Issuu

NO V EM B ER 201 7 PM#40063170

Part of the Whole

2018 Reinsurance Market Outlook ILS FYI BY GREG MECKBACH

Micro Management BY MANISH SHAH

91,254 PEOPLE CAN’T BE WRONG Since we started our post-claims surveys in 2007, thousands of people have taken the time to let us know how impressed they were with the way Economical took care of them. From fires and floods to fender-benders, we’re proud to earn a 93% claims satisfaction rating — one delighted customer at a time.

Get ready for the future, with us. economical.com/stories

property | auto | business Economical Insurance includes the following companies: Economical Mutual Insurance Company, The Missisquoi Insurance Company, Perth Insurance Company, Waterloo Insurance Company, Family Insurance Solutions Inc., Sonnet Insurance Company, Petline Insurance Company. Percentage based on 91,254 Economical claimant survey responses measuring customer satisfaction with claims services from January 2007 to December 2016. ©2017 Economical Insurance. All rights reserved. All Economical intellectual property, including but not limited to Economical® and related trademarks, names and logos are the property of Economical Mutual Insurance Company and/or its subsidiaries and/or affiliates and are registered and/or used in Canada. All other intellectual property is the property of their respective owners.

CANADIAN UNDERWRITER

VOL. 84, NO.11, NOVEMBER 2017 CANADA’S INSURANCE AND RISK MAGAZINE. PUBLISHED BY NEWCOM BUSINESS MEDIA INC.

www.canadianunderwriter.ca COVER STORY

2018 Reinsurance Market Outlook

The global nat-Cat story for 2017, one that could tell the tale of the largest related losses in history, shows how interconnected each country’s reinsurance market is to the global whole. Reinsurers in Canada need to understand that being part of the whole may demand rethinking risk, pricing and partners.

FEATURES

Insurance-Linked Securities Standard of Care Losses from recent hurricanes could top US$100 billion, threatening to wipe out some Cat bonds. Still, investor support for insurance-linked securities remains strong.

A Nova Scotia ruling that explores standard of care and “complexity” of risk may offer some relief to insurance brokers, but should not inspire complacency.

BY GREG MECKBACH

BY HEATHER GRAY & LAURA SULLIVAN

16 Customer Service Incumbents are joining fintech and insurtech firms in realizing a digital approach — anchored by strong and agile core systems — is needed to put customers first. BY RON STOKES & MORGAN RICHARDSON

21 Ethics Series

Wildfire Modelling Wildfire is again in the spotlight and the hope is that it will remain there until modelling becomes more precise, and awareness of losses is enhanced. BY ANGELA STELMAKOWICH

33 Digital Fusion

If criticism of an adjuster is included in an email between a broker and insurer, one in which both the adjuster and customer are copied, action is needed to correct any wrongs.

Insurers must ensure core, data and digital capabilities are available as micro-services that can be “fused” together if they expect to offer customers a truly digital experience.

BY THE CIP SOCIETY

BY MANISH SHAH

36 RIMS Canada Conference Risk professionals must be on top of issues since they are part of discussions early on about how best to ready organizations for whatever might unfold. BY JASON CONTANT, GREG MECKBACH & ANGELA STELMAKOWICH

39 NICC Wrap-up Be it traditional matters like Cat losses or emerging trends, insurance professionals need to understand how risks can develop and transform. BY JASON CONTANT & ANGELA STELMAKOWICH

November 2017 Canadian Underwriter

(416) 442-5600 ext.opportunities. 3652the ve marketing communications 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 Paul Aquino Sascha Hass Canadian Underwriter’s Insurance Media Group is committed (416) 510-6796 Manager Online Editor Production Singh Sascha Hass Canadian Underwriter’s Insurance Media Group is committed Twitter: @InsuranceCanuk Production Manager (416) 510-5187 Circulation Manager VOL. 84, NO.11, NOVEMBER 2017 tor Gary White Harmeet Singh to providing the most timely and relevant news, information paul@canadianunderwriter.ca anadianunderwriter.ca Production Manager Online 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 to insurance from all segments CU_Harmeet and resources Gary professionals White Harmeet Singh (416)of 510-6760 Circulation Twitter: @InsuranceCanuk Manager anadianunderwriter.caTwitter: and resources to insurance from all segments of @CU_Harmeet Gary professionals White -5600 ext. 3652the industry, providing marketers with a range of specialized PROFILE (416) 510-6760 hsingh@canadianunderwriter.ca mgarufi@bizinfogroup.ca Subscriptions/Customer Service National Editor Senior Publisher CU_Harmeet National (416) 510-6788 (416) 442-5600 ext. 3652the Editor industry, providing marketers with a range of specialized Managing Director, (416) 510-6760 Account Manager Subscriptions/Customer Service Mary Garufi National the insurance industry’s social network Twitter: @CU_Harmeet Gail Page and highly effective marketing communications opportunities. Angela Stelmakowich Angela Stelmakowich Insurance Media Group 442-5600 Steve Wilson -5600 ext. 3652 Claims Claims ext. 3545 (416) Publisher Subscriptions/Customer Servicemarketing Gail Page andClaims highly effective communications opportunities. Michael Wells (416) 442-5600 ext. 3652 gpage@bizinfogroup.ca Associate Publisher astelmakowich@canadianunderwriter.ca Ian Portsmouth mgarufi@bizinfogroup.ca Subscriptions/Customer Service astelmakowich@canadianunderwriter.ca steve@canadianunderwriter.ca uino Manual Gail Page Account Manager Manual gpage@bizinfogroup.ca ian@canadianunderwriter.ca Publisher (416) 510-6793 (416) 510-5187 Paul Gail Page Manual (416) Aquino 510-6793 InsuranceMarketer.com Twitter: @InsuranceMedia (416)Production 442-5600 ext. 3545 nadianunderwriter.ca michael@canadianunderwriter.ca gpage@bizinfogroup.ca Print Manager Associate Publisher InsuranceMarketer.com (416) 510-6800 (416) 510-5187 uino Michael Wells Associate Editor paul@canadianunderwriter.ca gpage@bizinfogroup.ca InsuranceMarketer.com (416) 510-6800 InsuranceCanuk (416) 510-5187 Paul Aquino Circulation Manager Director, Business Development (416) 510-5122 Meckbach Associate Editor Phyllis Wright nadianunderwriter.ca Greg Twitter: @InsuranceCanuk (416) 510-5187 Circulation Manager michael@canadianunderwriter.ca -6788 Sandra Parente paul@canadianunderwriter.ca Print Production Manager gmeckbach@canadianunderwriter.ca Mary Garufi Greg Meckbach Art Director InsuranceCanukINSURANCE Circulation Manager (416) 510-6788 Mary Garufi sandra@canadianunderwriter.ca the insurance industry’s social network (416) 510-6796 Twitter: @InsuranceCanuk mgarufi@bizinfogroup.ca Circulation Manager (416) 510-5122 National gmeckbach@canadianunderwriter.ca Gerald Account Manager -6788 Phyllis Wright Manager (416)Heydens 510-5114 President Mary Garufi industry’s social network the insurance mgarufi@bizinfogroup.ca National Online Editor (416) 510-6788 Claims (416) 442-5600 ext. 3545 Account Manager Mary Garufi DIRECTORY the insurance industry’s social network Twitter: @CU_Greg Wells mgarufi@bizinfogroup.ca Account Manager Jason Contant Claims (416) 442-5600 ext. 3545 Creighton Elliot Ford Manual Art Consultation Bruce Manager insBlogs Michael Wells mgarufi@bizinfogroup.ca (416) 510-6796 Michael Wells President Account Manager jcontant@canadianunderwriter.ca InsuranceMarketer.com Manual canadianunderwriter.ca (416)Production 442-5600 ext. 3545 Account Manager Print Manager Sascha Hass Wells InsuranceMarketer.com michael@canadianunderwriter.ca mike@canadianunderwriter.ca INSURANCE eford@canadianunderwriter.ca (416) 442-5600 ext. 3545 (416) 510-6893 Print Production Manager gs -5122 Michael Wells Phyllis Wright Elliot Ford Online510-5122 Editor (416) 510-5122 Bruce Creighton insBlogs canadianunderwriter.ca Vice President DIRECTORY Print Production Manager (416) instouch.com Phyllis Wright Art Director Production Manager (416) 510-5117 NCE michael@canadianunderwriter.ca Print Production Manager Harmeet Singh instouch.com -5122 Production Manager Manager Gerald Heydens Phyllis Wright President eford@canadianunderwriter.ca INSURANCE Gary White Papanou (416) 510-5122 Account Manager TORY Phyllis Wright Alex Karen Samuels President hsingh@canadianunderwriter.ca Insurance Blogs hosted by Canadian Underwriter rd Vice President Circulation Manager Bruce Creighton insBlogs insBlogs DIRECTORY (416) 510-6760 Ontario (416) 510-5190 Manager (416) 510-5117 President Newswire Elliot Ford Twitter: @CU_Harmeet Creighton insBlogs Bruce Mary Garufi Ontario INSURANCE nadianunderwriter.ca Property & Casualty Insurance Account Manager President Papanou rd Print Production Manager Property & Subscriptions/Customer Casualty InsuranceAlex Newswire Bruce CreightonINSURANCE eford@canadianunderwriter.ca mary@newcom.ca Vice President DIRECTORY (416) 442-5600 ext. 3652 Service -5117

instouch.com

insBlogs Ontario

instouch.com instouch.com instouch.com Ontario

Ontario insBlogs

the insurance industry’s social network

Elliot Ford gs nadianunderwriter.ca (416) 510-5117 Alex Papanou insBlogs eford@canadianunderwriter.ca

Insurance Blogs hosted by Canadian Underwriter

Bruce Creighton Vice President DIRECTORY (416) 614-5831 Phyllis Wright Gail Page erwriter Vice President Associate Publisher insBlogs Alex Papanou -5117 Connect with Canadian insBlogs Underwriter Insurance Blogs hosted by Canadian Underwriter Vice President gpage@bizinfogroup.ca urance Newswire (416) 510-5117 Papanou Paul Aquino & Casualty InsuranceAlex Newswire Property Property & Casualty Insurance Newswire Alex Papanou 510-5187 Property & Casualty Insurance(416) Newswire paul@canadianunderwriter.ca Insurance Blogs hosted by Canadian Underwriter Connecttwitter.com/CdnUnderwriter with Canadian Underwriter with Canadian Underwriter facebook.com/CanadianUnderwriter Twitter: @InsuranceCanuk Connect with Canadian Underwriter Circulation Manager insBlogs.com Insurance Blogs hosted by Canadian Underwriter insBlogs.com Insurance Blogs hosted by Canadian Underwriter with Canadian Underwriter (416) 510-6788 Mary Garufi tter.com/CdnUnderwriter facebook.com/CanadianUnderwriter Insurance Blogs hosted by Canadian Underwriter Connecttwitter.com/CdnUnderwriter with Canadian Underwriter twitter.com/CdnUnderwriter facebook.com/CanadianUnderwriter facebook.com/CanadianUnderwriter Canadian Underwriter mgarufi@bizinfogroup.ca .ca Insurance BlogsAccount hosted byManager Canadian Underwriter linkd.in/CanadianUnderwriter instouch.com/group/CanadianUnderwriter tter.com/CdnUnderwriter facebook.com/CanadianUnderwriter InsuranceMediaGroup.com (416) 442-5600 ext. 3545 .ca twitter.com/CdnUnderwriter kd.in/CanadianUnderwriter instouch.com/group/CanadianUnderwriter facebook.com/CanadianUnderwriter Michael Wells MediaGroup.com .ca linkd.in/CanadianUnderwriter instouch.com/group/CanadianUnderwriter InsuranceMediaGroup.com michael@canadianunderwriter.ca Print Production Manager InsuranceMediaGroup.com linkd.in/CanadianUnderwriter instouch.com/group/CanadianUnderwriter kd.in/CanadianUnderwriter Published instouch.com/group/CanadianUnderwriter by InsuranceMediaGroup.com www.CanadianUnderwriter.ca/MediaGroup linkd.in/CanadianUnderwriter instouch.com/group/CanadianUnderwriter (416) 510-5122 www.CanadianUnderwriter.ca/MediaGroup Published by Phyllis Wright

insBlogs.com Insurance Blogs hosted by Canadian Underwriter

Insurance Blogs hosted by Canadian Underwriter

insBlogs.com

gs.com insBlogs.com

.ca

InsuranceMediaGroup.com

www.CanadianUnderwriter.ca/MediaGroup

.ca

Account Manager President www.CanadianUnderwriter.ca/MediaGroup Elliot Ford Bruce Creighton eford@canadianunderwriter.ca Vice President (416) 510-5117 Alex Papanou

.ca

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 is published times yearly + thebyAnnual Statistical Issue) by NEWCOM BUSINESS MEDIA INC. 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. 451 Attwell Dr., Toronto, ON M9W 5C4 442-5600. Canadian at thirteen 80 Valleybrook Drive,(monthly Toronto, + Ontario, M3B Statistical 2S9 SINESS MEDIA INC. Canadian Underwriter Underwriter is is located published times yearly the Annual Issue) by (416) 614-2200 • MEDIA (416) INC. 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 not be reproduced or transmitted rved. Printed The contents of this publication may without not be reproduced or transmitted ither in part orininCanada. full, including photocopying and recording, the written consent of the All rights reserved. Printed in Canada. TheINC. contents of this publication may not be reproduced or transmitted Phone: (416) 442-5600. NEWCOM BUSINESS MEDIA ither in part or in full, including photocopying and recording, without the written consent of the Allany rights Printed The contents of this publication may without not be reproduced transmitted Chairman andinin Founder President er. Nor may any part of this publication bereserved. stored apart retrieval system of any nature without in form, either 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 Canada. publication The be stored in a retrieval system of any nature without Allany rights reserved. Printed contents of this publication may without not be reproduced transmitted prior written consent. monthly as a source of news, technical information and comment, asin a link between in form, either in partandorin full, including photocopying and recording, the written or consent of the prior written consent. monthly as a source of news, technical information and comment, and asin a link between in any form, either in part or full, including photocopying and recording, without the written consent of the Vice President, Operations Controller of the insurance industry including brokers, agents, insurance and reinsurance companies, © Published monthly asNor a source of any news,part technical information and comment, and as ain linka between copyright owner. may of this publication be stored retrieval system of any nature without ofmanagers the insurance industry including brokers, agents, insurance and reinsurance companies, © Published monthly as a source of news, technical information and comment, and as a linkcompanies, between and consultants. all segmentswith of the Canadian insurance industry including brokers, agents, insurance andstored reinsurance Connect Underwriter copyright owner. Nor may any part of this publication be in a retrieval system of any nature without managers and consultants. all segments of the insurance industry including brokers, agents, insurance and reinsurance companies, prior written consent. adjusters, risk managers and consultants. prior written consent. adjusters, risk managers and consultants.

ranceMediaGroup.com InsuranceMediaGroup.com InsuranceMediaGroup.com Jim Glionna

Joe Glionna

Melissa Summerfield

Peter Fryters

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rio

INSURANCEINSURANCE – – we have it covered. we have it covered.

10 TIC Talk With technology disruption well-established on its radar screen, the Toronto Insurance Conference will soon have a Millennial, Rael Levy, at its helm. One of TIC’s goals will be to steward a conversation on how brokers can use emerging technology. BY GREG MECKBACH

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Canadian Underwriter November 2017

ISSN Print: 0008-5251 ISSN Digital: 1923-3426

FOCUS

7 Editorial 8 Marketplace 42 Moves & Views 44 Gallery

SCOR’s strength stands out clearly O8

O5 Stable Outlook

Stable Outlook C10

AA-

Standard & Poor’s

HO5 C15

HO6

C20

HO5

HO2

Aa3

Moody’s

Stable Outlook

C12

AAFitch Ratings

C21

HO1

A+

C19

AM Best Stable Outlook C18

“SCOR’s success story continues. Over the past 15 years, the Group has overcome obstacles, faced economic and financial crises, and absorbed major natural catastrophes. Throughout this long journey, SCOR has held its course. SCOR has achieved the solvency and profitability strategic targets set out in its successive plans. It has grown, reinforced its financial strength and expanded and deepened its franchise. It has diversified its portfolio and developed a superior risk management strategy. Today, SCOR is a truly global group. The upgrade of our rating to A+ by A.M. Best on September 1st, 2017, which follows the upgrade to AA- by S&P and Fitch in 2015 and to Aa3 by Moody’s in 2016, once more demonstrates the relevance of SCOR’s business strategy and confirms SCOR as a Tier 1 global reinsurer. The Group’s strength is a clear benefit for our clients.” Denis Kessler Chairman & Chief Executive Officer

www.scor.com

Broaden your product suite with Commercial Accident coverage Now you can protect your commercial customers’ associations, groups, organizations and businesses from accidents at their events, in their workplace, or on their property, with the launch of Aviva’s Commercial Accident insurance. Even when your customer has taken safety measures to prevent accidents, there’s always a chance of someone getting hurt. Fill the gap in your customers’ coverage by offering an added layer of protection, with completely tailored benefits for accidental injury or death. You have the flexibility to write the policy as a standalone or as an add-on to an Aviva p&c policy. Contact your Aviva Commercial Account Underwriter to learn more.

