Marketplace

CANADIAN MARKET

SCM buys Granite Global Solutions

SCM Insurance Services has acquired the property and casualty businesses of Granite Global Solutions. The terms of the deal were not disclosed.

The businesses acquired include Granite Claims Solutions, a national adjusting firm; Granite Health Solutions, a provider of medical assessments and health services; CKR Global, a national provider of risk mitigation and investigation services; and Rochon Engineering, a forensic engineering and environmental consulting company.

Larry Shumka, president and chief executive officer of SCM Insurance Services, now leads the combined entity.

Granite’s claims, health and investigations businesses will be added to the corresponding business units in SCM Insurance Services, respectively ClaimsPro, Cira Medical Services and Forensic Investigations Canada. Rochon Engineering will continue as a standalone company.

Canadian combined ratio hits 99.8% in 2013

2013 and 2014 reflect stories in severity versus frequency for the property and casualty industry in Canada, Joel Silverthorn, a senior financial analyst for A.M. Best Company Inc., said in September during the company’s 2014 Insurance Market Briefing – Canada.

With events such as ice damming, frequent storms and continued water events, this frequency “crept in below retentions,” Siliverthorn told attendees at the briefing in Toronto.

A.M. Best’s special report, published in advance of the briefing, notes the overall p&c industry combined ratio deteriorated to 99.8% in 2013, a 3.6-point increase from the prior year. Over the last five years, the combined ratio was 100.9% in 2009, 100.7% in 2010, 99.1% in 2011, 96.2% in 2012 and 99.8% in 2013.

Silverthorn told delegates that water has now taken over fire as the largest peril.

TECHNOLOGY

UBI could bring in non-traditional players

The use of telematics technology in auto coverage, and the usage-based insurance (UBI) model, will “act as bridges toward an inevitable future” for the industry, in which “non-traditional” companies could “enter and disrupt” the risk management business, Aite Group LLC suggested in the report, Telematics and Usage-Based Insurance: Notable Players in an Evolving Market.

“There are over 200 vendors in the UBI or telematics space that insurers could look to for assistance or guidance in using this technology to meet the demands of today’s insurance market,” Aite said in the report, adding not all vendors “provide the same capabilities or even those that carriers might want or need.”

Aite predicts that UBI, as a business model, and telematics, as a “technology enabler,” will “act as bridges toward an inevitable future for the insurance industry.” That future, Aite suggested, includes active risk mitigation (ARM) for businesses and personal risk management (PRM) for individuals.

“ARM will be a set of business tools that work together to provide analysis, predictive observations and warnings, and dynamic action plans to corporate risk managers to prevent or reduce the occurrence, frequency, and severity of insurance claims,” Aite Group predicted.

By contrast, PRM will use “similar sensor and connected smart device technology to reduce risk and negative outcomes for individual consumers or their families,” Aite Group added. 

CLAIMS

Lombard loses court case on Ontario auto

The Supreme Court of Canada in August dismissed an application, from Lombard General Insurance Company of Canada, for leave to appeal a court ruling against Lombard over the limitation period on claims under the Ontario auto family protection endorsement.

In July 2006, Eckhart Schmitz, whose Ontario auto policy was issued by Lombard, was hit by a car. The following year, Schmitz sued the driver who hit him for more than the defendant’s liability limit of $1 million. In 2010, Schmitz sought coverage under his family protection endorsement with Lombard. But Lombard contended the coverage was sought after the expiry of the 12-month limitation period, stipulated in Section 17 of the family protection endorsement.

In a decision released February 4, 2014, the Court of Appeal for Ontario ruled in favour of Schmitz, finding that a policyholder making a claim under a family protection endorsement “suffers a loss ’caused by’ the underinsured coverage insurer’s omission in failing to satisfy the claim for indemnity the day after the demand for indemnification is made.” 

PCS releases storm loss estimates

The Insurance Bureau of Canada announced earlier this month that an August 4 rain storm in Burlington, Ontario caused more than $90 million in insured damage, according to a preliminary estimate from Verisk Analytics Inc.’s Property Claims Services (PCS) unit. In a separate report, PCS estimated that a storm that hit southern Alberta August 7-8 caused $450 million in insured damage. In Burlington, nearly 200 millimetres of rain fell in three hours, according to the city.

