C A N A D A’ S I N S U R A N C E A N D R I S K M A G A Z I N E . C A N A D I A N U N D E R W R I T E R . C A
S E PT E M B E R 2 010 A Business Information Group Publication #40069240
Building Blocks By Craig Harris
Collaborative Risk Assessment By Edward Robertson
Builders Risk By Brian Lloyd
IBAC
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Every night, millions of Canadians can sleep easy.
From coast to beautiful coast, the majority of Canadians depend on their Insurance Broker to advise them on their insurance needs; and they sleep well because of it. None of this would be possible without Insurance Brokers being able to work in the full knowledge that we can depend on the services of Canada’s highest calibre of insurance carriers to follow through with the coverage our customers need, the value they seek and the attention they deserve. The Insurance Brokers Association of Canada and our members are proud to count so many of the country’s renowned and trustworthy insurance companies as our friends and business partners. We value our shared commitment to the customer, and it is with heartfelt thanks that Brokers right across Canada pay tribute to the insurers we unhesitatingly recommend to clients, secure in the knowledge of your professionalism, cooperation and efficiency. Thanks to such partnerships, millions of Canadians can sleep easy, knowing that they, their families and all they possess, remain fully protected. Your Best Insurance is an Insurance Broker
IBAC
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Because they know they can rely on us. And we rely on you. 2010 Full Partners
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Participants
Lloyd’s Underwriters
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VOL. 77, NO.9, SEPTEMBER 2010 CANADA’S INSURANCE AND RISK MAGAZINE. PUBLISHED BY BUSINESS INFORMATION GROUP
www.canadianunderwriter.ca
COVER STORY
Building Blocks
36
New expectations borne from the global financial crisis are spurring several insurers to beef up their risk management regimes. The overarching idea is to build a new risk culture within insurance companies. BY CRAIG HARRIS
FEATURES
48
16 Collaboration
Builders Risk
Risk managers can demonstrate added value by undertaking a collaborative effort to identify and assess risk.
Sound investigation techniques and establishing site access are among several key elements in the effective handling of a builders risk claim.
BY EDWARD ROBERTSON
24
BY BRIAN LLOYD
54
20 Public Auto
52 Before the Fact
As Ontario’s auto insurance product becomes increasingly unwieldy, one has to wonder whether the province’s auto insurance product is destined to become public.
In condo and other lines of insurance, it is crucial to ensure the right coverage is in place prior to the occurrence of a foreseeable event.
BY FRANK CAIN
28 Raising the Bar Canada’s federal solvency regulator has issued new draft guidelines that would establish high standards for reinsurance practices. BY ROBERT MCDOWELL AND KOKER CHRISTENSEN
32 Water Innovation Stronger Storms Research shows climate change is not necessarily changing the frequency of major storm events, but it is contributing to their strength and intensity. BY GORDON A. MCBEAN
4
Red Carpet Car collision repair centres are encouraged to view their own processes through the eyes of their consumers. BY DAVID GAMBRILL
Canadian Underwriter September 2010
BY J. ALVIN SPEERS
The increasing frequency and severity of storm damage is going to challenge the insurance industry to be more innovative when it comes to dealing with water risk. BY BLAIR MACLEOD
58 Gold Mine A lot of information required to maximize the efficiency of a brokerage is already located in a broker BMS. BY PAT DUREPOS
63 Sunny Days Insurers are applauding municipalities that have developed innovative projects to reduce the risk of water damage in their communities. BY MARY LOU O’REILLY
Change is Good
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VOL. 77, NO.9, SEPTEMBER 2010
PROFILE
14 Bridging the Gap IBAC president-elect Lyle Fraser sees brokers as the bridge between consumers’ daily lives and the technical world of insurance. BY VANESSA MARIGA
SPECIAL FOCUS
8
Editorial
12 Marketplace 66 Moves & Views 68 Gallery
Editor David Gambrill david@canadianunderwriter.ca (416) 510-6796
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President Bruce Creighton Vice President Alex Papanou