MC-17-4615-Commercial Accident-CU.indd 1

2017-10-25 9:37 AM

EDITORIAL

Share and Share Alike

Concern over cyber’s potential impact on human life is rearing its head. Angela Stelmakowich

Editor Canadian Underwriter angela@canadianunderwriter.ca

It seems so simple, a message learned from a very early age: Sometimes, it is best to share. The lesson not only nurtures high-minded goals like generosity of spirit, but also fosters a decidedly more practical understanding of the usefulness of alliances in times of boom and bust. It is a notion tailor-made for the pervasive, unrelenting threat that is cyber. Consider the approach in the United Kingdom. The General Data Protection Regulation, set to take effect next year, means “organizations will be required, by law, to report details of cyber breaches that result in the loss of personal data to the Information Commissioner,” Matt Hancock, minister of state for digital, said at a recent conference hosted by the Association of British Insurers. Canada’s own Digital Privacy Act, once in force, will include a mandatory requirement for organizations to provide notice to affected individuals and to the Office of the Privacy Commissioner of Canada. This is an excellent approach on a personal level; any information that allows one to be prepared and have time to settle should be welcomed. That said, a wider view of sharing needs to be adopted. After all, any organization can be a victim of a cyber attack. Findings of a global survey from PwC indicate disruption in operations is viewed as the number one

consequence of a cyber attack, followed by compromise of sensitive data, harm to product quality, and harm to human life. Despite those concerning consequences, four in 10 of the respondents report that they do not have an overall information security strategy. It used to be all about data, but cyber attacks have taken a nefarious turn. Concern over cyber’s potential impact on human life is rearing its head, something also noted in another recent report, this one from Accenture. It found that polled executives for distribution utilities expect that cyber attacks could interrupt electricity supply. While this may seem merely an inconvenience, it could potentially be so much worse. “Attacks on industrial control systems could disrupt grid reliability and the safety and well-being of employees and the public,” Stephanie Jamison, managing director, Accenture Transmission and Distribution, cautions. “Irrespective of motive,” the report points out,“a successful attack could see large populations suffering major power outages, as well as causing enormous business disruption and economic damage.” It must be acknowledged, however, that all experiences, good or bad, can offer some useful nugget. Once collected on a far wider, perhaps global, scale, these nuggets can produce a

store of lessons learned that can then be shared and employed. Clearly, privacy is paramount and needs always to be respected. However, sharing general experiences, concerns and actual threats — something that companies of all kinds and all sizes face on a day-to-day basis — offers a wealth of information. It is on the front lines of daily operations that so many things come to the fore and those details would be better used than addressed alone. A silo approach to dealing with cyber attacks should no longer stand. Going it alone can take far too long to figure out things and will not benefit from collective wisdom. With 2017’s potentially record-breaking insured losses, in large part because of the devastating hurricanes making landfall in United State territories, it may feel inappropriate to consider what have so far been mainly financial effects around cyber to be important enough to be viewed as a likewise serious Cat. But it is likely that some form of cyber attack, one that successfully capitalizes on interconnectedness and organizations’ reliance on connected systems, will prove the vehicle to adversely affect the greatest number of people. Trying to build a readily available and continuously updated store of intelligence by sharing data, information that can blunt any adverse impacts, might be prudent. November 2017 Canadian Underwriter

MARKETPLACE

UBC RESEARCHERS DEVELOP QUAKE-RESISTANT CONCRETE It is hoped upcoming pilot testing involving the application of seismic-resistant concrete during a seismic retrofit at a Vancouver elementary school will produce positive results and usher in enhanced protection for a wider range of structures. Called eco-friendly ductile cementitious composite (EDCC), “the material is engineered at the molecular scale to be strong, malleable and ductile, similar to steel — capable of dramatically enhancing the earthquake resistance of a seismically vulnerable structure when applied as a thin coating on the surfaces,” the University of British Columbia (UBC) reports. EDCC has been added as an official retrofit option in British Columbia’s seismic retrofit program, UBC notes. The composite combines cement with polymer-based fibres, flyash and other industrial additives, making it highly sustainable, UBC civil engineering professor Nemy Banthia, who supervised the work, explains in the university statement. During testing, researchers subjected EDCC to quake simulation tests using intensities as high as a magnitude 9.0 to 9.1 event. “We sprayed a number of walls with a 10-millimetre-thick layer of EDCC, which is sufficient to reinforce most interior walls against seismic shocks,” Salman Soleimani-

Reinsurance MOVE INFRASTRUCTURE PROTECTION BURDEN TO REINSURERS: SPEAKER A lack of insurance coverage for critical infrastructure is one reason for the growing gap between insured and economic losses, Glenn McGillivray, managing director for the Institute for Catastrophic Loss Reduction, noted during the recent 8

Canadian Underwriter November 2017

Dashtaki, a PhD candidate in UBC’s Department of Civil Engineering, notes in the press release. “Then we subjected them to Tohoku-level quakes and other types and intensities of earthquakes, and we couldn’t break them,” Soleimani-Dashtaki relays. UBC reports that EDCC applications include resilient homes for First Nations communities, pipelines, pavements, offshore platforms, blast-resistant structures and industrial floors. The “technology has far-reaching impact and could save the lives of not only British Columbians, but citizens throughout the world,” Melanie Mark, provincial minister of advanced education, skills and training, suggests in the UBC statement. “On behalf of Canada’s property and casualty insurers, Insurance Bureau of Canada (IBC) congratulates UBC on this important advance in construction technology,” Aaron Sutherland, vice president of IBC’s Pacific Region, tells Canadian Underwriter. “Developing new materials and implementing better building standards will help keep Canadians safe when earthquakes strike,” reports Sutherland, emphasizing the need for “a ‘whole of society’ approach to reduce risks for consumers.”

44th Annual Engineering Insurance Conference (AEIC) in downtown Toronto. “There is more and more damage that goes uninsured for various reasons. One of the big drivers is the fact that governments do not really buy insurance for critical infrastructure,” McGillivray said at AEIC, hosted by the Canadian Boiler & Machinery Underwriters Association. “We have to start thinking seriously of moving the

burden away from the taxpayer and putting it on to the back of the reinsurance industry,” McGillivray said. “I would rather pay a premium than for some of the losses we have been seeing,” he suggested.

ANALYZING NEAR-MISSES CAN ASSIST WITH CAPACITY MANAGEMENT Insurers and reinsurers can benefit by considering how near-misses — such as an

incident when an Air Canada Airbus A320 almost landed on a taxiway where four other passenger jets were located — might have become major disasters, Risk Management Solutions (RMS) and Lloyd’s suggest in a new report. “By adopting a counterfactual perspective and exploring how historical events could have unfolded differently, additional insight can be gained into rare extreme losses that might otherwise come as a surprise,” RMS catastrophist Gordon Woo suggests in a statement. Counterfactual risk analysis can help identify unknown or poorly recognized sources of unmodelled risk, and gauge their contribution to insurance risk metrics, the report adds.

Technology KNOWN RISKS, NEW TECHNOLOGY CAN POSE CHALLENGES: MUNICH RE The combination of known risks with a new technology is challenging, Christian Höft, client manager with Munich Re, told Canadian Underwriter the day after the (re)insurer released a comprehensive risk analysis of the Hyperloop technology. The Hyperloop Transportation Technologies (HTT) technology is a new form of transport that envisions passengers and goods being transported in capsules travelling at high speeds in a low-pressure environment using electromagnetic propulsion. The thought is that the pods could travel 600 kilometres in 30 minutes. “The technological develop-

MARKETPLACE ment of the Hyperloop itself is continuously delivering internal and external challenges and uncertainties,” Höft points out. HTT and Munich Re will partner to develop an insurance concept and integrate an enterprise risk management system to allow HTT to actively manage enterprise risks.

SOFTWARE COULD UP TRUST IN AI SYSTEMS THAT SET PREMIUMS New software developed at Ontario’s University of Waterloo could make it easier to adopt and trust powerful artificial intelligence (AI) systems that set insurance premiums, generate stock market predictions and assess who qualifies for mortgages, the university reports. The software analyzes and explains decisions made by deep-learning AI algorithms, providing insights needed to satisfy regulatory authorities and give analysts confidence in their recommendations. The algorithms essentially teach themselves by processing and detecting patterns in vast quantities of data. The ability to explain deep-learning AI decisions is expected to become more important as the technology advances and regulators require financial institutions to provide reasons to the people affected by them.

Regulation CANNABIS LEGALIZATION FRAMEWORK DRAFTED Alberta has become the latest province to draft a

framework to manage cannabis legalization put forward by the federal government. The Alberta Cannabis Framework proposes who can buy and use cannabis once it is legal, and where people will be able to buy and use it. Among other things, it proposes having new tools to expand the ability of police to address drug-impaired driving, and provincial oversight and regulation of wholesaling and distribution of cannabis products through the Alberta Gaming and Liquor Commission. The final framework and legislation is expected to be tabled this winter.

BRITISH COLUMBIA STRENGTHENS SPILL RESPONSE REGULATIONS Transporters of liquid petroleum products in British Columbia now will need to have provincial plans in place to manage a spill, reports the province’s Ministry of Environment and Climate Change Strategy. The new regulations requiring spill preparedness apply to pipelines, and rail and trucking operations transporting more than 10,000 litres. The regulations also extend liability for full cost of response and recovery to a combination of both the owner and the transporter of the substance. In addition, the provincial ministry reports, British Columbia is considering future regulations that could require full compensation for First Nations, community and provincial response and recovery efforts.

Canadian Market ENDEAVOUR LAUNCHES CYBER FACILITY Endeavour Insurance Services is looking to facilitate easier management of risks in the small-medium enterprise cyber space with its new technology and cyber facility. Predominantly managed via an online portal, it “will provide multiple opportunities for MGAs (managing general agents), producing brokers and clients in the United States and Canada to generate new business streams in the North American Specialty Lines space,” the company adds.

AUTOMATED ONLINE OFFICE INSURANCE “COULD MAKE BROKERS REDUNDANT” Front Row Insurance Brokers has launched a fully automated system that it contends allows small business owners to buy and download business liability insurance and office contents insurance policies online, without needing to go through a broker. The product covers office equipment for theft, damage, fire and loss of use, as well as liability insurance for small business. Earthquake and flood insurance are also offered up to full equipment values (except for in British Columbia and Quebec). The online model is said to deliver business insurance quotes in five minutes and a downloadable insurance policy within 10 minutes, at lower premiums, as brokers

and underwriters are removed from the transaction.

Risk MPI OPENS NEW CENTRE FOR AUTOMOTIVE RESEARCH, TRAINING Manitoba Public Insurance has opened a new, state-ofthe-art centre for automotive research and training to keep pace with “rapid changes in the design, construction, technology and reparability of motor vehicles,” notes provincial Crown services minister Cliff Cullen. The centre will enable qualified technicians to work in collaboration with Manitoba’s repair industry, as it adapts repair methods for vehicles now being constructed of complex materials, including aluminum, carbon fibre and high-strength and ultra, high-strength steels. Cullen says the changes “are having a significant impact on the reparability of new vehicles.”

SGI CANADA LAUNCHES FARM BUSINESS UNIT SGI Canada has launched a farm business unit to help farmers understand their increasingly sophisticated insurance needs. As farms have become bigger and operations more expensive, insurance needs of farmers have grown more complex, SGI Canada notes. Staff in the new unit “understand these changes in the industry and are equipped with the farming knowledge and insurance know-how to better protect today’s agricultural producers. November 2017 Canadian Underwriter

PROFILE

TIC Talk Greg Meckbach Associate Editor

With technology disruption well-established on its radar screen, the Toronto Insurance Conference will soon have a Millennial, Rael Levy, at its helm. It will be some old, some new with regard to issues expected to be top of mind for members of the centuryold Toronto Insurance Conference (TIC). An example of the former are information technology developments that are disrupting the insurance industry while an example of the latter is the sunset clause on laws restricting banks selling insurance, notes incoming president Rael Levy. “One of the things (TIC is) firmly focused on is technology, given the number of disruptive forces that are sort of percolating in the background,” including insurtech and fintech, says the current vice president of TIC, which since 1918 has served as a forum to address concerns to commercial brokerages in the 10 Canadian Underwriter November 2017

Greater Toronto Area. Levy is to take over as TIC president this coming March from Michael Loeters, senior vice president of strategic clients and risk management for PROLINK, Canada’s insurance connection. With disruptive technology, “it’s only natural to assume that some insurers might look to sell direct to the endcustomer and to disintermediate the broker,” Levy notes. “So, the TIC is really looking to steward a conversation on technology and, specifically, how brokers can utilize emerging technology to reduce frictional costs in the insurance transaction, both with the insurers and with the end-customers, to facilitate an easier, more streamlined way of doing business,” he explains. A lawyer, Levy works near the Air Canada Centre — home of the Toronto Maple Leafs — as assistant general counsel and director of government relations for Marsh Canada Limited. Born in South Africa, he spent his early childhood in Durban and immigrated to Canada in 1994 with his family. Levy lived first in Toronto and then for seven years in London, Ontario, where he attended Western University. After graduating with an Honors Business Administration degree from

the university’s Ivey Business School, he studied law at the school, graduating in 2004. Being a Millennial is one thing that sets him apart from previous TIC presidents, Levy suggests. “As a Millennial, I am a big fan of the sharing economy,” he says, citing accommodation rental website Airbnb as one such example. “I believe that there is something to be learned from this type of platform or model and, clearly, brokers need to get together and figure out how to manage technology in a way that is going to benefit the broker channel,” observes Levy, who joined the TIC Board of Directors in 2014.

LAW TO BROKING While still studying law, Levy worked as a summer student for Osler, Hoskin & Harcourt LLP. After graduating, he returned to the firm to article and later served as an associate in corporate law. “I had a good experience,” Levy says of his time at the firm, where his areas of work included mergers and acquisitions, corporate finance and investment funds. “I loved the people there and the calibre of work was excellent. It just did not necessarily fit with what I thought it was going to be, so at about the end of 2010, I joined

Marsh Canada,” he relays. At Marsh Canada, Levy reports that he is getting “a taste of a number of different areas of law,” including corporate law, litigation, employment and privacy. He is also looking to further enhance his insurance education, currently studying for the Registered Insurance Brokers of Ontario (RIBO) exam, which is a prerequisite to being a licensed broker in the province. “I can’t say I have never thought about making a leap

“TIC is really looking to steward a conversation on technology and, specifically, how brokers can utilize emerging technology.” over to the business side of things at Marsh, and there are certain lines of insurance that lend themselves well to legal expertise,” such as representations and warranties, Levy suggests. But his “main priority” right now is to get his RIBO licence. “One of the things I picked up in the last couple of years was government relations,” Levy says of his experience

Photo: Peter Tym

PROFILE

with Marsh Canada. “That’s really how I came to be on the board of the TIC. One of the senior managers (at Marsh Canada) mentioned it to me and I took it up with alacrity, just because it fit very well with what my internal role was — to meet with regulators and to meet external brokers and to collectively try to move the dial on some important issues to the broker community.”

ISSUES OF CONCERN One of those issues is the federal Bank Act, which stipulates the “authorized” types of insurance that banks are allowed to sell in their

branches. Banks are not allowed to sell home and auto insurance in their branches, but may do so through subsidiaries. The act also prohibits banks from providing access, from their own web pages, to other web pages through which insurance other than the “authorized” types are being sold. The federal legislation has a five-year sunset clause, which is meant to provide “an opportunity to examine the legislative and regulatory framework in light of emerging trends and developments, to ensure it remains robust and technically sound,” notes a 2016-2017

federal budget document. At the time of the budget release, the Bank Act was up for review in 2017, but the sunset clause was later extended to March 29, 2019. The 2019 review “has been a big issue for the Insurance Brokers Association of Canada (IBAC) and also for TIC,” which is represented on the IBAC board, reports Levy. “Brokers feel like there is a presumptive element of undue influence over the consumer when they are applying for credit, a business loan or mortgage, and they might feel intimidated or out of options, and then insurance is foisted upon them at the last minute to consider

as well,” he points out. If restrictions on banks selling property and casualty insurance are eased, Levy cautions, “the concern is that if they (banks) start selling personal lines insurance within the retail branch, it potentially opens up the door for them to consider selling small property packages to small businesses, and then expanding that to medium enterprises.” As currently written, “the status quo is sufficient to accommodate choice for the consumer, but also to keep banks doing traditional banking work,” he contends. Another potential threat to commercial brokerages is the use of artificial intelligence (AI) in rating models and claims. This is because brokers add value “in advising on the nuances around coverages and also in facilitating resolution of claims,” Levy maintains. “As AI becomes more prevalent in insurers’ online platforms aimed at direct sales, it could eventually become a threat to commercial brokers,” he predicts. That said, Levy emphasizes, “I really believe that there will always be a role for brokers who care about their clients and can offer impartial advice about the insurance-buying and claims-resolution process.”

