Marketplace

CLAIMS

Alberta responds to 2013 flood review

The Alberta government has accepted several recommendations in relation to an independent review of the province’s response to the floods that occurred in the summer of 2013.

The report, called Review and Analysis of the Government of Alberta’s Response to and Recovery from 2013 Floods, makes 16 recommendations to enhance and improve the province’s emergency response and recovery procedures.

“Work on implementing these is under way,” Alberta Municipal Affairs notes in a press release December 11.

At press time, the flooding was Canada’s costliest natural disaster to date, when measured by insured losses of about $3 billion.

The report on the response was prepared by MNP LLP.

One recommendation was the development of a new provincial operations centre, which could either be a purpose-built facility or constructed in an existing government building.

Funds earmarked for distracted driving working group

A national working group should be established to address the problem of distracted driving, the Traffic Injury Research Foundation (TIRF) suggests in a recent report announced by The Co-operators Group Ltd.

The Co-operators reported this past December that it plans to provide funding to TIRF to establish a working group on distracted driving.

“Because distracted driving is still an emerging issue, and one that falls under provincial jurisdiction, bringing together stakeholders to help develop a strategic plan at a national level will be very valuable work,” says Kathy Bardswick, president and chief executive officer of The Co-operators, in a statement.

TIRF’s report is titled Distracted Driving in Canada: Making Progress, Taking Action.

TIRF plans to work with Drop It And Drive – a British Columbia-based distracted driving educational campaign – to form the working group.

Marsh calls for greater participation in U.S. flood insurance

Insurers that contract with the United States National Flood Insurance Program (NFIP) should be allowed to write their own polices, Marsh & McLennan Companies Inc. suggests.

Insurers are permitted to market, sell and service NFIP policies “under their own name in exchange for an administrative allowance from the NFIP,” Marsh & McLennan states in the report, titled Reforming the National Flood Insurance Program and released December 9. Those policies are dubbed write-your-own (WYO). “Any claims payments that are made by WYO companies are reimbursed by the NFIP,” notes Marsh & McLennan, adding that NFIP should share risk with private industry. “By opening up private market participation, the NFIP can help improve the program’s sustainability by providing expertise and market stability.”

CANADIAN MARKET

Economical Insurance mutual policyholders approve demutualization

Mutual policyholders of Economical Insurance – the first federally regulated property and casualty carrier to start the demutualization process – voted in December to continue to the next stage of demutualization.

The vote took place nearly six months after the federal government enacted regulations allowing for the demutualization of p&c carriers.

The mutual policyholders voted “in favour of commencing negotiations with non-mutual policyholders on the allocation of demutualization benefits through court-appointed policyholder committees,” Economical notes.

Economical reports it would take at least two years, “from the date the board decides to proceed with demutualization to the date the Minister of Finance approves the final conversion proposal,” assuming that each step is successful. The Board of Directors voted in favour of demutualization November 3.

Underwriting income triples in Canadian P&C

Underwriting income for the Canadian property and casualty insurance industry was $1.417 billion for the first nine months of 2015, a 190.2% increase from $488 million during the same period in 2014, MSA Research Inc. reports.

MSA’s results include data on almost every insurer in Canada. The industry results at nine months omit “some major” writers regulated by Quebec’s Autorité des marchés financiers because those writers only file semiannually.

The combined ratio for the industry improved 2.9 points, from 98.43% in the first nine months of 2014 to 95.53% during the same period last year. For the first nine months of 2015, direct premiums written were $36.42 billion.

REINSURANCE

Us$85 billion in economic losses in 2015: Swiss Re

Preliminary sigma estimates indicate total global economic losses from natural catastrophes and man-made disasters will total approximately US$85 billion in 2015, but just US$32 billion in insured losses, Swiss Re reports.

A February winter storm in the United States was the largest loss-making natural disaster of 2015, resulting in insured losses of more than US$2 billion.