Canadian Underwriter is published thirteen times yearly (monthly + the Annual Statistical Issue) by BIG Magazines LP, a division of Glacier BIG Holdings Company Ltd., a leading Canadian information company with interests in daily and community newspapers and business-to-business information services. Business Information Group is located at 12 Concorde Place Suite 800, North York, ON, M3C 4J2. Phone: (416) 442-5600. Canadian Underwriter, USPS 022-494. US office publication: 2424 Niagara Falls Blvd., Niagara Falls, NY 14304-0357. Periodicals Postage Paid at Niagara Falls, NY, USA. US postmaster: Send address corrections to Canadian Underwriter, Po Box 1118, Niagara Falls, NY 14304. All rights reserved. Printed in Canada. The contents of this publication may not be reproduced or transmitted in any form, either in part or in full, including photocopying and recording, without the written consent of the copyright owner. Nor may any part of this publication be stored in a retrieval system of any nature without prior written consent. Š Published monthly as a source of news, technical information and comment, and as a link between all segments of the insurance industry including brokers, agents, insurance and reinsurance companies, adjusters, risk managers and consultants. Privacy Notice From time to time we make our subscription list available to select companies and organizations whose product or service may interest you. If you do not wish your contact information to be made available, please contact us via one of the following methods: Phone: 1-800-668-2374 Fax: 416-442-2191 E-mail: jhunter@businessinformationgroup.ca Mail to: Privacy Officer, 12 Concorde Place., Suite 800, North York, ON, M3C 4J2 Subscription Rates: 2010 Canada 1 Year $49.95 plus applicable taxes 2 Years $73.95 plus applicable taxes
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6
Canadian Underwriter September 2010
CBN Ad/MC2010/CUW
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2010 Underwriters of the Year The following individuals are being recognized by the Canadian Broker Network for their excellence in underwriting and their understanding of what the role of an underwriter really is: to write great business that satisfies the clients’ needs and creates a win-win for the broker and insurer. What sets these underwriters apart from other hard working underwriters is their attitude. They communicate in an open and effective manner, and they go out of their way to explain the reasoning behind their decisions and make suggestions, if necessary, to help our member brokerages place the risk elsewhere. Their consistency and helpful nature have made them outstanding underwriters who are a pleasure to work with.
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For more information on the Canadian Broker Network, contact Steve Frye at (416)368-7990.
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EDITORIAL
Conditioned Response
Other than providing a baseline from which to offer rate decreases, is there much point in the province of Alberta hiring actuaries? David Gambrill, Editor david@canadianunderwriter.ca
8
If Alberta’s auto insurance regulator really wants to save Alberta taxpayers money, it should stop paying actuaries to make recommendations on industry-wide auto rate adjustments, because the regulator routinely ignores their advice anyway. For the second year in a row, Alberta’s rate regulator decided to play Santa Claus and give the province’s consumers a 5% rate decrease on mandatory auto insurance rates. This is the second time in a row the regulator has ordered a 5% decrease against the advice of its own actuary, Oliver Wyman. Watching Alberta’s regulator trying to please auto insurance consumers in the province by offering unjustified lower rates each year is as predictable as watching the mouse go after the cheese in the maze. God forbid the cheese might be guarded by electrical “sticker shock” one of these days. Let’s look at the track record: Three years ago, in 2008, when the province’s $4,000 cap on minor injuries was found to be unconstitutional, Oliver Wyman called for an industry-wide auto insurance rate increase of 14%. In response, Alberta ordered a 5% industry-wide rate increase. In 2009, when Alberta’s Court of Appeal found the minor injury cap to be constitutional after all, Oliver Wyman called for a 3% rate decrease. In response, the Alberta Automobile Insurance Rate Board (AIRB) ordered
Canadian Underwriter September 2010
a 5% auto insurance rate decrease. In 2010, Oliver Wyman called for auto insurance rates to remain flat at 0%. In response, the AIRB ordered a 5% auto rate decrease. Keep in mind that over the past three years, AIRB’s actuary has generally painted a rosier picture than the insurance industry in terms of rate requirement. Two years ago, for example, when the minor injury cap was found to be unconstitutional, the Insurance Bureau of Canada (IBC) called for a 36.7% rate increase. One year ago, in 2009, when the cap was once again restored, IBC called for a 6% rate increase. But insurers can’t seem to win even when their advice is the same as that of the government’s actuary. In 2010, IBC’s submission on rate was the same as that of Oliver Wyman, which called for no rate adjustment (0%) in 2010. And yet, the province ordered a 5% decrease. So really, other than providing a baseline from which to deduct an additional 2% to 9% from the industry-wide rates, is there much point for the province to hire actuaries? Oh sure, the province’s consumers will be happy they are paying lower rates — in the short term. But at some point, this political suppression of rates is going to lead to an untenable situation of the type we see in Ontario right now.