November 2017 Canadian Underwriter

MARK YOUR CALENDAR February 27-28, 2018 BEANFIELD CENTRE, TORONTO

Insurance Vectors: Risk, Technology, Engagement

The 2018 Insurance-Canada.ca Technology Conference Insurance is undergoing dramatic changes, driven by three new insurance vectors: • New Risks - such as cyber - are challenging insurers to develop products and services for the 21st century • Customer Engagement - requires innovative products to meet the needs of today’s customer, omni-channel facilities to access information and resources, and advanced analytics to optimize decisions • Digital Technologies - are moving computing resources from data storage in the back office to strategic intelligent applications supporting existing and emerging tasks and operations, including insurance cover. Some insurers and brokers are licensing technologies from start-ups and InsurTechs to get a head start without disrupting legacy technologies. Others are taking a deeper plunge with transformational projects.

One thing is clear: Insurance as usual is not a viable plan. ICTC 2018 FACULTY WILL FOCUS ON: • Identifying new risks that will provide unique opportunities. • Defining generational differences and the impact on insurance distribution and products • Strategies for leveraging InsurTechs and Startups.

• Managing Omni-Channel strategies • Impact of AI / Machine Learning on existing processes. • The future of Telematics and Automotive technologies • And more.

Learn more and register at www.insurance-canada.ca/ictc If you are interested in sponsor opportunities, please call 437-222-4222 Kathryn Bertsch: Ext 244 • kathryn.bertsch@insurance-canada.ca Doug Grant: Ext 242 • doug.grant@insurance-canada.ca Patrick Vice: Ext 243 • patrick.vice@insurance-canada.ca

PRESENTED BY

In the

Alternative

Greg Meckbach Associate Editor

Losses from recent hurricanes could top US$100 billion, threatening to wipe out some Cat bonds. Still, reinsurance experts say investor support for new insurance-linked securities remains strong, with any players opting to exit the market expected to be easily replaced. Despite four North Atlantic hurricanes making landfall on United States territory since August and most catastrophe bonds issued in the 12 months prior to June 30 having U.S. property risk exposure, insurance-linked securities (ILS) experts are not reporting any signs that investors are shying away from the ILS market. Spared a major hurricane for 12 years — 2012’s Sandy had been downgraded to post-tropical storm status when it hit New Jersey — Puerto Rico, Texas, Florida and Louisiana were the sites of hurricane landfalls from August 25 to October 7. Hurricane Maria made landfall September 20 in Puerto Rico, 10 days after Hurricane Irma made two separate landfalls in Florida and less than a month after Hurricane Harvey made landfall near Rockport, Texas. Funds from ILS “will have to cover significant

losses,” associated with hurricanes Harvey, Irma and Maria (HIM), Emmanuel Modu, managing director and head of the ILS group at A.M. Best Company Inc., reported on October 16. Citing figures from AIR Worldwide, Fitch Ratings Inc. reported in late September that “upperend loss estimates” for Hurricane Maria alone were US$85 billion. In addition, there is the US$50 billion in “upper-end expected losses from Hurricane Irma,” US$25 billion from Hurricane Harvey, more than US$20 billion in other catastrophic losses during the first six months of 2017 and the approximately US$3 billion from the September 19 earthquake in Mexico. (Hurricane Nate did not make landfall in Louisiana until October 7.) At the time, Fitch Ratings was estimating that 2017 catastrophe losses “will constitute a capital event for a number of (re)insurance companies, as opposed to just an earnings event,” but added “the industry’s very strong capital levels going into this year greatly limit any risks to solvency.” The difference with recent years has been clear. Global law firm CMS points out that “reinsurance programs have now been called upon four, five or sometimes more over the course of 2017.”

AWE AND ORDER “The market has reacted well and in an orderly fashion,” to HIM, reports Bill Dubinsky, head of ILS at Willis Towers Watson Securities. “ILS investors expect to provide recoveries from these sorts of headline Cat events. Many investors have either

November 2017 Canadian Underwriter 13

reloaded or are in the process of reloading their capital as necessary to support new ILS investments,” Dubinsky explains. In the aftermath of HIM, Standard and Poor’s does not anticipate there will be any “meaningful” retreat from the ILS market in the future, notes Gary Martucci, director of S&P Global Insurance Ratings. “There is plenty of cash looking to be invested, so any investors that leave will easily be replaced,” Martucci predicts, pointing out that “active years are a risk of this asset class, but so far, actual losses have been minimal.” That said, the property and casualty insurance industry “could see certain Cat bonds totally wiped out by the 2017 hurricane season,” cautions Jeff Mohrenweiser, head of ILS at Fitch Ratings. “It is possible that some of the bonds may be full losses,” adds Aditya Dutt, senior vice president and treasurer at RenaissanceRe and president of Renaissance Underwriting Managers Ltd. “However, we do not believe that any of the cedants will be without coverage as a result. Most, if not all, cedants purchase multiple forms of reinsurance, which may include Cat bonds. The issuers of affected Cat bonds have other forms of coverage in place that will perform in these events in addition to their Cat bond coverage.” In its annual ILS report released this past September, Aon Securities reports that as of June 30, 2017, catastrophe bonds on risk for both property and life lines had reached US$25.8 billion (up by US$3.3 billion compared to the same date in 2016), representing about 15% of global reinsurer capital. Additionally, there was approximately US$89 billion worth of capital deployed by alternative markets as of this past June 30, Aon Securities notes in Insurance-Linked Securities: Alternative Capital Breaks New Boundaries. Of the 32 Cat bonds issued in the 12 months ending June 30, 28 covered U.S. property risk. As of October 16, no Cat bonds had been “officially triggered” by HIM, says Mohrenweiser, adding that Fitch Ratings analysts believe that anywhere from US$250 million to US$1.5 billion of 14

Canadian Underwriter November 2017

Cat claims this year “could, ultimately, be paid by Cat bonds.” As of the end of 2016, these bonds constituted roughly 25% to 30% of the approximately US$90 billion of alternative capital in the reinsurance market, he reports. If one assumes the ILS market’s share of losses from HIM is US$20 billion, “then we expect that less than 5% of the losses will fall on catastrophe bonds, while 95% will fall on the other ILS instruments and vehicles,” including industry loss warranties, sidecars and collateralized reinsurance, Mohrenweiser says.

LAWS OF ATTRACTION Whether or not ILS issuers will have difficulty attracting investors in the future “remains highly difficult to assess at this stage,” says Benoit Liot, retrocession senior account manager for SCOR. “This series of events will act as a test for the ILS industry and its ability to reload capital after an event,” Liot says of HIM.

“We do not believe that any of the cedants will be without coverage as a result. Most, if not all, cedants purchase multiple forms of reinsurance, which may include Cat bonds.” Officials with RenaissanceRe Holdings Ltd. do not believe that ILS issuers will have difficulty attracting investors in the future, says Dutt. “The market for ILS is robust and deep enough to support losses from time to time,” he says. “The important aspect of performance through any event is the extent to which losses surprise the investor or issuer. If the security did not perform in the manner it was intended, that usually deters investors and issuers. We don’t believe that is the case in the 3rd quarter,” he adds. Modu noted in mid-October that he expected it “will take a few months before there are more reliable numbers about the true losses” of HIM. “The conjec-

ture about the range of the estimated US$100 billion of losses associated with HIM that would be covered by the ILS market is wide — somewhere between 10% and 30%,” he said at the time. “If one applies the mid-point percentage of 20%, this would indicate that approximately 25% (or US$20 billion) of the ILS capital may be depleted.” Fitch Ratings estimates that forms of alternative capital other than Cat bonds could pay 7% to 10% of insured losses from the three hurricanes while Cat bonds could pay another 1% to 3%, says Mohrenweiser. “Alternative capital represents about 15% of the reinsurance capacity and roughly one-third of the alternative capital are Cat bonds,” he adds. “Several Cat bonds, issued on an aggregate basis, have been marked down following the series for hurricanes as their attachment probabilities have considerably increased,” Liot says. “However, no official loss notice has been issued to our knowledge,” he notes. Of the costliest insured disasters (natural and man-made) from 1970 through 2016, three of the top five were North Atlantic hurricanes, Swiss Re reports in Natural Disasters and Man-Made Catastrophes in 2016. Adjusted to 2016 U.S. dollars, placing first, third and fourth were hurricanes Katrina (US$80.7 billion), Sandy (US$30.1 billion) and Andrew (US$27.4 billion). Last year “continued the decade-long stretch of no ‘major’ hurricanes making U.S. landfall, the longest since the 1860s,” the report notes. Of the North Atlantic storms that made U.S. landfall so far this year, HIM “will not be a test case for Cat bonds in general,” Liot predicts. “This being said, we believe that this series of events will certainly give cedants a clear idea of collateralized reinsurer responses when faced with the actual loss of investor capital, and with significant ‘lock-up’ periods after the application of buffer (above loss estimates) clauses.” The 2017 hurricane season, Liot says, “may already have given” cedants “food for thought about how to blend one-shot protection with more traditional placements offering reinstatements.”

Recent Insurance Press Releases featured on insPRESS.ca On Side Restoration renews 3-year national sponsorship agreement with WICC

Michele Quirk joins Vericlaim Canada

October 30 — by On Side Restoration Services Ltd.

CEP-Sintra beefing up its structural and civil engineering team in Ontario

Alice Keung of Economical joins Insurance-Canada.ca advisory board October 30 — by Economical Insurance

Pario Engineering & Environmental Sciences opens new Windsor branch, welcomes Dennis Pupulin, P. ENG., FEC October 27 — by SCM Insurance Services

One hundred carriers benefiting from ClearPay Transactions October 25 — by ClearPay

SNAP Premium Finance and Concentra Bank close on-going securitization facility October 24 — by SNAP Financial Group

Kernaghan Adjusters expands Alberta team with addition of 2 new senior adjusters October 24 — by Kernaghan Adjusters

Automate your payments with FIRST Canada at the 2017 IBAO convention

October 19 — by Sedgwick

October 19 — by CEP

Economical and Atlantic broker Macdonald Chisholm Trask Insurance raise more than $25,500 for Victorian Order of Nurses October 18 — by Economical Insurance

30 Forensic Engineering’s Dr. Adam Campbell presented at the 2017 Human Factors and Ergonomics Society International Meeting October 18 — by -30- Forensic Engineering

Join Cunningham Lindsey and EFI Global at the IBAO Conference – Booth 92 October 18 — by Cunningham Lindsey

Network with the industry. Support a great cause. October Broker Bash. October 17 — by FIRST Insurance Funding of Canada

October 24 — by FIRST Insurance Funding of Canada

30 Forensic Engineering joins JLT Canada to bring together municipal leaders at the inaugural Public Sector Summit 2017

Burns & Wilcox Canada enters exclusive agreement with Node International for comprehensive cyber liability insurance

MKA Canada, Inc. mobilizes in the Caribbean

October 17 — by -30- Forensic Engineering

October 24 — by Burns & Wilcox Canada

October 17 — by MKA Canada, Inc.

GARANTIE OR remporte deux STEVIE® Awards de bronze lors des International Business Awards

Totten selects Policy Works to issue commercial policies

October 23 — by The Guarantee Company of North America

30 Forensic Engineering recognized as top experts by Canada’s legal community

GUARANTEE GOLD® wins double bronze STEVIE® Awards in the 2017 International Business Awards October 23 — by The Guarantee Company of North America

Petley‐Hare & Insurancejack.com sign with Sharp Mobile October 23 — by Sharp Mobile Technology Ltd.

Policy Works and Surety Source partner on integrated point-of-sale surety product solution October 20 — by Policy Works

Cunningham Lindsey welcomes Matthew Leaker and John Powell to our major and complex loss adjusting team

October 16 — by Policy Works

October 13 — by -30- Forensic Engineering

CEP-Sintra ranked among the top 25 engineering firms in Quebec October 11 — by CEP

Pario strengthens presence in Montreal region October 11 — by SCM Insurance Services

Vericlaim poursuit sa croissance avec l’ouverture d’un nouveau bureau à Rouyn Noranda October 11 — by Sedgwick

October 20 — by Cunningham Lindsey

Vericlaim expands with new Rouyn Noranda office

EFI Global opens a new office in British Columbia, headed up by Jubilee Cacaci

IBAO announces 2017 Awards of Excellence finalists

October 19 — by Cunningham Lindsey

October 11 — by Sedgwick October 11 — by Insurance Brokers Association of Ontario

To Read the Full Story for Each Press Release visit insPRESS.ca Continued on page 48.

INSPRESS COLUMN fp AD NOV 2017.indd 1

2017-11-02 3:07 PM

Digital Access As fintechs and insurtechs take hold, more than just the tech is changing. Incumbents are joining fintech firms in realizing a digital approach — anchored by strong and agile core systems — is necessary to put customers first. And cultivating that approach from the time customers are young offers promise of customers for life.

Ron Stokes

FinTech Leader, EY Canada

Morgan Richardson

Manager, Financial Services Transactions, EY Canada

A common fear in the financial services industry is that new market entrants, also known as fintechs, will do to insurance what ride-sharing apps have done to taxis. Consumer expectations are changing and nearly every financial service institution — no matter its size, structure or particular circumstances — should be well on its way to digital transformation. As fintechs establish themselves in the Canadian market, they are changing more than just the user interface. The EY FinTech Adoption Index 2017: The rapid emergence of FinTech, released this past July, found that fintech adoption has more than doubled over the last 18 months, and the trend will continue as Canadians become more familiar and comfortable with alternative offerings. And there are plenty of choices — the fintech umbrella includes money transfer and payments, financial planning, savings and investments, borrowing and insurance. What is more, these start-ups are finding ways to build their own customer base with creative offerings for younger generations.

DRIVING FINTECH IN CANADA Fintech companies share two core characteristics: a laser-like focus on the customer proposition and a willingness to apply technology in novel ways. These are powerful differentiators in a marketplace where many incumbents are still focused on selling products rather that solving customers’

Canadian Underwriter November 2017

problems. As a result, they struggle to deliver the seamless and personalized user experiences consumers increasingly expect. The other fintech driver is favourable demographics, a market ready to embrace the digital offerings. Unsurprisingly, the fintech adoption index revealed the use of fintech products and services is higher among younger consumers. The demographic most likely to use fintech are 25- to 34-year-old consumers, followed by 35- to 44-year-olds. This pattern is expected. Not only are 25- to 44-year-old consumers comfortable with Internet and mobile technologies, they are also looking for a wide range of financial services as they achieve life milestones, such as completing their education, starting full-time employment, becoming homeowners and having children. Looking at why more Canadians do not use fintechs, it is either because they do not know of any, or they prefer their traditional financial services provider. The former will change as people become more aware of alternate service providers; the latter is a testament to the strength of the incumbents’ brands. While this is something that traditional institutions should be proud to hear, this is not a time to rest on their laurels.

BUILDING A CUSTOMER Fintechs and insurtechs (fintechs in the insurance space) are challenging traditional providers

in many ways, but they have their own hurdles to overcome, namely, building a devoted customer base as a brand new company. Gaining customer traction is fundamental to growth for any business, but it is particularly relevant for fintech start-ups, which rely on it as a key metric for raising investment funds. The index study identified three business models that can drive mass adoption: 1. Revolutionize the economics of a market: Fintechs could offer a previously paid-for service free of charge to garner interest, or they could offer a much cheaper service by reducing costs through technology. 2. Create something new and compelling: This is where fintechs usually shine — they can offer consumers new services to address previously unmet customer needs. 3. Distribute across an existing customer base: Taking a bit of a shortcut, fintech firms could help a more established business fulfill currently unmet customer needs, or they could collaborate with them. That gives them access to an existing customer base while still taking the opportunity to be innovative. As fintechs take hold in the Canadian market, they are shifting their focus to long-term viability and stronger brand recognition. Indeed, in the banking space, some fintech companies are specifically targeting parents to start children on a path of financial acumen and regular fintech use with mobile tools for savings, investments and payments. Ideally, these young clients would become customers for life. For example, there are a number of companies that provide prepaid debit cards for children, paired with mobile apps. The apps allow parents to set allowance amounts, oversee spending, load money for emergencies, lock the card if lost or stolen, and block purchases from certain stores. The children’s apps allow them to set savings goals, automatically save a percentage of each allowance and enable them to track their spending activities, instilling good habits early on. Generally speaking, the under 18-year-old demographic is often forgotten by the financial services industry because of their typically low income and signatory power. Accordingly, there is little insight into how targeting this market may translate into insurance. Besides offering options for young ones, there are three tools and technologies fintechs and insurtechs could use to accelerate market advantage: 1. Build “word of mouth” referrals: By offering novel and differentiated experiences, fintechs can push themselves to the forefront of the market. Relationships and trust play a critical role in influencing adoption, so endorsements from opinion leaders and community champions are vital. 2. Establish a strong brand identity: Mass adoption is not always the answer. A fintech could build a distinct identity and build a following with clear boundaries, designations and behaviours. This then enables it to capture the entirety of a targeted customer segment.

