Hamilton—Volleyball Tournament.......................................................... August 30 Little Rapids, NL—Golf Tournament .................................................... September 8 Dartmouth—Charity Softball Tournament ....................................... September 15 Ottawa—Golf Tournament ................................................................ September 15 Edmonton—Battle of the Insurance Bands....................................... September 28 Dartmouth—South Shore Soiree ........................................................... October 19 Toronto—Indoor Beach Volleyball .......................................................November 8
Looking for insight and research on the latest trends in the p&c industry? Visit our free online library of Trends Papers at www.insuranceinstitute.ca/cipsociety/information-services. Looking for information to advance your career? Visit: www.insuranceinstitute.ca/mycareer.
cdnunder_0706.pdf
1
2017-07-06
4:27 PM
CELEBRATE CANADA’S 150 TH ANNIVERSARY
97 TH ANNUAL IBAO CONVENTION OCTOBER 25–26 SHAW CENTRE + WESTIN OTTAWA HOTEL JOHN HERDMAN Head Coach Women’s National Soccer Team
COLIN CLAHANE Director, Business Finance BMO Bank of Montreal
C
M
FAB DOLAN
Y
Head of Marketing Google Canada
CM
DAVID MARSHALL Ontario Ministry of Finance Adviser Auto Insurance
MY
CY
CMY
K
WWW.IBAO.ORG/CONVENTION