Ontario auto insurers failed to take enough rate over the past three years, even as they were absorbing increasing accident benefits claims costs. Finally, their money flowed outwards faster than their income flowed inwards, and suddenly Ontario insurers found themselves paying at least one-and-a-half times more money in accident benefits claims than they were collecting in premium. The upshot of that was a predictable market correction. Insurers started charging more premium, boosting their rates by an average of about 5.5% in 2008 and 8.8% in 2009. We are witnessing the political fallout from this, in the form of much-needed auto insurance reforms in the province, based on consumers’ complaints about rising insurance costs. It is not difficult to see this happening in Alberta sometime over the next three years. Alberta has been suppressing rates against the advice of the industry and its own actuaries for some time now; you can see the need for a market correction coming as a result. And when it does, Alberta will be facing the same political backlash over rates that it has been trying to avoid through suppressing them in the short term. At that point, the province’s actuary will be well positioned to say to the regulator: ‘We told you so.’ Not that it matters what the actuaries think, right?
Marine
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at 25.42°N 90.15°W, ACE insures progress
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© 2010
IBAC Chess
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Check. The ideal opportunity for insurance brokers to up their game is imminent — Laurentian University’s online Honours Bachelor of Commerce (H.B.Com) and Master of Business Administration (MBA) programs, offered through an exclusive arrangement with your insurance brokers association. As the level of competition in the insurance industry ramps up, so does the need for brokers to hone their business skills in order to advance in their careers, to build their business; even, perhaps, to open their own brokerages. And the need for owners to groom the best qualified talent for succession will only increase, too. There is no better way to gain these strategic business skills than through a business degree, and now brokers have a unique opportunity to acquire such credentials through a Laurentian University MBA or H.B.Com degree. Online.
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Mate. With an outstanding reputation for this calibre of business education, Laurentian University will recognize senior broker industry credentials and professional experience to enable students to fast-track their degrees. Both programs are open to members in good standing with their provincial broker association, and who have successfully completed their CAIB or CPIB designation. Admission to the online MBA program requires a 4-year undergraduate degree, although brokers with no degree but with exceptional industry experience will also be considered. Applicants to the online H.B.Com program must hold a college diploma. (For full details visit your provincial association web site.) Now there’s a way to up your game. Applications will be available online beginning January, 2011, with a deadline of March 31st to start the program in September.
Your move
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MARKETPLACE
Canadian Market RSA, AVIVA PLC CONFIRM REJECTION OF RSA’S OFFER TO BUY AVIVA’S CANADIAN BUSINESS RSA has confirmed in “a response to press speculation” that it did in fact propose to acquire Aviva's Canadian, UK and Irish general insurance business for £5 billion in cash. In a separate public statement released on the same day, Aviva plc confirmed its board of directors rejected the deal, in part because it felt the offer undervalued its general insurance operations. RSA says it considered the deal “a fair value” for the target businesses, representing a price-to-earnings ratio of around 9.8 times and a multiple to net assets of 1.6 times. RSA says the businesses it sought from Aviva had a profit of around £510 million in 2009 and net assets of about £3.2 billion. RSA said it “remains open to discussions with Aviva.” Aviva said in its statement that given the “compelling strategic and financial benefits to Aviva shareholders of retaining the GI [general insurance] business, its upside potential and the terms offered by RSA, the board was unanimous in rejecting this proposal.” Aviva said the general insurance market is at a cycli-
cal low. “Accordingly, the current business performance does not reflect its full earning potential,” the company said. “Aviva is the leading general insurance business in the U.K. and in Ireland, and the number two player in Canada, and should be valued accordingly.”
CANADIAN BROKERAGES BOOST PROFITABILITY DESPITE 2008-09 MARKET CRASH: SURVEY Canadian property and casualty insurance brokerages increased operating profitability by roughly 5% between 2007 and 2009, reports Berris Mangan Consulting Inc. In its study, Property & Casualty Insurance Brokerage Industry Report, Berris Mangan surveyed 285 Canadian property and casualty brokerages. The average operating profitability of the sample stood at 30.6% in 2009, an increase from 25.3% in 2007, despite the recession. Of the 285 brokerages, 159 (56%) under-performed relative to the industry average. One hundred and twenty-six (44%) had aboveaverage results.