3. Focused marketing activity: Fintechs that offer highly personalized user experiences have access to valuable data about their audience. Leveraging this data is key to targeted marketing approaches, such as traditional and digital advertising placements, search engine optimization, blogs and social media. Insurtechs need to keep these business models and tools at the heart of their strategies as the insurance market continues to evolve. In fact, the incumbents could put these tools to good use, too.

COMPETING WITH INSURTECHS Traditional insurance companies need to find ways to stay relevant, as they are increasingly going to be compared to the sharp and nimble insurtechs. The index study shows that 10% of surveyed digitally active Canadians have used an insurtech in the last six months. That includes car insurance using telematics, insurance premium comparison sites and activitybased insurance. What is more, this adoption of insurtechs is set to increase to 24% in the near future. In comparison to the other 19 markets studied, Canada falls in the bottom quartile, but has a significant number of what looks to be “non-regular” users. Non-regular users only used one fintech service, while fintech users have used two or more such services in the last six months. This suggests that adoption will only continue to grow. To start, insurers must offer a wider range of products with a high degree of personalization. Data from sensors and telematics devices makes this much easier. For example, real-time driver behaviour data can be used for automotive insurance; smart appliances, including thermostats, for home insurance; fitness trackers for life and health insurance; and warehouse monitors and fleet management in commercial insurance. The data streams from these devices are invaluable for more precise underwriting and more responsive claims management, as well as product innovation. They can be used as the foundation for usage-based insurance (UBI), which is sometimes called “pay-as-you-drive” or “pay-as-you-live.” This means premium pricing could be based on actual usage and driving habits, with discounts linked to miles driven, slow or moderAnalysis of FinTech adoption across age brackets 48 41

30 22

18-24

25-34

35-44

45-54

55-64

15 65-74

Age

9 75 and above

Notes: The figures show average rate of FinTech adoption across the age demographics in our surveyed population.

November 2017 Canadian Underwriter 17

ate speeds and safe braking patterns, for instance. Some of these innovations have already hit the market. There are companies that provide pay-per-mile insurance facilitated by a mileage tracking device that plugs into the car, supplemented with a mobile app. One company has been developed as an on-demand insurance platform that collects details on the things important to a user and protects them. It can temporarily enable insurance for loss or damage on a phone, camera and laptop when the owner leaves his or her home.

DEVELOPING DIGITAL ON THE INSIDE In the spirit of attracting the next generation of consumers, there is a lot to be gained by going digital on the inside. Many insurers have undertaken core transformation programs, but they are just the first step towards basic digital communications, paperless documents, online data

entry, mobile apps and the like. More advanced technologies, which can enable major efficiency gains and cost improvements, require stronger and more flexible core systems. Chatbot technology, for instance, can deliver considerable value as a stand-alone app, but its full return on investment cannot be achieved without being fully integrated with core claims platforms. In other words, the basics need to be implemented first. Fintech is progressing quickly as an in-

dustry and there are many other services and subsectors that are budding, or only present in a few markets, not explored in the recent index. While it is not clear where the fintech sector will go, it is worth keeping an eye on social insurance, including peer-to-peer insurance and brokerfree insurance models. Either way, one thing is clear — digital advancement will not stop or slow down, putting the insurance sector under greater pressure than ever before.

Editor’s Picks Looking for more information about fintech and insurtech? Check out www.canadianunderwriter.ca and search for the following: • Home telematics startup Roost closes second round of funding • Customer choice must be key consideration in next wave of insurtech: expert • Insurtech funding in Q1 2017 sees 64% drop from Q1 2016 to US$283 million: Willis Towers Watson Securities • Fintech sector in Canada not reaching full potential: Competition Bureau of Canada

Envista Forensics Welcomes Ron Koerth. Envista Forensics welcomes Ron Koerth to our family as Senior Vice President. Ron’s respected reputation and knowledge make us stronger together, assuring our clients even more Certainty in an Uncertain World. With offices in Toronto and Vancouver, we deliver unrivaled forensic engineering expertise across Canada, and our technical experts are trusted advisors and renowned industry leaders. For the answers you need, visit envistaforensics.com.

Ron.Koerth@envistaforensics.com +1 416 433 1375

Canadian Underwriter November 2017

Standard Yet Complex Heather Gray

Equity Partner, Clyde & Co. Canada LLP

Laura Sullivan

Articling Student, Clyde & Co. Canada LLP

A Nova Scotia ruling exploring the standard of care and “complexity” of risk may offer some relief for insurance brokers, but that should not inspire complacency. While it appeared that the standard of care for brokers had expanded, brokers must clearly understand that standard of care may increase in line with the complexity of the risk. Canadian insurance brokers have cause for relief in the recently released decision of Nova Scotia’s Court of Appeal in Marsh Canada Ltd. v. Grafton Connor Property Inc. Issued in June 2017, the appeal court partially reversed the 2015 ruling by the Supreme Court of Nova Scotia, which had been widely viewed as expanding the scope of the standard of care applicable to brokers.

Notwithstanding the reversal, the decision serves as a reminder to brokers that the standard of care is inextricably linked with the sophistication of the client and the sophistication of the risk.

COMPLEX RISKS AND RELIANCE In Grafton Connor, the insurer denied coverage on the basis that material features of the insured building had been misrepresented in the application for insurance. The insured challenged the denial and commenced a claim against its insurer and its long-time broker. In its 2015 ruling, the Supreme Court of Nova Scotia agreed the insurer was entitled to void the policy for misrepresentation, but found the broker liable for 50% of the insured’s loss. The court held that in complex insurance transactions, the standard of care requires brokers to make “additional inquiries, before the application form is completed… to ensure” that their clients have “the necessary skill to provide accurate information.” The information at issue was whether the building was of masonry construction, and whether or not it contained sprinklers. The Court of Appeal reversed the decision on the basis that requiring a broker to verify information, which is in the knowledge of the insured, was a “...significant departure from the law as it pres-

November 2017 Canadian Underwriter 19

ently exists” and that an agent “should be entitled to rely upon the applicant’s ability to represent... basic information correctly without further investigation.” It should be noted, however, the Court of Appeal’s reversal was premised on its finding that “there was no evidence the risks… were complex… whether the [building] was sprinklered and of masonry construction [is] not complicated.”

ing to inform the president about the limits of coverage. Ontario’s Court of Appeal upheld the decision of the trial judge in favour of Fine’s Flowers, but reasoning was split. The minority found the broker liable in negligence, while the majority found the broker liable in contract and negligence.

NON-SPECIFIC CLIENT INSTRUCTIONS AND RELIANCE The Court of Appeal’s decision in Grafton Connor falls in line with the longstanding formulation of the standard of care applicable to private insurance brokers set out in Fine’s Flowers Ltd. et al v. General Accident Assurance Co. of Canada et al, a 1977 decision by the Court of Appeal for Ontario. Fine’s Flowers involved several factors that tend to increase reliance on brokers, but the majority’s reasons for judgment stressed the importance of the non-specific nature of the insured’s instructions. The insured, Fine’s Flowers, operated a horticulture business. In January of 1968, the motor burned out on one of two pumps used to supply water to the boilers that heated the insured’s greenhouses. The greenhouses lost heat, and the insured lost approximately $27,000 in product. The insurer denied coverage because the contract specifically excluded liability for loss caused by ordinary wear and tear. The insured claimed against its longtime broker for breach of contract, and in the alternative, for negligence. Ontario’s then High Court of Justice found the president of Fine’s Flowers was “an astute and successful business man,” but “not particularly well-informed on the subject of insurance.” The court determined the president had relied on his broker regarding the coverage required, and that those facts were known to the broker: “the plaintiff looked to [the broker] to keep it fully covered” and the latter “knew that and had undertaken the responsibility of doing so.” The court found the broker liable for breach of contract and negligence for fail20

Canadian Underwriter November 2017

The insurer denied coverage because the contract specifically excluded liability for loss caused by ordinary wear and tear. The insured claimed against its long-time broker for breach of contract, and in the alternative, for negligence. The majority’s reasons for judgment were written by Justice Jane Wilson (as she then was), and focused on the lack of specificity in the insured’s instructions to his broker. Justice Wilson found that where a client makes a broad request of his broker such as the insured in Fine’s Flowers did when he “simply said he wanted ‘everything covered’”: “if the agent agrees to do business with him on those terms, then he cannot

afterwards, when an uninsured loss arises, shrug off the responsibility he has assumed. If this requires him to inform himself about his client’s business in order to assess the foreseeable risks and insure his client against them, then this he must do.”

UNSOPHISTICATED CLIENTS AND RELIANCE The issue of “sophistication” was also addressed by Manitoba’s Court of Appeal in the 2003 decision, Rosenblatt v. Reliable Life Insurance Co. In Rosenblatt v. Reliable, the court’s reasons for judgment focus on the insured’s lack of sophistication regarding insurance matters. The insured was an elderly widow who broke her leg while vacationing in the United States. The insurer rejected her claim on the basis that she had failed to disclose that she had been treated for a heart condition within the past 12 months, which would have disqualified her for the particular type of coverage she chose. The insured claimed against her agent of many years for failing to secure adequate coverage. The Court of Queen’s Bench of Manitoba found in favour of the agent. The court held that “the failure to apply for the proper coverage… did not arise from [the agent’s] negligence, but from [the insured’s] misstatements. She failed to advise of a change in her condition.” Manitoba’s Court of Appeal reversed the trial decision, and found the agent liable. The court held that the agent had a duty to “go beyond superficial inquiries” into the insured’s medical history, “even if that involved an authorization from [the insured] to obtain her medical history from her family physician.”

TAKE CARE WITH RELIANT CLIENTS While the decision in Grafton Connor is a welcome one for the Canadian brokerage community, it should be remembered that the risk at issue was a commercial property risk. Where the risk is more complex, or where other factors tending to increase the insured’s reliance are present, the standard of care required of brokers will increase in tandem.

The CIP Society Ethics Series

The CIP Society Insurance Institute of Canada

The CIP Society represents more than 17,000 graduates of the Insurance Institute of Canadaâ€™s Fellow Chartered Insurance Professional (FCIP) and Chartered Insurance Professional (CIP) Programs.The CIP Society, through articles such as this, is working to bring ethical issues to the forefront and provide learning opportunities that enhance the professional ethics of all insurance professionals.

Rude Awakening

The claims process can be a tense time for insurance professionals involved, with things sometimes getting testy. Should criticism of a claims adjuster be included in an email between a broker and insurer, one in which both the adjuster and customer are also copied, then steps need to be taken to correct any wrongs done. A competent independent adjuster was dealing with a difficult case, with tensions running high between the broker and the insurer. Having worked in the industry for more than a decade, this was nothing she had not seen before. She had learned that claim time is an emotional time for all parties involved, and understood that some customers expect a broker to champion for them at all costs. The adjuster had exchanged a number of heated phone calls with the broker, and was working to straighten out some contradictory information

on the claim. She was shocked, though, when one morning both she and the customer were copied on a very unpleasant email from the broker to the insurer. The broker used language she had not heard since the schoolyard, and accused her of being incompetent. The email stung on many levels, and the adjuster felt that it was completely unprovoked and entirely unprofessional. She had been embarrassed in front of the customer and the insurer representative, who, although new to the job, she anticipated she would be working with in the future. Left feeling as though she had to prove she was doing her job competently, is the onus on the adjuster to defend herself? Not wanting to escalate things directly with the broker, she decided it was best to approach her manager to disclose what happened. The manager was similarly upset, but not surprised since the broker was known for sending unprofessional emails and copying customers. What is the best way to address the brokerâ€™s email and continuing unprofessional behaviour? When should the regulators get involved? Lee-Ann Vansteenkiste, CIP District Manager, Southwestern Ontario ClaimsPro How the adjuster responds will define her as a professional. It is very important to focus her commu-

November 2017 Canadian Underwriter 21

nication on facts, and not immediately be on the defensive. The broker’s email must be acknowledged, both in writing to ensure there is a paper trail of communication, and then followed up with a phone call to all parties. The response should start with a formal confirmation of the email: “Receipt is acknowledged of your email. I am sorry that you feel this way and trust the below will clarify the situation.” The response should be concise and factual, detailing in chronological order how the events of the claim have unfolded and what is required to move ahead. It should then end by inviting all parties to discuss the situation further either via a conference call or in person. The adjuster should not acknowledge any personal attacks; she should also not place blame with anyone. If any part of the situation relates to work done or not done by the adjuster, then she should own up to it and make a plan to move forward. It is not up to the adjuster to demonstrate the broker was acting unprofessionally. The adjuster’s professional response will speak for itself and will build on her own reputation as being calm, professional and action-oriented. With respect to dealing with the broker in the future, the best defence is an offence. The adjuster needs to ensure that she is consistently handling her files and communicating proactively and professionally. At the end of the day, even if this broker continues to be aggressive, the adjuster will be able to, based on facts, explain her position. At some point, the insurer and the customer will understand the nature of the broker and can then decide if it makes good business sense to continue that relationship. How insurance professionals respond to difficult situations will set the stage for their own personal branding. In this case, success will follow the adjuster when she consistently ensures that her file-handling and communication tells the story of a proactive, customercentric professional. 22

Canadian Underwriter November 2017

Randy Bushey, CIP Broker Consultant Bullying comes in various shapes and sizes. And bullies need to be confronted both in the schoolyard and in the business world. Some things of great value take years to establish, and can take but a moment to damage. A quality reputation is such a thing.

Some things of great value take years to establish, and can take but a moment to damage. A quality reputation is such a thing. The victimized players in these scenarios often further damage their names by responding with more heat, less light — and bad timing. This adjuster will salvage her reputation by unflappably resolving the issues, and then moving to demonstrate the criticism is invalid and repairing any damage to her reputation. Recognizing the age-old wisdom of taking responsibility for oneself — one can only control one’s own behaviour and reaction — the adjuster should continue to resolve the issue and not be thrown off her game by the inflammatory and unfair criticism. Because reputation is a highly valued commodity, and one that, once obtained, needs to be protected and defended, when the claim is closed — or this spe-

cific issue is resolved — the adjuster (or her manager) needs to calmly, but resolutely, stand up to the bully, demanding a written apology with all parties to the offending email copied in. This may need to be escalated to a higher level within the brokerage. If refused, the next step is to file a complaint with the regulatory authority’s Discipline Committee on the grounds of professional misconduct. If an adequate apology is received, the bully must know — clearly and firmly, but dispassionately — that a complaint will result if further bullying occurs. Bullies need to be confronted, but most victims will not go that far; maybe that is because they do not recognize the inestimable value of a good reputation, and that the protection of this valuable asset starts with the owner. Maurice Audet Senior Vice President | Regional Resource Leader Risk Research & Solutions Aon Reed Stenhouse Inc. Should rude and obnoxious behaviour in others be tolerated? Some people will have bad days, and in most cases, those who do, will apologize for their behaviour and all is well. But when someone persists in using emails as a weapon to insult, trash or otherwise belittle and bully others, this behaviour has to be challenged and stopped. In the scenario, it is regrettable the insurer did not respond to indicate that the broker’s behaviour was unacceptable. The scenario mentions that the broker had a history of unacceptable behaviour, so it is unlikely that he had just received a blistering earful from his client. With respect to the adjuster, perhaps she had reached out to the broker, but the unacceptable behaviour continued. What to do? First, the adjuster should remove herself from direct confrontation. It will usually only make things worse. Her manager should be willing to intervene, and if intervening with the broker is unsuccessful, speak to his manager. While dealing with a bully, head-on is one approach; it is not necessarily the best one.

The goal is to find a peaceful resolution. While there is no shortage of examples on the Internet, be they real or simply urban legends, of ways to put an unpleasant person in his or her place, most of them probably do not work. A manager’s call to the opposing manager removes the disputing parties from the equation and allows for a rational discussion. Most managers will not tolerate abusive behaviour either coming from, or directed at, their employees. In most cases, this should work, but in some cases, it may only inspire the individual to escalate the behaviour (“How dare you go over my head?”, etc.). If this happens, a complaint to the regulator is fully in order. In a situation a few years back, an email exchange involving a co-worker had gotten quite testy. The co-worker’s position was correct, but the rhetoric was getting inflammatory. While sympathizing with the co-work-

er’s position, it was strongly suggested that she phone the individual she was dealing with and talk it through. In this case, the conciliatory approach worked very well. Failing that, however, escalating to management is the next step that should be taken.