Insured losses from natural catastrophes were lower than in 2014, while man-made losses were higher, Swiss Re notes in a press release December 18. The explosions this past August at the Port of Tianjin in China are expected to lead to the year’s biggest insured loss. Swiss Re reports that man-made disasters triggered US$9 billion in overall insurance losses in 2015, up from US$7 billion in 2014.

RISK

Average risk manager makes six figures

The median annual base salary for Canadian risk management professionals responding to the RIMS Risk Management Compensation Survey 2015 was $104,000 as of June 1, 2015.

The survey results, released in December by RIMS, were based on 1,145 respondents (999 of whom were employed as risk management professional in the U.S. as of June 1, and 146 of whom were Canadians in the same occupation) to a broadcast e-mail sent in August 2015.

The margin of error for the 95% confidence level is 2.8 percentage points for U.S. respondents and 7.5 points for Canadians.

Base salaries varied by job title. For Canadian respondents indicating their roles and responsibilities most closely matched chief risk officer or vice president of risk management, the median salary was $174,000. For respondents who function as claims managers or workers compensation claims managers, the median salary was $72,500.

A.m. Best urges cyber exposure awareness

Insurance carriers writing cyber risk need to understand “aggregate exposures,” such as exposure of multiple clients to major service providers and “common vectors of attack,” A.M. Best Company Inc. suggests in a recent report.

In the report – A.M. Best’s View on Cyber-Security Issues and Insurance Companies – the ratings agency included some questions it asks insurers as part of the rating process. One is how “non-obvious paths of aggregation, such as common service providers and vectors of attack,” are being evaluated.

“The interconnectedness of cyber risk among companies is not necessarily correlated to attributes like physical location and class of business, so carriers must act accordingly and take a deeper look at the business written when examining potential aggregated loss scenarios affecting their portfolio,” A.M. Best notes in the report. “These insurance companies should have an understanding of their portfolio’s exposure to major service providers and other common vectors of

attack and adequately analyze the potential catastrophe scenarios on their book to arrive at reliable measures of potential losses.”

Willis Towers Watson merger complete

Willis Towers Watson plc – formed from the US$18-billion merger of commercial brokerage Willis Group Holdings plc and Towers Watson & Co. – began operating January 4.

The merger was approved December 11 by shareholders of both Willis and Towers Watson.

In North America, London-based Willis Group’s largest industry practice is in construction, in which it provides risk management services and places insurance and surety bonds.

In Canada, Willis also provides cyber, directors’ and officers’ liability, professional liability and environmental, among others.

Towers Watson’s services include product development, predictive modelling, claims consulting and catastrophe modelling for the insurance industry. The Arlington, Virginia-based firm was formed in 2010 with the merger of Towers, Perrin, Forster & Crosby Inc. and Watson Wyatt Worldwide Inc.

In September, 2015, Towers Watson agreed to acquire Brovada Technologies Inc., a Rothesay, New Brunswick-based provider of workflow software for the insurance industry.

REGULATION

OSFI official explains risk of asset managers

None of the world’s largest asset managers are regulated by Canada’s Office of the Superintendent of Financial Institutions (OSFI), but that sector is vulnerable to incidents “that can spark global financial stability concerns,” OSFI deputy superintendent Mark Zelmer suggests.

In remarks to the C.D. Howe Institute, Zelmer notes that OSFI does not regulate “any of the largest global asset managers” and that Canada “is not home to any of the major asset managers

that are currently under the global regulatory reform spotlight.”

Zelmer co-chairs the Financial Stability Board (FBS)’s work stream on non-bank/non-insurance entities. FSB, whose members include OSFI, recently identified five vulnerabilities of asset managers. One is “a mismatch between the liquidity of investment fund assets compared to the ease with which end-investors in those funds can redeem their fund units,” Zelmer suggests in his remarks.

“If prospects dim and investors suddenly decide to rush to the exit gates, it could prove very disruptive for the markets in question, particularly if a fund has to quickly liquidate large blocks of securities to meet the redemption requests,” Zelmer warns.