BANK-OWNED INSURERS DOUBLE MARKET SHARE OVER THE PAST DECADE Bank-owned insurers have effectively doubled their market share in personal lines between 2000 and 2009, according to the MSA/Baron Outlook Report Q1-2010.
12 Canadian Underwriter September 2010
Meanwhile, the broker channel has seen its market share in personal lines sink over the past decade from 66.6% to 59.5%. Bank-owned insurers reported net premiums written of $2.88 billion in 2009, whereas personal/multi-line broker writers wrote $16.1 billion and non-bank direct writers wrote $8.1 billion. “With the current rules in place, TD and RBC are chewing their way in ever-increasing chunks of the personal lines pie,” MSA Research Inc. president and CEO Joel Baker wrote in the report. “Their growth has far outstripped broker writers and other non-bank writers by huge margins. “Their share of the noncommercial space effectively doubled since 2000 from 5.3% to 10.6% in 2009, while brokers saw their share slip and other [non-bank] direct writers’ shares effectively went nowhere.”
Regulation NEW BRUNSWICK OPPOSITION VOWS TO INCREASE MINOR INJURY CAP LIMIT IF ELECTED The New Brunswick Progressive Conservatives say they will increase the cap on soft tissue injuries if elected this fall. By how much remains to be seen, according to Times & Transcript. “The specific amount of how much will be based on a three-month review upon tak-
ing office,” Jody Carr, MLA for Oromocto is quoted as saying in Times & Transcript. Carr is the opposition critic for areas of interest relating to justice and consumer affairs; attorney general; courts of New Brunswick; New Brunswick Credit Union Deposit Insurance Corporation; New Brunswick Insurance Board; Office of the Consumer Advocate for Insurance; Office of the Conflict of Interest Commissioner and policy development. “We want to be responsible rather than just pull a number out of a hat,” Carr said in the Times & Transcript. “We want to make sure it's a responsible cap so we don't see an increase in rates.”
MANITOBA REGULATOR REQUIRES BROKERS TO HAVE AN E&O FRAUD ENDORSEMENT Manitoba licensed insurance agents are now required to have an endorsement that covers fraud and dishonest acts as part of their mandatory errors and omissions insurance. The amendment to the Insurance Agents & Adjusters Regulation was implemented on May 31, 2010. It allows for a one-year transition period.
Claims ALBERTA SETS RECORD WITH $400-MILLION HAILSTORM Alberta's July 12 hailstorm caused a record-setting $400 million in insured damages, the Insurance Bureau of
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Canada reports, citing data from PCS-Canada. The amount establishes a new record for insured hailstorm damage in Canada. The previous record was set in Calgary in 1991, when a 30-minute storm generated roughly 62,000 claims and $342 million in home and auto property damage. Noting deadly windstorms in 2009 that caused $347 million worth of insured damage in Alberta, Doug Noble, IBC's vice president of Alberta and the North, commented: “There is no doubt we are seeing more and more the impact of severe weather in Alberta.”
Gaudet launched a civil tort suit against Vetter related to a 2005 automobile accident. Gaudet demanded that State Farm hand over any and all documentation the insurer had collected on him, argu-
ing that to collect evidence and to use surveillance without his knowledge or permission is a violation of his rights under PIPEDA. State Farm argued the evidence fell outside the scope
of PIPEDA and that it was protected by client-attorney privilege. The insurer argued further that it was not within the privacy commissioner’s jurisdiction to investigate the claim.
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September 2010 Canadian Underwriter 13
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PROFILE
Bridging the Gap Vanessa Mariga Associate Editor
IBAC presidentelect Lyle Fraser sees brokers as the bridge between the complicated, technical world of insurance and consumers’ day-today lives. Fraser Lyle, president-elect of the Insurance Brokers Association of Canada (IBAC), admits that buying a brokerage is an odd way to foray into a career in insurance. Lyle, a Vancouverite and president of Lyle Insurance Services, graduated with a business degree from Simon Fraser University in 1981. He moved around the country a bit, always working in sales, before returning to British Columbia’s lower mainland. “I have to stay in sight of the ocean,” he jokes. “I have lived in a lot of different provinces over my lifetime, the prairies and Ontario, but the smell of the sea kept drawing me back.”