THE FINAL WORD Most claims professionals have experience working with a variety of personalities in difficult situations, and can relate to the stresses put on other insurance professionals by their clients, or other parties, during the claims process. In an ideal world, claims-handling involves everyone working together to ensure the best possible outcome. When unprofessional behaviour enters the claims-handling process, lines of communication can be damaged, and negotiations stalled. This can make it difficult to determine if all parties are acting in good faith.

In the aforementioned scenario, the adjuster would do well by ensuring her response does not match the broker’s in either tone or substance, and that she continues to communicate with the insurer and customer competently and professionally. As a first step, reporting the situation to her manager can give the adjuster more insight and perspective. Here, the adjuster learns that this is not the first time the broker has behaved this way, and while it may be little consolation to her at the time, it can give her manager ample cause to escalate the issue with the broker’s manager. When unprofessional and inappropriate behaviour in the workplace is not adequately addressed, it is allowed to continue. By working with her manager, the adjuster can help ensure the broker’s repeated behaviour is flagged with his higher-ups and resolved with the appropriate consequences.

November 2017 Canadian Underwriter 23

Part of the Whole

The global natural catastrophe story for 2017, one that could tell the tale of the largest related losses in history, shows how interconnected each countryâ€™s reinsurance market is to the global whole. Reinsurers operating in Canada are advised that, this time around, being part of the whole may demand rethinking risk, pricing and partners.

24 Canadian Underwriter November 2017

COVER STORY

Part of the Whole

t is said that every cloud has a silver lining. Consider the copious clouds that formed in 2017 — from those that contributed to devastating above-average hurricane activity in the Caribbean and the United States to those feeding storms here at home that drenched and flooded numerous regions — and any silver lining can be tough to decipher through the fog of loss. Beyond storms, though, around the world there have also been deadly quakes, costly windstorms, extensive flooding and destructive wildfires. The latter once again includes Canada, where the aftermath of Fort McMurray is still being felt and (re)insurance pricing remains out of whack with the actual risk. It is on this front that a silver lining, however faint, may begin to reveal itself. It would likely not come as a shock to many — if, in fact, any — if the Canadian insurance industry experiences another year of billion-dollar losses from natural catastrophes. As flooding and wildfires continue to exact high tolls, coupled with the threat that the worst from either is likely yet to come, the hope that pricing will inch closer to actual risk is transforming into resolve that it must do so. While it may, ultimately, be a benign year for reinsurers in Canada, the tipping point on pricing may have been reached, with some players expecting increased rates for 2018. Views on how capacity will be affected in Canada is less consistent, ranging from some tightening to no change whatsoever. There are also concerns regarding the potential impact of non-modelled perils, but 2017 offers the opportunity to rethink approaches being used to ensure any developments are taken into account. What the 2017 Cat experience (to date) has made crystal clear, however, is that the Canadian reinsurance market is not divorced from the global market. Experiences elsewhere and responses formed as a result can have an influence on approaches used, pricing demanded, partnerships sought, capital deployed and the risk appetites set in Canada. 2017 looks as though it could become the most expensive Cat loss year ever, with it representing an earnings event or perhaps a capital event for some. Still, the reinsurance industry — both globally and in Canada — appears in a good position to weather the storms and remain on a solid track for the future. What does this mean for how reinsurers view Canada? Canadian Underwriter asked senior executives of reinsurance companies what they expect to unfold in 2018.

November 2017 Canadian Underwriter 25

COVER STORY

Part of the Whole

Pierre Dionne Senior Vice President & Chief Agent

C aisse Centrale de Réassurance – Canada

It is difficult to comprehend the level of destruction brought about by the thirdquarter catastrophes. Although Canada has not been immune to its share of large losses in the past, the scale of the Houston flooding dwarves the Calgary flood, while the recent California wildfires will now overtake Fort McMurray as the costliest wildfire ever. Even more heart-wrenching is the impact of the Mexican earthquakes, and the impact of hurricanes Irma and Maria on the Caribbean and Florida. At time of writing, almost 80% of Puerto Rico remained without power, one month after Maria hit the island. Barbuda, Dominica, St. Maarten and the Virgin Islands were left completely devastated. They will be missing the crucial winter tourism season, adding additional pressures on an already-fragile economy. This only increases the uncertainty surrounding recently published loss estimates. In all of this, the (re)insurance industry was lucky to have Irma hit the western coast of Florida rather than the eastern coast, while Hurricane José made a sharp turn to the north, narrowly avoiding hitting the same islands that were trying to recover from Irma. Still, 2017 will be a US$100 billion-plus catastrophe year, joining — and potentially surpassing — 2005 and 2011, both of which stand around the US$130 billion mark. The reinsurance renewals following those record years had reduced capacity and increased rates, even here in Canada. Therefore, although Canada had a mercifully quiet year for reinsurers, some tightening of capacity and increasing rates for the 2018 renewals should be expected.

Joseph El-Sayegh President & Chief Executive Officer SCOR Canada Reinsurance Company

The principle of supply and demand applies greatly to the reinsurance industry. 26 Canadian Underwriter November 2017

“Following the largest payout in the history of Cat in Canada in 2016, and what appears to be the largest Cat year globally, reinsurers are expected to draw a line on how much they need to remunerate their capital and replenish the funds to withstand other catastrophes in the future,” says Joseph El-Sayegh of SCOR Canada Reinsurance Company. Following horrific results in 2010 and 2011 from worldwide catastrophes, some reinsurers reduced their capacities from high Cat-exposed areas. Canada, which had just suffered the Slave Lake wildfire, was one of them. Limited Cat supply and increased demand to satisfy the Office of the Superintendent of Financial Institutions’ requirements drove the prices upward and minimum 2% rate on line made a comeback for the 2012 renewals.

Cat reinsurance uses global capacities to diversify its capital and benefits from a reduced charge in the capital model. While the Fort McMurray (FMM) wildfire in 2016 impacted the global portfolios of the reinsurance market, the Canadian capacities supported by the same market will be impacted by global catastrophes. The question lies in the quantum of that impact. The answer depends on the supply. The challenge of the Canadian insurance market remains in the aggregation of non-modelled perils. Alberta has been impacted with the highest number of them for the past seven years. While wildfires in British Columbia threatened many communities this year, the impact was not near the FMM wildfire. The Cat treaties were barely touched and 2017 will likely end up a benign year for the Canadian reinsurance market. However, following the largest payout in the history of Cat in Canada in 2016, and what appears to be the largest Cat year globally, reinsurers are expected to draw a line on how much they need to remunerate their capital and replenish the funds to withstand other catastrophes in the future. The key word is consistency in the approach. In general, the Canadian cedants behaved responsibly during competitive seasons and the reinsurers replicated the same approach during hard market. This allowed for smooth transitions. Being consistent creates predictability, and being predictable creates credibility. This is how a market leader should behave. Be close to the clients and communicate with them to satisfy their demands while rewarding the product offering.

Tim Fisher Senior Vice President & Canadian Branch Manager XL Catlin – Reinsurance

On the 30th anniversary of Cat 87J — a strong windstorm that swept through the United Kingdom, resulting in immense losses to property portfolios and caus-

COVER STORY

Part of the Whole ing the near extinction of the U.K. proportional property treaty — Hurricane Ophelia’s remnants batter the U.K. and Ireland, fires burn in California, Spain and Portugal, and the recovery process from hurricanes Harvey, Irma and Maria, the Mexican earthquakes and various other events continue, aided by the proceeds of insurance, reinsurance and retro markets. With cost estimates of US$75 billion to US$125 billion, 2017’s series of events is unprecedented. Natural peril losses can so easily dominate reinsurers’ attention as they watch, often with horror, as these events unfold before their eyes. However, 2017 also witnessed increased frequency of cyber attacks (many uninsured), continued stress in large corporate directors and officers liability in North America due to increased frequency of severe losses in a highly competitive pricing environment and, more generally, sustained industry competition that has seen loss ratios rise and reserve releases fall. Ongoing pre-announcements from (re)insurers indicate recent catastrophes are likely to represent a capital event for many. Also reports indicate that insurance-linked securities funds have suffered loss, and uncertainty of loss estimates is likely to trap billions of dollars as collateral until estimates are finalized. So how will the catastrophe losses and general market weaknesses affect Canadian reinsurance business in 2018? Firstly, the reinsurance market is not about to implode as a result of recent events. Reinsurance contracts are operating as expected and capacity will likely remain available as it did following the Fort McMurray losses of 2016. That said, given the unprecedented magnitude of the 2017 events, multiple years of margin erosion and increases in cost of capital from all sources, it is unlikely to come as a surprise that the cost of reinsurance looks set to rise across all lines and all territories. Implementation should always be clientspecific, as each protected portfolio and client relationship is unique.

“The reinsurance market is not about to implode as a result of recent events. Reinsurance contracts are operating as expected and capacity will likely remain available as it did following the Fort McMurray losses of 2016,” XL Catlin’s Tim Fisher comments. Reinsurance, however, remains a highly efficient and effective way for insurers to manage their risk.

Patrick Li Senior Vice President North America Property and Casualty & Head of Canada PartnerRe

2017 has finally brought an end to the run of light Cat years. While the final industry loss figure from the 2017 hurricanes Harvey, Irma and Maria events and wildfires in California is still unknown, it is almost certain that the (re)insurance industry will lose significant earnings and, in some cases, capital. This, in itself, might not have been a game-changer; however, against a back-

ground of already paper-thin margins across all lines, reducing casualty reserve run-off and the effects of the Ogden rate — used to calculate personal injury payments in the United Kingdom — the cost of capital in all forms is expected to increase. As a result, reinsurers expect a pronounced correction in the Cat reinsurance and retrocession pricing for the United States, as well as a trajectory back to technically adequate levels in other parts of the world, including Canada. The extent of hardening of reinsurance rates will not be one-size-fits-all; it will vary depending on several factors, including whether or not an individual account is loss-affected and the adequacy of the current pricing levels for the individual buyer. On the plus side for the industry, it is clear that the value of reinsurance as a product has been well-demonstrated and, for the first time, clients can clearly assess the value of reinsurance versus alternative capital products. The industry will also use the Cat activity to probe the weakness of their models and, ultimately, improve them. Whatever the market conditions in 2018, reinsurers will need to continue to offer their clients relevant reinsurance solutions that support their clients’ business goals — whether that is growing their businesses, managing the volatility in their quarterly results or optimizing their capital. Successful reinsurers will be those that have the global reach and technical expertise to partner with their clients over the long term to create meaningful and innovative solutions that address such challenges as releasing capital to invest in new opportunities, developing new products or using technology to tap niche markets.

Geoffrey Lubert Executive Vice President & Managing Director Willis Re Canada

Alberta-based insurance companies are finally breathing a sigh of relief with the November 2017 Canadian Underwriter 27

COVER STORY

Part of the Whole reinsurance focus now centered elsewhere. The well-documented events in the Caribbean, the United States and Mexico involving multiple hurricanes and tropical storms, earthquakes and, more recently, wildfires, are certainly giving reinsurers reason for pause. And, 2017 is not yet done. The recent releases of Q3 earnings demonstrate the strain these Cat losses have had on reinsurers’ financial results. There is no doubt that insurers who passed Cat losses onto their reinsurance partners will pay varying degrees of increased reinsurance premiums at their next renewal. Some insurers will find themselves boxed into a corner that requires increased catastrophe retentions and increased reinsurance spends. Fortunately, for insurance companies operating in Canada, there remains an oversupply of catastrophe reinsurance capacity, which will continue to insulate most of them from increased Cat rates in 2018 (subject to no major event in 2017 Q4). Reinsurers, of course, will voice a different view to this one. However, Canadian insurers will continue to leverage their non-catastrophe reinsurance purchases in order to prevent any increase in their catastrophe reinsurance spends. Moreover, property risk XOLs (excess of loss), casualty XOLs, quota share treaties and reinsurance protections for lines of business such as surety will continue to be experience- and exposure-rated, with no implied inherent hardening of the reinsurance capacity. Globally, reinsurers (and property insurers) will need to re-examine the deployment of their capital in writing business that is clearly in the wrong place and where there is no catastrophe rate that is sufficient to produce an underwriting profit over the long term. It is reported that homes and businesses have been re-built multiple times in a variety of known flood zones — mainly in the U.S. Climate change is making many people rethink how close to the water’s edge they build their homes as the oceans continue to rise. 28 Canadian Underwriter November 2017

“There is no doubt that insurers who passed Cat losses onto their reinsurance partners will pay varying degrees of increased reinsurance premiums at their next renewal,” notes Willis Re Canada’s Geoffrey Lubert. “Some insurers will find themselves boxed into a corner that requires increased catastrophe retentions and increased reinsurance spends.”

Frank Rückert Senior Vice President Canadian Treaty Department Hannover Re

Canada was no stranger to natural catastrophes and extreme weather in 2017, such as the British Columbia wildfires and flooding across the country. While these losses are dwarfed by those recently in the United States — in particular, losses from hurricanes Harvey,

Irma and Maria (HIM) — the experience will, ultimately, make its presence felt in Canada. Whether Canada likes it or not, it cannot detach itself from the worldwide reinsurance market. HIM affected big market players, more or less heavily, in some cases wiping out their Cat budgets for the year. The 2017 Cat experience is not expected to prompt a movement similar to 2012 — following the worldwide events in 2011 — in which there was some capacity shrinkage in Canada because worldwide participants moved their capacity to Japan, Thailand, Australia and New Zealand. Beyond the overall reinsurance environment, there is also awareness that reinsurance rate adjustments following Fort McMurray losses were not truly reflective of the risk and were not consistently applied at that time. This resulted in a differentiated underwriting approach that depended on the kind of business being written and how big losses were. In heavily affected accounts, not all adjustments that might have been necessary were made. As such, the Canadian market will face a hardening of rates in 2018. It should not be a question of “if” as much as “how much” prices will rise. Reinsurers should commit themselves to higher rates; they should not adopt a wait-and-see approach and accept another round of decreases. Clients today have more options with regard to capital providers, which is a potential threat to reinsurers, but that simply means reinsurers should identify the right balance between not losing the client versus getting an adequate rate. The reinsurance community just needs to show it brings additional value to the table beyond capacity. Partners, for their part, should be cognizant of naïve capacity, those ventures that are simply trying to diversify their portfolios and may not have a deep understanding of the market and risks in Canada, or have a long-term commitment to the region.

COVER STORY

Part of the Whole

Veronica Scotti President & Chief Executive Officer Swiss Re Canada

The Canadian market is part of one global risk pool, and as such, it will feel, to some extent, the effects of the global reinsurance market. Territories and clients at the epicentre of the total losses will feel the impact more strongly than those at the periphery, but there will be ripple effects for everyone. This is because reinsurers’ earnings, and in some cases capital, have been depleted from the large volume of catastrophic losses globally, so it is expected there will be some impact on the returns reinsurers need to achieve in order to continue to deploy capital. However, the reinsurance market will remain resilient despite the extraordinary loss burden and will help facilitate an economic rebound in the affected areas. All professionals in the industry will use this opportunity to recalibrate their models to ensure the scenarios that have been endured are correctly reflected as (re)insurers take on risk in the future. Reinsurers will continue to serve their purpose of extending protection against peak risks. Companies that are heavily invested in accumulation management and cycle-pricing, and have committed to act as bold principal in the use of their own balance sheets, should find themselves well-positioned in the aftermath of these events. While Canada was largely spared from mega-events, notwithstanding sizeable losses in Quebec, Alberta and British Columbia, the hope heading into 2018 is that Canadian insurers look at the cluster of global oversized losses as an opportunity to reflect on their own risk scenarios and drivers, assess the adequacy of their reinsurance programs from an enterprise risk management perspective, and look deeper into alternative reinsurance business models that today compete side by side in the market. Through continued commitment to the Canadian market, the idea is to keep sights long and work together on narrowing the protection gap in 2018, which requires a whole of society approach.

“For the first time since 2005, the global impact of hurricanes in the United States will be felt beyond the U.S. borders as the catastrophe treaties go through the renewal process,” Steve Smith of Farm Mutual Re says. “Non-traditional reinsurance vehicles are facing trapped capital for the first time and their response to repatriating that capital will be put to a test.”

Steve Smith President & Chief Executive Officer Farm Mutual Re

The top of everyone’s mind this year is water, climate change and, of course, hurricanes. Not only have the tragic events of Harvey, Irma and Maria dominated reinsurance discussions, so has the frequency of violent storms that were experienced in Ontario and Quebec from May to August this year.

