This Canadian insurer may want to cover your hospitality clients

Brokers struggling to find coverage for small and mid-sized restaurant and hotel clients may now have a new option available, and it’s already getting a response.

CAA Club Group’s Echelon subsidiary announced Monday it is offering up to $5 million in property and liability coverage to some small and mid-sized clients in the hospitality sector. Echelon Insurance is targeting family and fine dining restaurants, hotels, and motels, including bed-and-breakfasts and banquet halls.

In some cases, Echelon Insurance could cover pubs, bars and lounges.

“Within minutes of [issuing] the press release we got two applications in the door. There are definitely a lot of calls coming in,” Echelon Insurance president Robin Joshua told Canadian Underwriter Tuesday.

Echelon is distributing the coverage mainly through retail brokerages but also has managing general agents.

When CAA Club Group acquired Echelon Insurance in 2019, CAA expanded into non-standard auto, property and commercial insurance. CAA Club Group bought Echelon Insurance from Echelon Financial Holdings Ltd., which still exists as a separate company. Echelon Financial owns 75% of the Insurance Corporation of Prince Edward Island while CAA Club Group owns home and auto insurer CAA Insurance, Echelon Insurance as well as the Ontario and Manitoba affiliates of the Canadian Automobile Association.

“We have underwriters who know this business,” Joshua said of the restaurant, hotel and banquet hall sectors. “Some of these small and medium-sized businesses are having difficulty finding insurance and in some cases there is an affordability issue where the price is being jacked up dramatically by various companies.”

Joshua said Echelon Insurance underwriters will assess a client’s risk in order to quote a price that is reasonable and fair.

If you have clients in the hospitality sector, an insurer such as Echelon will look at four areas of risk, Joshua said. Those are the construction of the building, occupancy (such as a banquet hall or fine dining restaurant for example), protection (against hazards such as fire and water) and the environment that the business is in.

Echelon Insurance was already providing restaurant and hotel coverage when CAA acquired Echelon Insurance from Echelon Financial.

“We decided to re-launch [commercial hospitality coverage] with a focus on those small and medium-sized businesses, specifically in a small number of categories that are really struggling today,” Joshua said.

The hard market in commercial coverage has caught the attention of politicians. Ontario Premier Doug Ford was quoted last month by the Canadian Press warning commercial insurers to rein in what he described as “astronomical” rate increases to businesses or outright denial of coverage.

Separately, the Insurance Bureau of Canada announced last month the launch of its Business Insurance Action Team. IBC is aiming to address the withdrawal of some insurers from the hospitality market as well as increasing rates, IBC vice president Jordan Brennan said Oct. 21 during a keynote address at the Insurance Brokers Association of Ontario annual convention

The topic also came up again on Nov. 4 during Intact Financial Corp.’s quarterly earnings call with investment banking analysts.

“In the high-risk areas of the market — take bars and restaurants with heavy liquor liability — this part of the market was largely served by foreign operators and a number of them left. This has led to a capacity crunch in a very small portion of the market,” Intact CEO Charles Brindamour said during the call. An analyst had asked whether Intact executives are worried about commercial insurance becoming more regulated.

“I don’t think that scaring insurers is the way to bring capital back into the system,” Brindamour replied at the time.

One of the foreign insurers exiting the restaurant business is Allianz Global Commercial and Specialty. That is part of AGCS Canada’s exit of its Midcorp business, announced this past June, AGCS Canada chief agent and head of claims Bernard McNulty told Canadian Underwriter earlier.

That is part of an effort by AGCS to focus more on financial institutions, telecommunications, information technology, aviation, aerospace and construction.

“Restaurants suffer everything from fires, vandalism and water damage,” McNulty said at the time. “Vehicle impact claims are also very common and many restaurants in Canada have drive-thru capacity, particularly in the fast food area. Along with many of these incidents, we incur business interruption claims. We looked across the entire portfolio. With the pattern that we could see in the business — in the aggregate — and the way that we price this business, it just wasn’t commensurate with the level of losses that we were seeing.”

 

Feature image via iStock.com/Bill_Vorasate