Sometime in the early 1990s, a family member who worked in the insurance industry suggested that a career in insurance might be what Lyle needed. After considering the suggestion for a year or two, he decided that his background in sales, combined with his desire to work with people, would be a good fit for a career in brokering. So, he enrolled in classes to obtain his CAIB designation. Together with his wife, Nancy Lyle, he bought a small brokerage in Abbotsford, B.C. in 1994. “There was a steep learning curve for me, because the business of running a brokerage was foreign to me,” he said. “You take your book learning and apply it to the real world and eventually they do match. I sort of did things backwards than most people would do. Most people start as a junior person and then work their way through it. I jumped in with both feet.” The immersion was a success. Eventually Fraser and Nancy expanded the business to open a second office in Surrey, B.C. They have plans for a new location, also in Abbotsford, in Fall 2010.
14 Canadian Underwriter September 2010
Lyle admits his love of learning drew him into the business initially, and kept him in it. “You never get old at this job,” he says. “It’s always changing. You’re always challenging yourself.”
I sort of did things backwards than most people would do. Most people start as a junior person and then work their way through it. I jumped in with both feet. But for Lyle, the real gratification of being a broker comes from serving as a translator or interpreter, bridging the gap between the technical, jargon-filled language of insurance and a consumer’s everyday life. “What I think is really neat is to take a technical item and be able to relate it to people on a one-on-one basis so that it makes sense to them,” he says. “It’s not something written in policy wordings. It’s something that people can say: ‘Ah! That’s how it works.’
“Watching people walk out of the office with the ‘A-ha!’ moment, that interface makes brokers, in my view, a valuable resource to consumers. Because without that, they would have no idea of what they’re buying.” Lyle likens these days of Internet connection and direct supplier contact to performing a medical self-diagnosis on the Web. “You can diagnose yourself via the Internet and then look for a prescription online. But without really knowing which questions to ask, or without all of the background knowledge and expertise, you could be opening yourself up to some really big problems.” Online transactions certainly serve a purpose, he adds. Brokers should not shun digital media completely as a means of communication. But such media should augment, not supplant, other existing means to offer the insurance product to consumers. “We have to, as brokers, still be able to offer the consumer choices of when and how they want to be contacted and whether that should be through a simple phone call, a reminder notice in the mail, an email or
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even Twitter or Facebook,” he says. “We have to as brokers embrace technology, and how we communicate with consumers can be a hybrid of direct contact and contact through electronic means. It can be a spectrum.”
THE YEAR AHEAD Prior to joining the ranks of IBAC three years ago, Lyle served as president of the Insurance Brokers Association of British Columbia. Shifting from a regional focus to a national focus has been a bit of a challenge, he admits. “It took me a while to get there, but the diversity of IBAC’s members is a really great thing.” Already the association is ramping up for the 2012 review of the Bank Act, he says. In October 2009, federal finance minister Jim Flaherty announced he would amend legislation to make it illegal for a bank to retail or market its insurance products on its banking Web site. In other words, it would extend the rules of a physical branch to the Internet. Brokers are still patiently waiting for the official wording of the amendment, but Lyle remains confident the forthcoming changes will reinforce the origi-
nal intent of the legislation. “For me, [Flaherty’s announcement] doesn’t represent a huge shift in how the government is viewing things,” he says. “It’s more of a focus on reinforcing what the original intent of the legislation was. We’re still waiting for Mr. Flaherty to put those amend-
ments forward, but we’re confident that he understands the issues. It’s just unfortunate that there’s been some freedom taken with the intent.” As IBAC awaits the final word on the amendments, it will push forward with other initiatives, he continues. For example, the as-
sociation is working out the final details with Laurentian University in Sudbury, Ontario for a masters program in insurance. The program is scheduled for launch in September 2011. IBAC is also buffing up its educational offerings for its existing membership. The benefit of providing more continuing education opportunities is two-fold, Lyle says. First, it will satisfy the existing broker force’s need for ongoing professional development. Second, it might help to draw more people down the career path. For potential recruits asking ‘what’s in it for me?’ IBAC will provide tools to help them advance and develop their careers as they see fit. “It’s a buffet of education and how you want to load up your plate is up to you,” he says. IBAC will also continue its outreach to the consumer, he adds. In 2011, a new television commercial will be developed and aired that “further reinforces our connection with the consumer and what it means to them as value-added,” he says. Lyle remains enthusiastic and energized about the upcoming year. “It’s full-speed ahead. Just watch us.”
September 2010 Canadian Underwriter
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No Risk in
Collaboration Edward Robertson
Principal, ER Technical Inc.
