Marketplace

CANADIAN MARKET

Arthur J. Gallagher to acquire broker Noraxis

Arthur J. Gallagher & Co. has signed a $422-million agreement to acquire Noraxis Capital Corporation – a subsidiary of Roins Financial Services Limited, which owns the RSA Canada group of companies – that, if approved, will leave the Illinois-based company holding majority equity interests.

Upon completion of the transaction, which is subject to regulatory approval and is expected to close in July, Arthur J. Gallagher will hold 87.1% of the equity interests in Noraxis. The remaining 13% will continue to be owned by various management employees of Noraxis, notes Arthur J. Gallagher, an international insurance brokerage and risk management services firm.

“Gallagher expects to finance the transaction using mostly additional long-term borrowings and its line of credit. This transaction is expected to result in earnings accretion of $0.07 per share in 2015, and should also generate another $0.03 per share of earnings from our ability to use additional tax credits.”

Noraxis generated almost $125 million in revenue in 2013, has more than 650 employees and operates out of 23 offices across Alberta, Manitoba, New Brunswick, Nova Scotia and Ontario.

“In Noraxis, we have found our ideal Canadian partner and together we now have a solid platform for organic growth and a leadership team that will continue to attract new merger partners,” says David Ross, CEO of Arthur J. Gallagher International.

Rowan Saunders, CEO of RSA Canada, says the sale “enables us to invest in advancing our strategy and build stronger capabilities and propositions to our brokers and customers.”

Canadian P&C net income falls 30% after record cat losses: Swiss Re

Record catastrophe losses caused the Canadian property and casualty insurance industry to see 2013’s underwriting profit decline to $284 million compared to $1.9 billion in 2012, notes a briefing from Swiss Re.

Net income (after tax) fell by almost 30%, and return on equity deteriorated to 7.7%, a decline of 3.5 points. Elevated catastrophe losses increased the combined ratio by almost five points year over year to 99.8%.

“Alberta floods caused the biggest loss on sigma records in Canada, with an estimated $5 billion in economic losses and an estimated $2 billion in insured losses,” notes the briefing. Combined with damage from thunderstorms and flash floods in Toronto and an Ontario ice storm, insured losses from natural catastrophes “reached a new record for the country.”

TECHNOLOGY 

Polled UBI customers report becoming better drivers: Desjardins

Half of the respondents to a poll marking the one-year anniversary of Desjardins General Insurance Group’s (DGIG) launch of its usage-based insurance (UBI) programs said they are safer drivers and almost seven in 10 now pay more attention to acceleration and braking.

The survey – based on input from 257 Ajusto and Intelauto (for group insurance customers) clients – indicates more than two-thirds of respondents agreed with the statement that they pay more attention to acceleration and braking since signing up. As well, 50% of respondents agreed they have become safer drivers since they installed the telematics device in their vehicles and began monitoring their driving habits online.

DGIG reports that clients of the programs are earning, on average, a 12% discount in their insurance premiums.

New Canadian fire insurance grading index version issued

Fire Underwriters Survey (FUS), operated by Opta Information Intelligence, was scheduled to release a new online system for its Canadian Fire Insurance Grading Index in late May.

Version 2.0 was to be available through the iClarify property valuation tool from Opta, at no additional cost to subscribing insurance firms and the brokers they sponsor. The system is also available at the FUS website.

Some features of the new version of the index, a web-based service, include that 80% of all hydrants in Canada have been geo-coded and included in search results; and that road network data with improved mapping accuracy has been updated.

“The insurance industry is evolving quickly and there are significant gains ahead as companies realize they can improve accuracy, efficiency and profitability with the implementation of digital and GIS-based tools,” suggests Michael Currie, FUS director at Opta Information Intelligence. 

CLAIMS

Homeowners filing more claims for storm damage: J.D. Power

Year over year, the number of weather-related insurance claims in Canada has increased by 32%, notes the latest edition of the annual J.D. Power 2014 Canadian Home Insurance Study.

The study, which examines customer satisfaction with their homeowner insurers, is based on responses from 7,092 customers, collected March through April 2014.

Overall, 41% of the home insurance claims were for weather-related damage.

Despite the rise in weather-related claims, though, customer satisfaction with their insurance providers – even among those who filed a claim – is improving.

