CNA Re closes Canadian offices

The Chicago-based CNA Group is the latest of reinsurance players to be placed on the injury list as a result of losses on Canadian business. CNA Re, which writes its business in Canada through a wholly-owned U.S. registered subsidiary, Niagara Fire Insurance Company, has axed its Canadian management team and shifted control of the book of business to the Chicago head-office.

The recent closure of CNA Re’s Toronto office will not have any material impact on the company’s Canadian business, says Marsha Munn, vice president of Treaty Re (which through the CNA Group structure controls CNA Re). “We remain committed to the Canadian market,” she adds.

CNA Re’s troubled Canadian operation produced $41 million in net earned premiums for the 1999 financial year. However, the soft market coupled with rising claim costs resulted in Niagara Fire posting an underwriting loss for the year of $16 million which translated into a bottom-line loss of $9.5 million (Niagara Fire has operated at a net loss for three years running). With a $91 million surplus the company appears to be sound, observes Joel Baker, general manager of rating agency A.M. Best Canada. Niagara Fire holds an “excellent” rating.

According to Munn, the new Chicago-based management team of Canadian operations has already met with key brokers and clients. The company will continue to take on new business in Canada, Munn says with emphasis on “underwriting profitable new business”. Although the company will not be looking to “broad brush” its Canadian portfolio in terms of harsh rate increases, she notes, “we will look to manage the business to an acceptable combined ratio”.

Munn confirms that the market’s rate bloodletting had taken a heavy toll on the Canadian operation. “The market has been soft for three years running and we simply could not justify the cost of maintaining a Canadian office. We felt we could best service the book from Chicago.” Colleen Sexsmith will remain as the group’s chief agent in Canada, Munn says.