“Do you still need to convince others in the organization that risk assessment is worthwhile?” I recently put this question to a director of enterprise risk management (ERM) and a leader in ERM implementation among insurance firms. I had met her at an ERM event, at which time she was based in Canada. She did the job so well she got called to the U.S. head office in 2009. “We’re past that stage” she replied. “Once they see that you add value, they invite you back.” Her answer was most encouraging, especially given disheartening survey results.
SURVEY RESULTS Canadian Underwriter reported online in July 2010 a survey that found only 6% of organizations surveyed expressed confidence their organizations were “extremely effective” at risk assessment. This finding echoes at least five other studies going back to 2008; each suggested
16 Canadian Underwriter September 2010
global insurance and financial services firms, among others, showed little confidence in their ability to assess risk. If people don’t have confidence in their risk assessment process, then clearly it is not addressing their concerns. Worse, it can be superficial and narrowly conceived.
RISK ID AND ASSESSMENT PITFALLS Insurance firms are at different stages of ERM maturity. Auditors and risk managers who have rolled out compliance initiatives with a view to probity and sound financial reporting sometimes treat ERM as the same sort of exercise.This can result in a rather narrow view of risk — a focus purely on financial measures — while ignoring the broad spectrum of risks, both strategic and operational, that ERM should contemplate. Senior managers characterize risk in the language of capital management.Yet it is necessary to think of risk in relation to underlying issues. The real stress test of a financial model is not to alter the input variables, but to examine the assumptions built into it. Major initiatives and the strategic direction itself are susceptible to risks identifiable in advance of material losses.
Illustration by Sandi Nichols/www.threeinabox.com
Risk managers can demonstrate added value by undertaking a collaborative effort to identify and assess risk.
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Even if a broader view of risk is sought, the risk ID process can easily be ruined. Listing “the Top 10” risks, brief keywords (e.g., “budget risk”) or, conversely, long risk descriptions are all ineffectual. Risk managers who conduct interviews and surveys with lax methods will not detect the frame of reference and assumptions shifting in the minds of respondents. They will not collect real risk, but rather perceived and alarmist risk from disparate levels and time frames. The results are not compelling. The key question is: What kind of risk assessment process truly adds value in an enterprise risk management program?
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In an operational review, risks are indeed detectable: • in implementation plans for a new policy; • in next year’s HR plan; • in the development and launch of a new product; or • in supply chain defects affecting the credit worthiness of a potential acquisition. Risk practitioners who lead a thorough process to discern such risks are
ADDING VALUE THROUGH ASSESSMENT The only kind of risk identification and assessment process that adds value is the one that solves business problems. Risk assessment conducted in workshops using a rigorous process is the preferred initial method; this is what my ERM director acquaintance had done. She found that this allows multidisciplinary project teams to enter into a structured discussion to identify risk. Quantitative business intelligence can then be contextualized. It starts with a clearly delineated context, whether strategic or operational, and includes a statement of time frame, project goals, corporate values and stakeholder views and interests. A good context statement doesn’t need to be long, but it must be authoritative. It will set the boundaries and make explicit the criteria of your risk exercise. What constitutes a risk? Here again, conceptual difficulties hamper the process.The traditional view is that risks are exposures to assets in pre-defined insurable categories. But a firm could have its assets well in hand and secure while taking a strategic path straight over a precipice. This is because the strength, weaknesses, opportunities and threats (SWOT) discussion does not sufficiently assess social trends, geo-politics, technological innovation, market shifts and industry developments.
18 Canadian Underwriter September 2010
Risk assessment conducted in workshops using a rigorous process is the preferred initial method. This allows multi-disciplinary project teams to enter into a structured discussion to identify risk. no longer dependent upon the rating agency’s view of the world, nor upon the firm’s internal risk rating system. They are helping managers perform their own due diligence.When building a matrix, heat map or other risk profile, they rank risk in dollar terms if possible, but also in relation to goals, reputation and corporate values.