In Ontario, the frequency of these storms resulted in significant flooding in the Ottawa region, Windsor and the communities of Drayton and Harriston. Although the extent of the damage may not have reached the radar of many reinsurers, they, nonetheless, brought a lot of attention to the introduction of overland flood coverages and the potential increased exposures from the coverage offerings. For the first time since 2005, the global impact of hurricanes in the United States will be felt beyond the U.S. borders as the catastrophe treaties go through the renewal process. Nontraditional reinsurance vehicles are facing trapped capital for the first time and their response to repatriating that capital will be put to a test. The result is an expected overall firming of catastrophe pricing. The other side of the story is the frequency of large residential losses. Anecdotally, there seems to be an increase in fire events that appears to be industry-wide. The question is why? Is it symptomatic of a distracted society, economics, inferior building materials or practices? One thing that does appear to be somewhat obvious is that pricing corrections need to take place at the primary level, as well as the reinsurance level. 2018 will be interesting.

Eric Steen Executive Vice President JLT Re

The recent catastrophic events of hurricanes Harvey, Irma and Maria caused widespread destruction and insured claims totalling roughly US$100 billion in hurricane-related damage. For the California fires, add some additional US$5 billion and counting. With all of these events considered, will the Canadian January 1 reinsurance treaties (property Cat, in particular) be affected? In short: it is unlikely to have significant impact. After Hurricane Sandy (US$30 billion in 2012), the market impact was negligible. The marketplace in traditional November 2017 Canadian Underwriter 29

COVER STORY

Part of the Whole

“The global insurers who will pay the hurricane losses will have to expect reinsurance treaty renewal terms that will affect and move their localized product prices higher, as they transfer Cat renewal terms to their coastal risks, with a net effect of premium volume growth,” JLT Re’s Eric Steen reports. markets and new capacity entrants absorbed the areas where many felt price correction could have taken place. If reinsurers rewind to the Fort McMurray wildfire event of last year, traditional markets and available new players had dry powder in the form of reinsurance capacity to deploy, so “overall industry” rate changes were, once again, fairly modest in the face of the largest natural catastrophe in Canadian history. Why are reinsurers to believe that the recent events will have any more of an impact than those mentioned? There will be huge reinsurance losses to the markets from the 2017 hurricanes — be very clear with that. Lloyd’s alone will have losses of at least US$5 billion. The top five global reinsurers will have earnings losses, and maybe even a small dip into their capital. The global insurers who will pay the hurricane losses will have to expect reinsurance treaty renewal terms that will affect and move their localized product prices higher, as they transfer Cat renewal terms to their coastal risks, with a net effect of premium volume growth. The possible retrocession cost impacts to reinsurers could be in the magnitude of 15% to 20% depending on specifics to each territory and player. While it is clear Lloyd’s, reinsurers and global insurers will be hit the hardest, here in Canada, buyers of reinsur30 Canadian Underwriter November 2017

ance will not see much of a change. The reason is that the capacity that exists here and is available on the sidelines will attempt, at first, to move terms, but that will not stick, locally; not this time and not until the nearly insatiable capital retreats and moves elsewhere.

Philipp Wassenberg President & Chief Executive Officer Munich Reinsurance Company of Canada

Having read a report stating that in the first nine months of 2017, sponsors completed seven Cat bonds with coverage for Canada, apparently Canada has come to the attention of the market, connecting alternative capital to catastrophe risk. Now that climate change is widely acknowledged as being real by everyone with reasonable intelligence, and large floods and wildfires seem to have become the new normal in people’s minds, but also in modelling, it was only a matter of time that pension and hedge funds, hungry for high yields in uncorrelated scenarios, would become attracted to Canada. This comes at a time when Cat bonds, for the first time in many years, will be called upon in response to the three major hurricanes — Harvey, Irma and Maria — sadly affecting many people

in the southern United States and the Caribbean. The earthquakes in Mexico make it worse. This will 10 have adverse effects on the global supply of reinsurance capital and, thus, will significantly drive Cat rates. But all these events also make two facts apparent. One is the enormous volatility in (re)insuring losses emanating from weather events and other Cats. Insured losses in 2017 may well be comparable to 2005 and 2011, the costliest years to date. Second is that with increasing value concentrations, the protection gap in many countries has grown unacceptably. Closing that gap is essential for nations to become resilient, both from a humanitarian and an economic perspective — it would be careless not to close it substantially. Never has insurance for those risks been more readily available and affordable. This is all the more true for Canada. Not covering these risks today will cost multiples in the future. Insurance industry players should all join forces to close the gaps where it would most hurt: flood and, of course, earthquake. It is their collective mandate towards the consumer and taxpayer.

Burning Questions What is needed to create enhanced focus and kick-start more action with regard to the wildfire peril in Canada? Approaches deserving of a look (or a closer look) range from improving stakeholder understanding of the potential related losses to rethinking how the peril needs to be modelled and addressed within insurance policies. Angela Stelmakowich Editor

Wildfire is once again in the sights of everyone from governments to policyholders, and no wonder. The British Columbia wildfires this summer will not generate anywhere near the insured losses from the Fort McMurray blaze last year, but should not be regarded as just another individual event. At about $3.6 billion in insured losses, the Fort Mac fire produced a record that, hopefully, but unlikely, will stand for a very long time. The loss “came from the destruction of about 7% of the city. The loss had the potential to be so much worse (think of the number if a quarter, half or three-quarters of the city were lost),” says Glenn McGillivray, managing director of the Institute for Catastrophic Loss Reduction. “Fort McMurray losses could have been in the doubledigit billions, making it a capital event for the industry and a solvency concern for a few insurers.” Given Canada’s sweeping boreal forest — plus the inclination for homeowners to settle in abutting areas, and for governments to allow this — (re)insurance officials say another “Fort McMurray,” this time in a more populated area, is possible. That record-setting prospect demands rethinking modelling, land-use rules and how wildfire is addressed in insurance policies. The wildfires in California have already gener-

ated loss estimates exceeding US$3 billion, a staggering figure that topples Fort McMurray from its dubious perch as the most expensive wildfire. “From a government perspective, we need to move away from the suppression mentality and toward a future state where we come to a new accommodation with fire,” McGillivray argues. “In many ways, we are where we are vis-à-vis wildfire risk in North America due to decades of a ‘suppression at all cost’ mindset,” he suggests. Viewing fire “as something to knock down,” he says, “has created a massive backlog of builtup fuel in the boreal, leading to more intense wildfires.” The ability to fight the anticipated increase in wildfires will be diminished, meaning “we need to come to some sort of peace with this, in part, by just letting some fires go,” he adds. “Climate change leads to hotter and drier summers at high latitudes, and wetter more vegetation-promoting winters,” says Balz Grollimund, Swiss Re’s head of underwriting for Canada and the English Caribbean. “As a result, wildfires in Canada are, and will continue to be, on the rise.”

ATTENTION DEFICIT DISORDER “Flood is getting more attention than wildfire from government and industry due to the fact that fire is a largely covered peril. Water is more

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of a wildcard,” notes Joel Baker, president and chief executive officer of MSA Research Inc., suggesting “there’s a constant tug of war between the two perils.” Wildfire information “is not as badly siloed as the flood hazard, so that is a positive,” says McGillivray. “To my knowledge, no one has really sat down and tried to pull all the data together in one place,” he says. “It will just take an interested party, like a vendor modeller or reinsurance intermediary, to take an interest.” Kevin Van Leer, senior product manager and a wildfire expert for RMS, says that following Fort McMurray, “there was significant interest from the insurance industry in developing fully probabilistic tools to quantify wildfire risk.” With constant reminders of the risk, “there is a strong impetus to keep evolving these solutions,” Van Leer says. While not all agree, his view is that Fort McMurray did, indeed, provide a wake-up call for the Canadian government and insurance industry. “It focused attention on wildfire as a peril, not least the implications for significant accumulations of exposure in relatively high-risk regions. This ‘reset’ brought the need for better risk quantification, and a longoverdue discussion of how analytics could help stakeholders manage wildfire risk more effectively,” he maintains.

MODEL, RISK, PRICING Having “a unified and country-wide database of past wildfires and their spatial extent reaching back throughout the 20th century would be an extremely valuable resource to fall back on,” says Grollimund. “Accurate modelling of wildfire risk is very challenging as the ignition and propagation of wildfires is very difficult to assess and dependent on factors which change fundamentally from month to month,” he reports. “As such, it is, in my view, more challenging to model the occurrence and extent of wildfires than, say, modelling windstorms or earthquakes. That does not mean that we should not attempt to model wildfire risk,” he emphasizes. For the most part, Van Leer says that “modelling wildfire is very similar to 32

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modelling any other peril, such as severe convective storm, in that there are events, hazards, vulnerability differentiation of different buildings, and the financial modelling component.” Still, differences do exist. “A key one is the human element, in terms of ignition and attempts to suppress fire. These add an additional layer of uncertainty to this already complex peril,” he says. “The real challenge is understanding the impact of what differentiates exposure,” he notes. “Exposure information, along with the associated claims data from past events, is what can be exploited to make modelling more accurate.” Phil Camp, a scientist at AIR Worldwide, says that land use, such as wildfire management, “can alter fuel loads, and human-induced climate change can influence fire behaviour on the long-term,

“From a government perspective, we need to move away from the suppression mentality and toward a future state where we come to a new accommodation with fire.” while active wildfire suppression changes burning conditions more acutely.” All of these human factors, “need to be accounted for to properly model the behaviour of wildfire as it spreads through both wildlands and the built environment,” Camp emphasizes. “One of the deficiencies of modelling Canadian wildfire risk was the lack of a properly defined and delineated wildland-urban interface (WUI), the area of housing development that is adjacent to wildland vegetation and experiences the highest probability of wildfire loss,” he says. “The lack of WUI maps is concerning for Canada, as the nation has some of the largest contiguous fuels in the world and a rapidly expanding human footprint of residences and industry.” Strides have been made in mapping the urban and infrastructure interfaces

in Canada, Camp notes, but “the data are not readily available for modelling use.” Despite the considerable work done by governments to date to better understand wildfire hazard, McGillivray suggests that not as much “has been done to carry this over to a better understanding of risk. This is where governments and (re)insurers need to partner up, as government researchers are experts on the former, (re)insurers on the latter.” Swiss Re has started applying smart data analytics methods to Canadian wildfire risk, notes Grollimund. But “the jury is still out on exactly where and how wildfire-related losses will be increasing. But, it is clear they will increase,” he says. “A change in risk should be accompanied by a change in premium. However, at this point, we lack the required knowledge to judge where, and how much, premiums should change to account for current, let alone future, wildfire risk,” Grollimund says. “We expect pricing to firm up in densely wooded areas, but not a huge hike,” Baker points out. “There is no separate premium loading for wildfire risk in a typical policy. Fire is fire, and wildfire is folded into the fire loading in the premium,” McGillivray notes. “It may be time to break wildfire out and have a separate loading for it.” Van Leer says that as modellers develop tools to allow insurers “to better quantify wildfire risk, from the portfolio-level all the way down to the individual location, the industry will certainly be able to manage — and price — wildfire risk more effectively.” Although Canada has witnessed just three major wildfires in modern history causing significant insured damage, “the future will be bleaker from a wildfire loss perspective,” McGillivray contends. “(Re)insurers will need to reckon with this,” he adds. “The first step in building a community resilient to wildfire loss is to accept that wildfire is part of the landscape and only through collective preparation from the government, local community and the homeowner can one effectively live with wildfire,” Camp suggests.

Fused Together

Manish Shah

Executive Vice President and Leader, Global Software Product Division, Majesco

Digital fusion looks poised to revolutionize the insurance industry. To join the revolution, insurers need to ensure their core, data and digital capabilities are available as micro-services that can be “fused” together if they expect to be in position to offer customers a truly digital experience. But that also means clearing any hurdles remaining within their systems and operations. Insurance is entering the “digital age” and a race to the future for insurers has begun. As the economy shifts toward platforms across all industries, insurers are also creating innovative new business models to build competitive advantages. These advantages are likely to leverage plat-

form capabilities to try different business models, those assisted by the use of broad ecosystems, enhanced customer experience and technology innovations such as cloud computing, artificial intelligence and machine-learning. Although any doubt regarding the need to digitalize insurance has likely ceased, related efforts remain an unpaved path for many insurers. Insurers are still in the midst of legacy modernization of their core systems for strengthening their back-end processing capabilities, although most realize digital transformations are necessary to bring meaningful benefits to customers. While the traditional approach of building portals on top of back-end systems is a quick-fix, it does not come close to helping digitalize insurance products, operations and services. Digital capabilities demonstrated by Uber, Amazon, Google and Netflix can easily cultivate customers through better experiences and newer products while constantly optimizing their own operating models. Starting as technology companies, though, they were not burdened with the complexity of either legacy systems or insurance products. Confined within a regulatory framework, insurance companies must continue to support current

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products and distribution channels, as well as allocate the budget to keep current systems running. It is certainly important for insurers to understand the balance they must achieve in the midst of competitive threats, including from new entrants that are already starting to change customer expectations from insurers. An effective digital transformation demands that core, data and digital capabilities are decomposed, available as micro-services for integration and are “fused” together for designing a digital experience. This is the digital fusion. The network of ecosystems that will provide digital fusion will create a world that is much better-prepared to cope with risk, prevent claims and minimize catastrophic impact. In addition, through improved risk selection, insurers will be able to quickly add products and services to their mix. Currently, digital fusion is erasing the concept of insurance and redrawing an entirely new vision and definition. The word “insurance” will mean something completely different to a homeowner in 2020 than it did to the homeowner in 2015, and the overall concept of insurance will be vastly improved. This shift crosses all lines of insurance, which is good, because those lines will begin to blur as digital fusion takes hold within insurance operations.

WHAT IS DIGITAL INSURANCE AND DIGITAL FUSION? Digital insurance is silo-less (or siloreduced) insurance operations, enabled by digital technologies. It is a new business platform that utilizes digital efforts to reconstruct a future-proof model with fewer barriers between systems. The real collective power of digital platforms is released when silos are reduced. In general, digital insurance platforms share the following traits: • maximized effectiveness across the entire customer journey with deeper, personalized engagement; • process digitization that improves operational efficiencies and customer experience; 34

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• ingestion and use of digital data-driven insights for better decision-making and to proactively identify customer needs; • ability to rapidly roll out new products and capabilities while expanding into new markets, provinces or other geographies; and • quick adaptation to rapid changes.

The great hurdle to building a digital framework is the existence of entrenched systems. In the past, those systems needed to be completely replaced and reconnected at all of the various integration points. Digital fusion helps insurers internalize the need to find the power in connections, and to prepare for a deeply connected future. Just as a fusion reactor safely conducts a fusion of atoms to create energy, insurers can combine elements that they control in a manner that releases their combined energy. It helps to envision three chambers: the first contains an insurer’s core or digital apps; the second offers access to a vast ecosystem of insurtech capabilities that are easily integrated with the apps; and

the third includes the insurer holding the “customer journey designer” that helps build an outside-in customer experience with customer engagement analytics.

IS DIGITAL FUSION NECESSARY? Digital fusion is necessary because the technologies that insurers want to employ are growing in importance. Insurers need a framework that will handle plug-andplay technologies and plug-and-play data streams. When viewed through the lens of opportunity, however, it is more important to view digital fusion as an exciting and desired end-state that goes beyond user experience. Insurance organizations will be creating more profit with a less convoluted process, and will be making better decisions with improved data and analytics. Looking inside the organization’s technology platforms uncovers the hurdles to improvement and reveals silos. A digital platform is re-architected from the ground up and designed to provide fusion across capabilities. With a digital architecture for auto, for example, underwriting uses social media data to supplement the underwriting review, the automated data engine picks up social media usage during common drive times and the information is then fed to the broker. During the quoting process, the broker mentions to the applicant that he can get a better rate if he signs a statement that he will agree to use the insurer’s mobile app or onboard diagnostic device. An app, for its part, is a two-way communication between the insured and real-time systems. It allows the insurer to know when there is risk to the insured or risky behaviours by the insured. Data is fuel for fusion, having almost limitless applications. • For commercial insurers, a digital platform can be employed to collect drowsydriving data from cab cams and help cultivate driver safety. • It could help prepare homeowners forced to evacuate during fires or floods, route them to safe locations, and let them know that the insurer is ready to help.

• A digital platform can handle usagebased pricing, but it can also go the next step into usage-based prevention, with warnings, tips and compliments. • Business leaders will have greater visibility into real-time risk levels. While a policy is in force, telematics and other relevant data streams flow back into actuarial and underwriting. Marketing uses the analytics to improve products and services, as well as to personalize communications and build loyalty. The idea is that data, systems and even people, talk to one another.

