MarketPlace

Canadian Market

Slave Lake wildfire ranks second-costliest insured disaster in Canadian history

Insured damage caused by wildfires that ravaged much of the town of Slave Lake, Alberta in May has hit the $700-million mark, according to the Insurance Bureau of Canada, citing PCS-Canada data.

That makes the Slave Lake wildfire the second-costliest insured disaster in Canadian history. The most expensive insured disaster in Canadian history remains the ice storm that hit Quebec and Ontario in 1998, which cost insurers more than $1.8 billion (figure adjusted for inflation).

Canada holds public consultations on P&C demutualizations

The Department of Finance Canada wasted no time winding up its public consultation on the demutualization of Canadian property and casualty insurance companies, giving the public and the industry a month to make submissions.

The Finance Department committed to establishing regulations for the demutualization of a Canadian P&C insurance company in its budget, released on June 6. The government officially launched public consultations on June 30 and set the deadline for July 31. Finance Minister Jim Flaherty has said publicly that no Canadian property and casualty insurer will be allowed to demutualize until regulations are in place. The public consultation was the first step in that process.

Signs of market hardening in some Canadian commercial segments: Marsh

Overall Canadian market conditions remain favourable across most commercial lines through the end of the 2011 Q2. But signs of a firming market are beginning to appear in segments of the marketplace, according to Marsh.

“It is too early to tell if the second half of the year will bring any overall increases to commercial insurance rates in Canada,” said Alan Garner, president and CEO of Marsh Canada Limited. “Marsh expects that pure Canadian commercial accounts will see rates remain flat well into the third quarter of 2011, and possibly beyond.”

In its Canadian Insurance Market Midyear Update, Marsh examined data from transactions brokered by Marsh through early July 2011.

The report’s findings suggest the majority of commercial property, casualty, and financial and professional insurance buyers are not experiencing significant rate increases.

Property insurance rates are increasing in individual sectors such as energy and mining, and 2011 catastrophe losses could further affect rates for some buyers.

Also, underwriters are starting to look more closely at contingent business interruption and contingent exposures following the Alberta wildfires. They are requiring more information from insureds before offering such coverage, the report says.

Insurers, reinsurers planning to adopt more aggressive investment strategies  

Nearly half (46%) of 38 North American insurers and reinsurers surveyed by Towers Watson, a global professional services company, say they plan to be more aggressive in their respective investment strategies over the next year.

Additionally, insurance executives participating in the May/June online survey asserted that low interest rates (83%) represent the greatest investment challenge.

The majority of respondents in the online study, conducted in April and May 2011, had general account assets invested of more than $1 billion.

While an emphasis on fixed income investments is to be expected among insurers, nearly 40% said they expect to increase their allocation relative to alternative investments and look to other high-risk, high-yield vehicles. Only 9% of respondents said they expect to be more conservative in their investment strategies.  “It’s meaningful that a substantial number of insurers expect to embrace a more aggressive investment strategy at a time when they are clearly worried about the economy and financial market volatility,” said Christopher DeMeo, Towers Watson’s head of investment for North America.

Regulation

Alberta Insurance Act changes to take effect in July 2012

Alberta’s department of finance and enterprise has outlined changes to the Alberta Insurance Act that will go into effect on July 1, 2012.

Legislative amendments to the act include the following:

• Legislation will require statutory conditions to be incorporated into multi-peril property contracts.
• The timeframe to initiate an action has been increased from the current one-year timeframe to two years. This is consistent with the Limitation Act.
• The dispute resolution process, currently referred to as the “appraisal procedure,” will be amended to strengthen consumer protection in a claims dispute.
• Electronic transactions will be allowed, permitting insurers and policyholders to use modern business practices and technology. (There will be some exceptions where written transactions will still be required to protect consumer interest. For example, the cancellation of an insurance policy or the change of a beneficiary.)

A full list of legislative amendments and regulatory changes can be found at: http://www.finance.alberta.ca/publications/insurance/alberta-insurance-act.html

B.C. changes legislation to protect innocent co-insureds

B.C. has changed its Insurance Act to protect innocent co-insureds from coverage exclusions if a loss is caused by the criminal act of another person co-insured on the same policy.

Based on the wording of the law, a policy exclusion would apply to a person who:

• committed the act or omission that led to the loss or damage;
• abetted or colluded in the act or omission;
• consented to the act or omission and knew or ought to have known that the act or omission would lead to loss or damage; or
• is in a class prescribed by regulation.

The amendment says a policy exclusion would not apply to an innocent co-insured who does not fall under the above criteria. Nonetheless, the innocent co-insured may not collect “more than their proportionate interest in the lost or damaged property.”

Also, the innocent co-insured is obligated by law to cooperate with the investigation of the insurer, whether by submitting to an examination under oath and/or producing relevant documents to the insurer.

B.C. privacy commissioner investigates ICBC’s use of facial recognition technology to aid police

British Columbia’s information and privacy commissioner is investigating the Insurance Corporation of British Columbia’s (ICBC) use of facial recognition technology to ensure that it complies with privacy law. Commissioner Elizabeth Denham’s investigation comes after ICBC offered its facial recognition technology to help police identify participants in the Stanley Cup riot in Vancouver on June 15. The riot led to millions of dollars worth of property damage.

ICBC has committed to co-operate fully with the privacy commissioner’s investigation.

ICBC said it would support a police investigation by confirming if there is a match between identified rioters and a name in the ICBC’s photo license database, but will not disclose personal information until the police obtain a subpoena, warrant or order.