Solving business problems In a facilitated risk ID session, participants gain insight. They start to understand one another’s view of risk, reach consensus and set priorities together —
all in relation to the common context. Their conclusions are defensible as the basis for decision-making, especially when the team includes stakeholder reps. It follows that risk mitigation will pursue many imaginative avenues. Managers proactively resolve contradictions, clear the path to implementation and safeguard key interests. This is achieved not necessarily through risk financing, but in whatever field is required — including, for example, administrative action, technical tasks, better consultation, new partnering and innovation. People start to gain an appreciation that risk ID and assessment is actually going to help them be successful in analyzing that complex investment, implementing that program or launching that project. Furthermore, the ERM program need not be at a loss when faced with “black swan” events, a term coined by Nassim Nicholas Taleb to describe unpredictable events that have enormous social consequences. Future scenarios planning, for example, is a good complement to the risk ID toolkit: it offers a credible way to cope with high degrees of uncertainty, develop planning options and pursue strategic resilience.
Building a risk-aware culture A risk-aware culture truly integrates risk thinking into planning and management.The ERM director identified above insists that, apart from formal risk assessments, a “review and challenge” process is now a routine part of her firm’s committee work. She makes it sound like a friendly discussion that is all about building relationship and trust. But I detect a careful methodology: there is a defined context; there is a cross-organizational and multi-disciplinary consultation; and there is the discernment of actual risk in relation to the firm’s goals and objectives. Perhaps you are a risk manager in charge of rolling out ERM. If you can work with program leads to explore ways in which high quality risk assessment helps solve their business problems, they’ll invite you back.
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Destination: Opinion/Analysis
Frank Cain
Michael Palermo & Associates Insurance Limited
The views expressed in this article are the author’s own and are not intended in any way to imply or express the views of the Michael Palermo & Associates Insurance Limited brokerage.
Public Auto
Ontario auto insurance is failing in part because it has become a cistern for all manner of loss situations, even the kind that involves reckless and wanton driving, which were not originally contemplated to be insurable. A line in one of the songs from the ‘Sound of Music’ goes like this: “How do you solve a problem like Maria?” While I am certain there will never be a song written about it, much less a stage play or a movie, Ontario’s auto insurance is another “Maria.”That’s not to say the auto insurance product does not contain all the drama, pathos and theatre of a dramatic production, but solving the problem is going to take more than an inspiring verse and a memorable chorus. In fact, with the Ontario government already deeply entrenched in the laws governing auto insurance, how far is the next step to a system of auto insurance resembling that of the ICBC? And is that step going to be a forced
20 Canadian Underwriter September 2010
or bilateral decision? The question is, can it be prevented, or are we travelling headlong into such a state of radical change?
HOW WE GOT HERE What has brought us this far? Consider the following: at best, auto insurance in Ontario has been a tenuous product; at worst, it has been a blight upon the financial report. It speaks of a cyclical phenomenon that recurs with the contemptible expectation of an unwanted season. Its results can neither be anticipated with a considerable degree of accuracy, nor applied in any sense of reasonable recovery. Any attempt to base profit solely on the onus-waiver of so-called nofault is diminished by every effort to prove the system unconstitutional. It shows its most vulnerable side in conditions of economic sloughs, when unbridled gluttony often substitutes for the fundamental principle of indemnification. If the product has shown any consistency in its application over the past several years, it has been used to elaborate the minor circumstance and debase the catastrophic. Loss dollars paid rest largely on the premise of premium allocated by driver capability, only to be defused by unknown driver deficiencies. Cessation of collisions and repetitive breaches of the law is contemplated by the use of charging extreme premium dollars rather than through meaningful authoritative intervention. What used to be driving privilege is now a right of passage, flamboyantly decorated with civil rights laws.
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To even the casual observer, it should be apparent that change in auto insurance is long overdue. Currently, legislation has been enacted to control unnecessary medical costs and to bring some semblance of order and rationale to a runaway system that is hemorrhaging premium reserve for unqualified claims dollars. The general fear is that because the expectation of early recovery never runs true to form, the time it
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could take for the reforms to successfully modify the system might continue to draw dollars away from the premium coffer, perpetuating auto insurance to be more worrisome than workable.