WHAT IT TAKES TO BECOME A DIGITAL INSURER? The great hurdle to building a digital framework is the existence of entrenched systems. In the past, those systems needed to be completely replaced and reconnected at all of the various integration points. Currently, digital innovations are happening far faster than any insurer can hope to implement in a traditional environment. It is difficult enough for most organizations to keep up with the impact of mergers and acquisitions. Cloud computing — implementation of which is less expensive and faster than the traditional approach — has opened new doors for insurers. What was not possible with entrenched systems is able to be accomplished through cloud deployment, as long as the platform is designed to operate on the cloud.

Cloud deployment of digital-ready systems can unify the insurer’s environment and prepare it for growth. The benefit of greatest impact is that a cloud-based platform can support a broad ecosystem of capabilities through a “find-andbind” architecture, which allows insurers to focus on customer experience and innovation without the distractions of infrastructure and IT operations. Unlike long and expensive integrations that cannot keep up with growth in innovations, new insurtech solutions can be swapped in at any point without interrupting the flow of operations. This is the core of what the industry calls future-proofing.

HOW WILL FUSION IMPACT CUSTOMER EXPERIENCE? The best relationships are built on personal knowledge and understanding. Digital insurers will know insureds, will

communicate with them in personalized ways and will offer new services and products that fit real needs based on that knowledge. One of the greatest impacts of digital fusion is its ability to create a “bubble” of protection and loyalty around the insured. Insurers, consumers and government bodies are justifiably concerned about data privacy. However, even with some essential privacy barriers in place, insurers will still be able to provide superior value that will come straight from automated analytics applied to personalized service. The greatest barriers to true digital customer experiences are within insurance systems and operations. When those barriers are removed and replaced with a digital fusion approach, customer relationships will achieve new levels of satisfaction and longevity.

Editor’s Picks Looking for more information about digitizing insurance? Check out www.canadianunderwriter.ca and search for the following: • Deep learning to help drive fraud predictions by 2019: Gartner • 79% of U.S. insurance CEOs confident of growth prospects, 82% looking to disrupt: KPMG study • Accepting failure can fuel success, drive advances for companies looking to reach digital maturity: global study • Brokers taking the initiative to embrace digital transformation: Insurance Analytics Canada speaker • Insurance industry expects digital technology to drive transformation, but most companies unprepared: study

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November 2017 Canadian Underwriter 35

Risk Ready

RIMS Canada Conference Toronto

Jason Contant Online Editor

Greg Meckbach Associate Editor

Angela Stelmakowich Editor

Risk is all around. Risk professionals are increasingly becoming entrenched in discussions early on regarding how to not only protect company assets and resources should something occur, but to provide insights in advance to beef up preparedness and blunt potential adverse impacts. The RIMS Canada Conference, held September 24 to 27 in downtown Toronto, tackled both risk issues of the day and of the future. Attendees were provided with insights on topics ranging from autonomous vehicles to drone services, fraud investigations and evolving ransomware attacks.

Canadian Underwriter November 2017

AUTONOMOUS VEHICLES SHIFTING LIABILITY Shifting liability and “the period of intersection” between conventional vehicles and fully autonomous vehicles (AVs) are likely among the challenges risk managers will face in the future, speakers said during a panel discussion at the RIMS Canada Conference. When there is a “period of intersection” between conventional and fully AVs, “the legal system is going to have to respond,” Mario Fiorino, director of legal and senior counsel for Insurance Bureau of Canada, said during Managing Risk in a Connected Community:Technology, Innovation and Insurance. “There is going to have to be an approach that recognizes that product liability principles [that are] left on their own and are common law will not be able to sort these issues out,” Fiorino explained to attendees. Issues that are likely to arise include “public road liability” related to communication between infrastructure and vehicles, and the principle of joint several liability, he pointed out. Fiorino predicted roadside public authorities

will be named repeatedly in these types of lawsuits, or the failure of infrastructure to have adapted in a manner that is foreseeable to the failures or interaction between autonomous vehicles and the infrastructure. “If there is a catastrophic injury that results, you are going to see municipalities and provinces named in that context in liability,” he said. Jim Kidd, project manager at the City of Toronto’s insurance and risk management section, noted during another panel discussion that uncertainty around liability could threaten to slow the introduction of AV technology. While there is discussion on strict liability, where vehicles are fully autonomous, the issue is more complicated during the semi-autonomous vehicle state, Kidd told those attending Autonomous Vehicles and the Connected City. “Human error enters the picture and liability becomes more complicated,” he said. With regard to the anticipated time when things are fully autonomous and cars are communicating with infrastructure, “there’s so many parties to attribute liability to: technology failure, product liability. Was it the software? Was it the hardware? Did the technology fail to prevent a collision? Did the operator fail to install software updates in a timely manner? Perhaps the uncertainty about how liability may be assessed may slow the introduction of AV technology,” Kidd suggested. For risk managers, they “must start considering how AVs will impact and fit into the risk matrix,” he recommended to attendees.

THIRD-PARTY DRONE SERVICES ON THE RISE A trend seems poised to take flight whereby companies in need of drone services to gain specific insights will increasingly tap the expertise and services of third-party providers. “I think third-party companies who provide services utilizing drones will be more common than having individuals at a company utilizing a drone,” Eric Schillup, a senior risk consultant with Zurich Canada, told Canadian Underwriter in advance of the RIMS Canada Conference.

At the conference, Schillup was among the speakers on the panel, Commercial Drones: Strategies to Reduce Their Risks. Given the current regulatory environment, demands and restrictions related to drones, there are companies now specializing in drone operations, Schillup said before the conference. These companies have experts, know who to contact in certain regions and understand how to negotiate the regulatory environment to obtain necessary permissions and certificates in a timely manner, he pointed out. For third-party providers — unlike companies requiring occasional drone services — the drone asset will likely not be idle as it can be used on behalf of various customers, Schillup said. Approvals also may be more readily available, for example, post-incident.

“If you were to weaponize that into some form of malware, that could be a very, very serious threat that organizations should have to look at.” “You don’t want to have a customer delay salvage and recovery operations so that you can get the special permit before you supply your drone over the building that just had a partial burn-down, exposure or something like that,” he said, adding that the process to obtain a Special Flight Operations Certificate from Transport Canada can be a lengthy one. “For immediate use, it’s still a little challenging in our regulatory environment,” Schillup suggested. While companies may increasingly choose drone services over maintaining their own units, that does not alter the considerable potential of drones as both post-incident and preventive tools. Drone improvements and developments could broaden commercial applications and produce more detailed, accurate and useable insights, Schillup envisions. He expects that, for the insurance

sector, drones are “going to be used a lot more, [but for] the assessment, the inspection scenarios versus the disasterrecovery scenarios.”

BROKERS TO FOCUS ON CONSULTATIVE SERVICES The brokers’ compensation model on commercial lines is “flipping” and it is anticipated that brokers in future will tend to earn more on the consultative services, Brian Parsons, president and chief executive officer of Willis Towers Watson Canada, suggested during the RIMS Canada Conference. The expectation is that brokers “are going to get compensated not because of the transaction — that would be table stakes — it’s because of the consultative process of getting to the transaction,” Parsons told those attending the CEO Plenary Panel. In response to a question about how Millennials are affecting the insurance industry, “What I see changing as the Millennials — and let’s not forget the Z generation that is just graduating from university now — they will say, ‘You know what? We will pay you for the consultative services, but the transaction is not worth a lot,’” he said. The roles of brokers and underwriters “will largely change because of the devaluation of the transaction,” Parsons said. “That compensation model for brokers, I see flipping as time evolves, to making money on the consultative services, and the analytics and the transaction is just going to be thrown in.”

MARIJUANA IMPAIRMENT COULD TRIGGER POLICIES Insurers would be well-advised to track the evolving marijuana risk to determine if impairment-related loss history could trigger defence and indemnification obligations in employers’ general liability policies, it was noted during the RIMS Canada Conference. “An employee who is under the influence of marijuana while at work could injure others, including customers, third parties or employees,” Leszek Bialy, vice president and head of alternative risk November 2017 Canadian Underwriter 37

know you are looking, you can be surprised how much can disappear and it’s harder and harder to trace.” For this reason, Robinson noted, it is important at the beginning of an investigation to determine who is going to be “brought into the circle of trust.”

FUTURE CYBER CRIME COULD FOCUS ON THREATENING LIFE

transfer for Zurich Canada, said during the session, Joint Accountability: A Risk and Insurance-Focused Marijuana Primer. “An employer’s general liability policy would typically provide defence and indemnification to the employer for alleged injuries to an injured party on or off of the premises,” Bialy explained. Use of medicinal marijuana is already legal in Canada and the impending legalization of recreational marijuana could come into force next July 1. Still, Bialy is not so sure that insurers are currently redrafting underwriting applications in light of the evolving marijuana risk. “However, the risk is deemed to be an evolving risk and insurers are watching. If there’s a loss history suggesting impairment, don’t be surprised if an insurer asks more questions and looks to confirm guidelines and policies to manage risk,” he noted. To address the risk, “from an underwriting perspective, the biggest issue underwriters are going to have is the lack of data,” commented Alexis Moulton, a partner with McLennan Ross LLP. “There’s simply not enough information out there right now. It makes pricing hard; it’s going to take a big effort on the part of the insurers, the brokers, the underwriters, the clients, the insured, etc. to understand this risk,” Moulton suggested to attendees. “Underwriters need to consider the what-ifs, but you can’t price it out of the 38

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range of what the growers can afford,” she pointed out.

SET FRAUD INVESTIGATION CIRCLE EARLY Risk managers dealing with internal fraud investigations must get brokers and carriers involved early on in any fraud investigation and ensure that evidence is preserved, Dave Robinson, senior manager for Deloitte, advised during the RIMS Canada Conference. “It makes a lot of sense to get your broker involved early on, even if you don’t make a claim down the road” on a fidelity policy, Robinson explained during the panel discussion, Financial Crime. “It’s important, from your (risk manager’s) perspective, that there is a policy in place that if there is an indicator of fraud… to contain the information initially, to get the experts involved quickly so they can give you advice about retaining information and steps to take,” Ian Gold, founding partner of Thomas Gold Pettingill LLP, said at the session. It is also recommended that there be “professional fees coverage on your crime policies, a minimum of $100,000, because $100,000 often will not get you to the end of the road,” added Nicole Ng, national claims leader at Jardine Lloyd Thompson Canada. Preserving evidence is critical “to make sure that you can actually bring a claim to the policy,” Ng said. “Once people

The expectation is that cyber criminals in the near future will navigate away from their focus on data and begin targeting or threatening human life, cyber security expert Kevvie Fowler noted during an interview in advance of the RIMS Canada Conference. “Moving forward the next five or 10 years, I’m expecting a monumental shift where cyber criminals are going to skip the data — they’re not interested in data — they’re going to start to attack or start to focus on human life,” Fowler, part of the Cyber Extortion – TNG (The Next Generation) discussion panel at the conference, told Canadian Underwriter earlier. Ransomware attacks designed to, among other things, crash an airplane, send lethal shocks via people’s pacemakers, shut down power so people cannot receive air conditioning or hospital equipment cannot work properly would result in a “cascading impact” that could include loss of life, he reported. “If you were to weaponize that into some form of malware, that could be a very, very serious threat that organizations should have to look at,” Fowler cautioned. As it stands, he suggested, cyber policies would have to better align with the new threat landscape. For something like a ransomware attack that targets pacemakers, with a demand of payment or else 500 people will be killed, “that ransom won’t be paid by one organization; it will be several people pooling together: people in the public sector, private sector, individuals in the community,” he predicted. “So, it will completely change the way we view cyber security, how these types of cases could be investigated and how organizations could proactively protect, how insurers can actually insure as well.”

National Insurance Conference of Canada Quebec City

Jason Contant Online Editor

Angela Stelmakowich Editor

Keeping Pace

Changes to Canada’s property and casualty insurance industry continue to keep players on their toes. Be it traditional matters like catastrophe losses or emerging trends and risks for which little history is available, professionals must remain alert to how risks can develop and how quickly they can transform. The recent National Insurance Conference of Canada in Quebec City once again offered timely and relevant topics for insurers and reinsurers alike. The only constant is that things are changing quickly and everyone needs to keep pace.

NAILING DOWN REINSURANCE ISSUES It is anticipated the Office of the Superintendent of Financial Institutions (OSFI) will next year release a discussion paper exploring catastrophe coverage and reinsurance practices, an exploration that, hopefully, will bolster understanding, noted Neville Henderson, OSFI’s assistant superintendent of the insurance supervision sector. “We do have concerns about growing trends in weather-related events, so we monitor those closely,” Henderson said during the National Insurance Conference of Canada (NICC) in Quebec City. “Reinsurance is extremely important in managing catastrophe risk and we’ve found we don’t have a deep understanding of how some of that is done,” he reported to attendees. “One of the things we’ve found is that companies don’t really understand some of the guidance, so they’re not following it,” he said. As well, experience over the years has illustrated “many of the companies really don’t know what the counterparty risk is. There have been forms of reinsurance that tend to concentrate that risk, so we’re trying to get our handle on how much

November 2017 Canadian Underwriter 39

that concentration is and what effect it might have in a severely adverse catastrophic event,” he explained. Reporting that there will be discussions at OSFI’s executive level later this year, the expectation is the paper will “talk to many of the issues we’ve uncovered” and that there will also be some recommended changes, Henderson said. “Some of the other elements get into changes that might affect capital and we need to have discussions with industry on those, find out if there are any undue or unexpected implications from that.” There is also a need to gather additional detail, “so we are going to be asking industry to help us and pull together and figure out how we respond to it from a regulatory, supervisory perspective,” Henderson told attendees. OSFI strongly encourages companies to take a look at their reinsurance protection. “We want them to do significant stress testing on their business to understand vulnerability and use reinsurance effectively to protect them,” he added.

zones and wordings, Enders said. An estimated 5% to 10% of policyholders still cannot be provided coverage “because of where the home is located and because of the types of losses that have been there before,” he pointed out. As such, more conversation between insurance companies and different levels of government is needed with regard to high-risk areas, Enders said. Everyone needs to be involved “to figure out who’s going to be responsible for what.”

FINE-TUNING RESIDENTIAL FLOOD COVER Flood-related cover for residential policyholders is far advanced from what it was before the devastating southern Alberta floods in 2013, but the next steps must be to refine offerings and address outstanding issues, Gord Enders, president of Direct-Line Insurance, said in advance of the NICC. Enders took part in the NICC panel, Where Water Meets Underinsurance: Canadian Flood Risk — A Public Policy Imperative. Despite insurers having “responded quite well,” product offerings are mostly for low- and medium-risk zones, he told Canadian Underwriter earlier.“As flood mapping is more relevant and more consistent, then I think we’ll start to see some of those zones being changed and higher limits being available for offer in certain zones,” he predicted. “We need to start fine-tuning those coverages,” he said. “In fact, some companies have to step up to the plate and start providing those coverages.” Much of the fine-tuning relates to rates, 40

Canadian Underwriter November 2017

More conversation between insurance companies and different levels of government is needed with regard to high-risk areas. That will likely demand consideration of a number of factors, including building codes and enforcement, where homes can be built, and what type of mitigation processes are in place, he noted in the interview. “If you’re in a really high-risk (zone) and you’ve got to spend $1,000 to get $10,000 worth of coverage, how available is it?” Enders asked. “Is it enough there that disaster funding could pull back?” he went on to say.

CYBER STILL UNKNOWN, BUT PROMISING LINE Cyber insurance offerings are still not fully understood to get a firm grasp of the risk, members of a discussion panel suggested during the NICC. In Canada, for example, the “risk score is effectively mostly around their technology and their perimeter and usage,” Maurice Tulloch, chief executive officer of international insurance for Aviva, said during the Global Leaders’ Panel. “It really doesn’t get into the biggest risk, which is do you educate your people on the cultural nuances of cyber, because most of the breaches we come across are weaknesses of employees,” Tulloch told attendees. Still, cyber is “one of the big future insurance pools,” he suggested. In the United Kingdom, Tulloch reported that Aviva’s cover for small and medium-sized enterprises there is a sublimit offering. “So, we obviously don’t cover things like reputational, which is a big emerging exposure,” he said. “We’ve got to be there. That’s what consumers need,” he emphasized. Christopher Peirce, executive vice president of global specialty with Liberty Mutual, noted that “you are very likely going to deal with cyber the way you deal with other risks: you sub-limit it.” Peirce suggested considering as a comparison flood cover in a commercial property policy. “You’ll get higher deductibles and policy limits and if you want to buy more, there will be a cover for it,” he explained. “It’s definitely an opportunity, but in the first place, it’s a risk that we are not able to assess and we are not able to quantify,” Victor Peignet, chief executive officer of SCOR Global P&C, said of cyber. “Right now, if I had to make a call, I would say that there would be some real money lost in the near term while people figure it out,” predicted Albert Benchimol, president and chief executive officer of AXIS Capital. Benchimol’s company is in cyber “with both feet, but we’re also sharing that risk with a lot of people,” he said. Still, “once we get over that hump, I think it

is going to become a standard part of coverage for almost every company.”