Among those who filed a weather-related claim, satisfaction with the claims process averages 790 (on a 1,000-point scale), up from 764 in 2013 when 31% of claims were for storm damage.

“Insurance is a product customers hope they never have to use, but when they do have to, that’s the opportunity for the insurance provider to make good on their promise,” says Jeremy Bowler, senior director of the insurance practice at J.D. Power.

REGULATION

Ontario updates attendant care rates

The Financial Services Commission of Ontario (FSCO) is revising the hourly rate guideline for attendant care benefits in the province’s standard auto insurance policy, raising the amount payable for “basic supervisory functions” from

$10.25/hour to $11/hour for accidents that occur on or after June 1, 2014.

FSCO’s Attendant Care Hourly Rate Guideline “establishes the maximum expense that automobile insurers are liable to pay” for attendant care services under the Statutory Accident Benefits Schedule.

Under Ontario’s standard auto policy, the maximum attendant care benefit that can be paid is $3,000/month if the victim did not sustain a catastrophic impairment. The maximum is $6,000/ month if the insured person did sustain a catastrophic impairment.

Attendant care benefits are for “services provided by an aide or attendant, or by a long-term care facility, including a long-term care home under the Long-Term Care Homes Act, 2007 or a chronic care hospital.”

RISK

Homes to demonstrate wildfire, flood risk reduction methods: ICLR

The Institute for Catastrophic Loss Reduction (ICLR) is scheduled to demonstrate loss mitigation methods on two homes this year in Western Canada, a move that is hoped to help with ICLR’s effort to influence the construction of new homes.

In May 2013, ICLR showed the public a home in Quebec City, which had been retrofitted to make it more resilient to earthquake risk and winter storms, as part of its Showcase Homes program.

At its recent annual general meeting, institute founder and executive director Paul Kovacs said ICLR expected to announce two homes – one in Calgary; one in Kelowna – in June. The Calgary home will be designed to prevent water damage while the one in Kelowna (to be showcased this fall) will be designed to prevent wildfire damage, noted Kovacs, who is also president and chief executive officer of Property and Casualty Insurance Compensation Corporation.

Kovacs said it is more expensive to retrofit an existing home, to make it more resilient to natural catastrophes, than to build a resilient home in the first place.

Third of small firms have no sever weather contingency plans: CIBC

More tha n a third of surveyed Canadian small business owners do not have contingency plans for work stoppages from severe weather or other interruptions, notes a new poll from CIBC.

Based on a web survey of 500 small businesses (under 500 employees) and carried out by Leger Marketing in February, 35% of respondents lack contingency plans.

In Atlantic Canada, 43% lacked business interruption plans; in Quebec, it was 41%; 31% in Ontario, 32% in Manitoba and Saskatchewan; 35% in Alberta; and 36% in British Columbia.

But following 2013’s major flooding events and ice storm, some small businesses are re-evaluating business interruption plans because of natural disasters and severe weather.

In all, 38% of respondents in Alberta and 23% in Ontario were rethinking their plans, compared to just 5% in Quebec and 9% in Atlantic Canada. This despite one in 10 owners having had a business interruption in the past year, with most citing weather as the cause, followed by illness or an owner’s personal reasons.

OSFI warns about use of data in product decisions

The use of “vast amounts” of data to make underwriting and product decisions carries some risk for property and casualty insurance companies, suggest presentation notes from Andrew Kriegler, deputy superintendent of the Office of the Superintendent of Financial Institutions (OSFI).

“The increasing use of big data to support product design, underwriting and pricing decisions – especially if they are based on models that derive from a small number of theoretical foundations – has the prospect of taking the longstanding competitive underwriting cycles and making them both more frequent and more severe,” state the notes for Kriegler, who spoke at the 2014 Property and Casualty Insurance Industry Forum.

The risk “is exacerbated when the dataset supporting these models is lean and the reality that underlies the data is subject to potential change, as in the case of new or expanding products.”

The riskiest insurance products derived from such data, Kriegler said, are those that cover infrequent, high-loss events, such as catastrophes, including earthquake and overland flood.

Kriegler recommended p&c professionals ask themselves if the models they use are “well-designed and properly maintained,” and if other carriers are getting the same answers at the same time.