Royal consolidates Quebec and trucking business

In two separate agreements, Royal & SunAlliance Insurance Co. of Canada has handed over its Quebec personal lines and long-haul trucking books as the company turns its focus to commercial lines.

CGU Insurance Co. of Canada will be offering renewals on Royal’s Quebec personal lines book as of April 2003. Although the book is profitable, the move was made due to Royal’s small marketshare, says the company’s vice president of commercial insurance, Mike Jakeman. There are very few personal lines carriers in Quebec, and Royal was not among the top players. Jakeman also confirmed that the company is cutting back its personal lines business in Manitoba for the same reason. “If you don’t have critical mass, the results tend to be indifferent over time.”

Royal is also exiting the long-haul trucking business, with Markel stepping in to offer coverage. Poor results from U.S. exposures in this line led to the decision, Jakeman says.

These and other moves will see staff reductions, although Jakeman would not give specific figures. He did note that many of the reductions were made through attrition, while some staff were moved into the company’s “Facility Association portfolio”. CGU will also be offering jobs to some of Royal’s Quebec staff.

The moves come as parent Royal & SunAlliance Insurance Group plc posted a loss of 156 million (Cdn$390 million) for the first nine months of the year. The London-based head-office announced extensive global restructuring plans at the time which could see Royal & SunAlliance withdrawing from countries where it does not hold “critical mass” in terms of marketshare. However, Jakeman says that, despite challenges of the marketplace, the global parent is committed to Canada. “We [the Canadian operation] have historically done well, although in the past few years we haven’t adapted to changes in the market as quickly as we should have.”

Jakeman feels the company continues to view Canada as a place where it can make money, however, it will not be in personal lines. Royal will be focusing on commercial lines, and doing so in a “specialist” rather than a “generalist” capacity. In particular, attention will go to reducing the company’s exposure to Ontario auto where it is “overweight”, according to Jakeman.

Royal’s Canadian arm did receive good news from rating agency A.M. Best, which has affirmed its financial strength rating of A- (excellent), and changed their outlook from “negative” to “stable”. This is based on the Canadian group, which also includes Western Assurance and Quebec Assurance, being strategically important to its parent, its strong position in markets and prospects for improved performance. Royal’s global parent has also announced the appointment of Andy Haste as CEO. Acting group CEO and former Canadian operations head Bob Gunn is expected to retire next year.