RENEWAL PACE NEEDS JUMP-START The insurance policy renewal process, which some call inefficient and cumbersome, needs to be fixed, speakers noted during an NICC panel discussion. Franck Baron, chairman of the Singapore-based Pan Asia Risk & Insurance Management Association, told attendees of the session, Straight Talk Commercial: Global Risk Manager Views, that the association’s corporate insurance program was renewed as of the first of July, but the policy has yet to be issued. Rick Roberts, director of risk management and employee benefits with EnsignBickford Industries, agreed that the time involved in completing a renewal can be “absurd.” If one looks “at the insurance transaction, from us as buyers, it’s the most inefficient transaction that we have to deal with on a daily basis,” Roberts said. “Right now, it’s a very cumbersome process,” he added. There is no need for such long lead times in the case of a long-time insured, it was suggested. “Why isn’t there any ability, perhaps through insurtech, to say, ‘Hey, is this you? What’s changed on this? Let’s work to that,’ and then not make it a 90-day process running around answering more or less the same questions each and every year on renewal,” said Darius Delon, president and principal consultant for Risk Management 101 and past chair of the RIMS Canada Council. By shortening the renewal process and having efficiencies on the underwriting side, Delon suggested to attendees, “that allows you to actually look at more new business renewals in a more comprehensive manner because it does seem like commercial underwriters are under the gun.”

A LITTLE COMPASSION Canada’s property and casualty insurance industry needs to do better collectively to make consumers aware of what they are buying before purchase, Bill

Adams, vice president of Western and Pacific for Insurance Bureau of Canada, said during a session at the NICC. Those discussions are necessary “to make certain their expectations are much more closely aligned to, in fact, the coverages that are in their policy,” noted Adams, moderator for the panel discussion, Did We Get it Right? A Realistic View of the Industry’s Performance in Fort McMurray. “Until we do that, there is going to continue to be that sense of revictimization,” he said. “The quality of compassion shown by insurers and their representatives came through as the single most important driver in their overall level of satisfaction with their claims process,” Adams reported. That said, he added, “unfortunately, some people spoke of feeling revictimized by the claims process.”

TECH DRIVING AUTO CONCERN Technology is likely driving the current trend in which the frequency of vehicle collisions is not slowing down while severity is increasing, Patrick Barbeau, senior vice president of claims for Intact Financial Corporation, suggested during a session at the NICC. “We see a lot of upward gusts of pressure coming from third-party liability claims and injuries in general in most provinces,” Barbeau reported during the panel discussion, Canadian Auto — State of the Union. “Frequency overall is not going down and severity is going up at a much faster pace than the average inflation,” he told session attendees. Replacing a bumper, mirror, wheels or even the windshield today, “often involves rewiring and reprogramming multitudes of sensors and cameras, increasing costs at a speed that has never been seen before,” Barbeau explained. “From a claims perspective, the actual cost of repairing cars is also increasing very fast across the country,” he said. “One would think all the safety features that have been developed in cars over the past few years would have impacted downward the frequency of car accidents, but that has not happened yet,” Barbeau pointed out.

Professional leadership at the forefront Lynn Oldfield, MBA, FCIP, CRM, President and CEO of AIG Insurance Company of Canada, was elected Chair of the Board of Governors of The Insurance Institute of Canada at the 64th Annual General Meeting, held October 24, 2017 in Ottawa, Ontario. S.J. (Jeff ) Goy, ACAS, CIP, President and CEO of The Wawanesa Mutual Insurance Company, was elected Deputy Chair of the Board. Patrick Van Bakel, BA, CIP, President and CEO, Crawford & Company (Canada) Inc. was elected Vice Chair, Governor-at-Large. Jean-François Blais, FCAS, FCIA, President of Intact Insurance, is immediate Past Chair. Regional Vice Chairs are: Colin Warnecke, CIP – Western provinces Robert Fellows, MBA, FCIP, CRM - Ontario Simon Charbonneau, FPAA, CRM - Quebec Paul Croft, BSc, CCIB, CIP, CRM – Atlantic provinces Divisional Vice Chairs are: Anna McCrindell, BA (Hons), FCIP, CRM - Academic Mike Kosturik, BA, FCIP – Professionals’ The Insurance Institute is the premier professional education body for the property and casualty insurance industry. Its membership of over 39,000 includes 20,000 active students in its formal programs, including the Chartered Insurance Professional (CIP) and the Fellow Chartered Insurance Professional (FCIP) designations. For more information, please visit InsuranceInstitute.ca and BeAssured.ca

November 2017 Canadian Underwriter 41

MOVES & VIEWS

UPCOMING EVENTS: FOR A COMPLETE LIST VISIT

www.canadianunderwriter.ca

Dave Smiley [1] has been appointed president and chief operating officer of Unica Insurance Inc., the Ontario-based subsidiary of La Capitale General Insurance announced recently. Smiley previously served as Unica Insurance’s vice president of operations since 2009. Having held senior management positions in Ontario and Alberta, he has almost three decades of insurance experience related to underwriting (personal and commercial lines), business development and marketing.

Steve Cohen [2] will join RSA Canada during 2018 Q1 in the insurer’s newly created role of senior vice president and chief underwriting officer. Cohen will be responsible for head office underwriting, pricing and reinsurance across both personal and commercial insurance portfolios and for enhancing the insurer’s capabilities in data, analytics and growth.

Tony Lackey [3], director of risk and insurance services for Carleton University, is this year’s winner of the Donald M. Stuart Award, presented annually by the Ontario chapter of RIMS, the risk management society. Lackey joined Carleton University in 2001, assuming responsibilities for the school’s risk 42 Canadian Underwriter November 2017

10a

10b

12a

management program, which included development of its annual enterprise risk assessment and the management of operational risks. He has held various positions with the RIMS Canadian Capital chapter, including president.

Hub International Limited has acquired Delisle Agencies Ltd., a familyowned brokerage based in Delisle, Saskatchewan. Delisle Agencies offers, among other services, insurance covering auto, personal, commercial, agriculture, First Nations, life, travel, medical and group. Delisle Agencies president Rob Ouellette [4] will join Hub Manitoba.

Ian Morewood [5] has taken on the role of vice president,

underwriting, public entity at Frank Cowan Company. Morewood has a bachelor’s degree in economics from the University of Waterloo and 25-plus years of underwriting experience, notes Frank Cowan Company, which offers programs for municipalities and healthcare, education and community organizations.

The Canadian Independent Adjusters’ Association (CIAA) announced its newly elected executive team for the 2017-2018 term. Monica Kuzyk [6a], vice president at Curo Claims, is taking over as CIAA president from Crawford & Company (Canada) Inc.’s Heather Matthews [6b]. In addition, Troy Quigley will serve as first vice president, Sarah Hirst as second vice president,

Jeff Edge as treasurer and Christopher Bartlett as secretary. The team’s directors include Albert Poon, Marie Gallagher, Craig Walker, Jim Eso, Gary Ellis, Grant King, Paul Féron and Sean Forgie.

In partnership with State Farm Canada, the Traffic Injury Research Foundation has launched the web-based tool, Drug-Impaired Driving Learning Centre (DIDLC). “With impending legalization of recreational marijuana and the opioid crisis in parts of Canada, a factual, publicly available resource like the DIDLC is a valuable tool that can help prevent injury and save lives,” notes State Farm Canada. DIDLC includes, among other things, modules on the effects of drugs on driving, laws and prevention.

MOVES & VIEWS

12 12b

Former Governor General of Canada David Johnston has been hired by Fairfax Financial Holdings Ltd. as a global advisor. In his new role, Johnston “will be expected to assist” company presidents in the Fairfax group “with business opportunities, community responsibilities and government relations,” notes a statement from Fairfax Financial, whose holdings include Northbridge Insurance and OdysseyRe.

Desjardins Group and La Caisse de dépôt et placement du Québec have announced the creation of a venture capital fund dedicated solely to the Canadian fintech sector. Not yet named, the fund “will target companies that

13a develop technology affecting investments, payments, client acquisition and retention, data analysis, deposits and loans, security or insurance,” notes a joint statement from la Caisse and Desjardins. The fund will make share capital investments and operate independently, it adds.

Vancouverbased On Side Restoration has appointed Kate Sully [10a] as branch manager of its Greater Toronto Area branch. Sully has “training and experience executing and leading structural drying and hazardous material remediation projects involving asbestos, mould, lead and clandestine labs,” On Side reports. Also at the company, Jeremy Burwash [10b] has taken on the role of project

Vericlaim Canada, a subsidiary of Sedgwick Claims Management Services Inc., has opened a new office in Rouyn-Noranda, Québec and appointed Stephane Latour [12a] as a senior claims adjuster. In addition, Kathy James [12b] has been named a senior claims adjuster in the company’s Toronto office. James will “focus on liability, automobile bodily injury and property adjusting.”

13b manager. Burwash “comes to the company with over seven years of project management experience.”

Octo Telematics Ltd. has agreed to acquire usagebased insurance assets from Willis Towers Watson plc., including DriveAbility, which aggregates and analyzes telematics and insurance data to help carriers design, score, issue and bind telematics-based auto policies. Following the transaction, Octo Telementatics “will develop a strategic alliance with Willis Towers Watson on additional auto telematics opportunities,” which will “focus on further development of algorithms and other analytical tools to provide actionable intelligence based on accurate analysis of data.”

John Valeriote [13a] and Ashley Misurka [13b] have joined Crawford & Company (Canada) Inc.’s Global Technical Services division. Valeriote will lead the company’s property appraisal practice and handle complex claims as needed,” while Misurka will manage its “newly established property appraisal and claims services branch,” Crawford & Company Canada reports in a press release.

November 2017 Canadian Underwriter

GALLERY

The Insurance Brokers Association of Ontario (IBAO) held its annual Convention — themed “Come Together” for 2017 – at Ottawa’s gleaming Shaw Centre, October 25-26. The event opened with broker education sessions, and closed with 10 hospitality suites hosted by CAA, Economical, Gore Mutual, Intact, Pembridge, RSA, The Commonwell, The Guarantee, Travelers and Wawanesa. The highlight of the events in between was the IBAO’s Awards of

Canadian Underwriter November 2017

Excellence gala, where comedian James Cunningham played host, outgoing IBAO president Traci Boland gave a moving farewell speech, and the following high achievers were recognized: Josslin Insurance, Innovator of the Year; BrokerTeam Insurance Group, Brokerage of the Year; Ashley Holmes of Roughly Insurance Brokers, Young Broker of the Year; and the London Insurance Brokers Association, Affiliate of the Year.

APPOINTMENT

GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery

Sandra Parente Sandra Parente has been appointed to the role of Director, Business Development of Newcom Business Media’s Insurance Media Group. The Insurance Media Group publishes Canadian Underwriter, Claims Canada and the Ontario Insurance Directory, as well as a number of online vehicles for property and casualty insurance professionals in Canada. Previously, Sandra was Group Publisher, News & Sports at Rogers Media, where she oversaw Maclean’s and Sportsnet; prior to that, she was the Publisher of MoneySense. She has also served as GM, Corporate Sales for Rogers Media’s B2B publishing group. In that role, she worked for a wide range of business markets, such as insurance, financial services and marketing. Sandra has extensive experience in the development of marketing solutions across core B2B media platforms, including print, digital, custom publishing and events. “Sandra is a highly regarded collaborator who works consultatively with marketers, helping them clarify their objectives, build out their strategy and, ultimately, make better business decisions,” says Ian Portsmouth, Managing Director of the Insurance Media Group. “Those assets, combined with her financial services knowledge and multimedia experience, will no doubt make Sandra a prized resource in the eyes of our customers.” Sandra is a recipient of numerous customer-first and business solutions awards. Her achievements in product innovation include leading the development of the Maclean’s Archive; the digital transformation of the Maclean’s education portfolio; the creation of Canada’s Product of the Year program; and the launch of MoneySense events for investors.

November 2017 Canadian Underwriter 45

GALLERY

More than 110 exhibitors — including Canadian Underwriter — took the floor at Ottawa’s Shaw Centre for the IBAO Convention 2017 tradeshow on October 25 and 26.

Canadian Underwriter November 2017

GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery

November 2017 Canadian Underwriter

GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery

Celebrity chef Lynn Crawford was the main attraction of the Boiler Inspection and Insurance (BI&I) Company of Canada’s Client Appreciation Evening, held at its downtown Toronto offices on October 19.

Recent Insurance Press Releases featured on insPRESS.ca Enhanced comprehensive commercial property insurance October 11 — by Trisura Guarantee Insurance Company

Member satisfaction with eDocs – 2017 survey results October 11 — by CSIO (Centre for Study of Insurance Operations)

IBAO convention to live stream CEO panel October 10 — by Insurance Brokers Association of Ontario

Automate your payments with FIRST Canada at the IBAS convention October 10 — by FIRST Insurance Funding of Canada

GoToInsure.ca chooses Sharp Mobile to enhance customer experience October 3 — by Sharp Mobile Technology Ltd.

WINMAR® Mississauga/Oakville and WINMAR® Markham/Toronto are pleased to announce that Sue Whittick has joined the WINMAR® family October 2 — by WINMAR®

Maximum refund to OSBIE members for second consecutive year

Kernaghan Adjusters hosted RIMS cocktail party September 23, 2017

October 2 — by OSBIE

October 6 — by Kernaghan Adjusters

September 29 — by ServiceMaster Restore of Canada

On Side Restoration announces new Markham branch manager and project manager appointments

ServiceMaster Restore of Edmonton earns top award Teachers Life welcomes new president and CEO

October 4 — by On Side Restoration Services Ltd.

September 28 — by Teachers Life

Crawford & Company (Canada) Inc. expands sales team with the appointment of Eric Harvey as account executive

The Canadian Independent Adjusters’ Association announces its 2017–18 executive team

October 3 — by Crawford & Company (Canada) Inc.

September 27 — by Canadian Independent Adjusters’ Association

To Read the Full Story for Each Press Release visit insPRESS.ca

Canadian Underwriter November 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 Events & Seminars

Convocations

Ottawa—Avoiding Bad Faith Claims ..................................................November 23 Kitchener—Accident Benefits in Focus ..............................................November 28 Kitchener—Directors’ & Officers’ Liability..........................................November 29 Webinar—ADVANTAGE Live: Climate Change....................................November 30 Toronto—Industry Trends & Predictions 2017 ........................................January 16 Ottawa—Don’t Let a Natural Disaster Turn into an Insurance Disaster..........January 18 Ottawa—The Most Helpful Insurance Questions to Ask to Mitigate Risk ......January 18 Pickering, ON – Axe Throwing ......................................................................March 7

IISA—Calgary ......................................................................................November 22 IINA—Alberta......................................................................................November 23 IADQ—Québec .........................................................................................January 13 IIO—GTA ................................................................................................. January 25 IIO—Kawartha/Durham .....................................................................................February 3 IIO—Conestoga.............................................................................................March 1 IADQ – Montréal .........................................................................................March 28

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.

GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery

The Insurance Brokers Association of Canada (IBAC) held its 2017 Annual General Meeting in Nanaimo, B.C., taking time to discuss issues of importance to the countryâ€™s broker community and to recognize extraordinary contributors to the channel. Among them: Lorne Perry, VP of IBAC and partner in Port Moody Insurance Services, who earned the Jean Charles dâ€™Auteuil Memorial Award of Merit; and Greg Mansfield, the Manager of Education at the Insurance Brokers Association of British Columbia, who received the 4th annual Dale Rempel Award of Excellence for his efforts to advance broker education. Read more about Greg in the December issue of Canadian Underwriter.

Canadian Underwriter November 2017

When great Brokers serve up excellent products, something delicious happens. When your menu includes competitively priced Insurance plans backed by the trusted CAA name, sales happen a little more smoothly. The cherry on top? You can sell the same product at the same price as your customers would get no matter how they choose to buy. Howâ€™s that for cool?

Want to learn more about partnering with CAA Insurance? Talk to us. broker.caainsurance.com | Join the conversation @CAAforbrokers Kathy Corbacio at 1-905-771-3297 (Ontario and Atlantic) Timothy L. Scott at 1-204-262-6103 (Manitoba)

Auto and Property Insurance are underwritten by CAA Insurance Company. ÂŽ CAA trademarks owned by, and use is authorized by, the Canadian Automobile Association. (1720-10/17)

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2017-10-23 11:07 AM

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