Quake coverage penetration low in NAPA

Risk Management Solutions Inc. announced in September that it estimates insured losses from the Magnitude 6 August 24 earthquake in California “will not exceed” US$250 million.

Meanwhile, Aon Benfield’s Impact Forecasting unit reported the earthquake insurance penetration rate in Napa County was just 5.3%.

“Residential earthquake insurance penetration rates have gradually lowered in California during the past two decades from 33% in 1996 to roughly 10% today,” Steve Bowen, associate director and meteorologist within Aon Benfield’s Impact Forecasting team, says in a statement. Total economic losses from the Napa quake are expected to reach US$2 billion.

REINSURANCE

Third-party capital fuels reinsurance excess capacity: S&P

Increased competition and third-party capital, along with declining premiums, is putting pressure on global insurers and could affect their ratings, but many companies are working to mitigate those effects on their business, Standard & Poors says.

Competition in the sector is likely to reduce earnings this year and next, putting capital strength at risk, the rating agency notes in a preview article online, ahead of publishing its annual Global Reinsurance Highlights publication. The agency currently provides ratings for 23 global reinsurers.

Increased competition in the sector has caused premiums to decline, S&P suggests. “An influx of third-party capital is fueling excess capacity in the industry, exacerbating the problem,” the report notes.

“The knock-on effects could threaten reinsurers’ competitive positions and their ability to maintain their financial strength. We also see heightened potential for volatility in earnings because of weakened pricing.”

However, overall, reinsurers’ risk-based capital adequacy and enterprise risk management (ERM) strategies – which tend to be stronger among global reinsurers than the insurance industry in general – are allowing for an average financial strength rating of “A,” for the sector, S&P notes. 

RISK

TSB makes new rail, aviation safety recommendations

The Transportation Safety Board (TSB) of Canada is concerned that some small air carriers and flight training schools are not required to have safety management systems and that railways are not required to have on-board video and voice recorders in locomotives, TSB said in a report to parliament, released in August.

The report covers the period April 1, 2013 through March 31, 2014 and, therefore, does not include two recommendations released in August from its investigation into the July 6, 2013 rail accident in Lac-Mégantic, Quebec, which killed 47.

In a separate report on the Lac-Mégantic tragedy, TSB recommended that the federal government require Canadian railways to “put in place additional physical defences to prevent runaway equipment” and to “audit the safety management systems of railways in sufficient depth and frequency to confirm that the required processes are effective and that corrective actions are implemented to improve safety.”

In its annual report, TSB said it was “concerned that there is no requirement for on-board video and voice recorders on locomotives.”

Another concern was raised in aviation.

“Since 2005, large air carriers in Canada have been required to have safety management systems,” TSB said. “This requirement doesn’t, however, extend to smaller carriers, such as air taxis, helicopter operators, commuter airlines, and flight training schools, which together are responsible for 94% of all commercial aviation accidents and 96% of all commercial aviation fatalities. The Board is concerned that, in the absence of (Transport Canada) requirements, the passengers and aircraft of these smaller operators are being placed at unnecessary risk.”

Below-average North Atlantic Hurricane activity predicted

Hurricane forecasters are predicting “below-average hurricane activity for the remainder of the 2014,” due in part to cooler-than-average ocean temperatures on part of the north Atlantic, Willis Re. Inc. suggested in a recent report.

“U.S. landfall probability estimates continue to be low this year, though caution should be exercised due to a recent run of poor U.S. landfall forecasts,” Willis Re noted in its 2014 Atlantic Hurricane Season Outlook.

The report referred to several predictions, from organizations including Colorado State University, the U.S. National Oceanic and Atmospheric Administration Climate Prediction Center, Weather Services International and Tropical Storm Risk, a service affiliated with University College London and sponsored by Aon Benfield and Crawford & Company.

The range in the forecast numbers of named Atlantic storms, from the sources cited by Willis Re, is 8.6 to 12.0, with the average being 10.2.