WHERE WE ARE GOING Is there an alternative? Auto insurance has been stretched well into its breaking point because of its convenience of availability; it has been given an unwar-
IN THE MATTER OF THE WINDING-UP OF THE INSURANCE BUSINESS IN CANADA OF RELIANCE INSURANCE COMPANY- CANADIAN BRANCH (“RELIANCE CANADA”) AND IN CONNECTION WITH FAMILY UNDERWRITING MANAGEMENT LIMITED
IMPORTANT NOTICE TO POLICYHOLDERS, INSUREDS AND CLAIMANTS WITH POLICY LOSS CLAIMS On December 3, 2001, the Ontario Superior Court of Justice (the “Court”) ordered the winding-up of Reliance Canada, under the provisions of the Winding-up and Restructuring Act, and appointed KPMG Inc. as liquidator (the “Liquidator”). For the period from May 1, 1998 to August 31, 1999 (the “Period”), Reliance Canada wrote residential insurance protection and excess automobile insurance in the province of British Columbia through a managing general agency known as Family Underwriting Management Limited (“FUML”). The Liquidator of Reliance Canada hereby gives notice that the Court has fixed December 17, 2010 as the last day for policyholders, insureds or claimants with Policy Loss Claims to send in their claims for loss under or arising out of a Reliance Canada policy (including a policy written through FUML). If you have any claims for loss under or arising out of a policy of Reliance Canada (including any existing, new, future, contingent, known or unknown, reported or unreported, liquidated or unliquidated claims), you must complete a Proof of Claim for Policy Loss Claim (“POC”) and submit it to the Liquidator in accordance with the procedure set by the Court by Order made August 3, 2010. Please note that neither this Notice nor an Acknowledgment of Filing means or implies that any claim filed is payable as a claim under a policy or in the windingup of Reliance Canada, or that it bears any particular priority if it is payable. For further information or for a POC package, please contact KPMG Inc. in writing as set out below, or visit www.relianceinsurance.ca. This Notice is being given pursuant to the Order of the Court made August 3, 2010. KPMG Inc. Liquidator, Reliance Insurance Company – Canadian Branch, in Liquidation Bay Adelaide Centre 333 Bay Street Suite 4600 Toronto, ON M5H 2S5 General Inquiry Line: (416) 777-8333 Email Inquiry: reliance@kpmg.ca
22 Canadian Underwriter September 2010
ranted elasticity for lack of an alternative. It has become a cistern for all manner of loss situations, even the kind that involves reckless and wanton driving. It’s time to stop using the product for anything but the true “accident” — an “accident” interpreted to mean an “unexpected happening.” Perhaps the alternative could be split into two considerations. First, the government could take over the liability when the loss cause is attributable to flagrant and lawless driving resulting in unspeakable carnage. Added to this could be losses attributable to stunt driving and auto surfing.The fundamental precepts of insurance do not and have never considered that a loss cause other than an unexpected happening should visit the door of an insurance company. That is anathema to the very nature of insurance. The second alternative? That could be “Maria’s” swan song: as explained above, this might mean turning the current system into an excess function as adopted in B.C. The recent legislative reforms enacted on injuries and related costs under auto insurance may have the anticipated effect on profitability. Only time will tell. If they do not, then the reforms can be added to a long list of events that have exposed the dichotomy between premium favourable to the public and premiums sufficient for the insurance companies to make the system work. You can try, but I doubt if you will ever find the nexus. Right now, the auto reforms can be likened to a labour situation in which a position is created before the existence of a human resources department, with HR currently reviewing the position’s past performance. Let me make this point abundantly clear: insurance companies are doing the best they can to run their businesses successfully. It is simply that auto insurance has all the earmarks of no longer making the grade as a pure insurance product. All one can do is accept that reasonableness in claims will prevail. Otherwise, expect more and possibly cataclysmic legislation.
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Brewing Bigger Storms
Gordon A. McBean
Director of Policy, Institute for Catastrophic Loss Reduction
In late September 2003, Hurricane Juan hit Nova Scotia with sustained winds as high as 158 kmh, gusts up to 200 km-h and maximum wave heights of 20 metres.The result was eight deaths and major damage. According to the Canadian Hurricane Centre, it was the worst event of this type to hit the region in more than a century. Although Atlantic Canada receives most hurricane impacts, Hurricane Hazel in 1954 left a tragic and lasting impact in southern Ontario. Hurricanes that affect North America begin as small atmospheric disturbances over the eastern tropical Atlantic Ocean where the sea surface temperature exceeds 26°C. They form at least a few degrees away from the equator to gain the effect of the earth’s rotation, which also means that hurricanes do not cross the equator. The warm oceans provide much of the energy as the storm evolves from a “tropical depression” to a “tropical storm” and then, when the winds reach 118 km-h, to a “hurricane.” As they develop they move west and then north before losing strength over land or colder waters and gradually change their characteristics. As in the case of Hazel, hurricanes affecting Canada are often in a state of transformation into mid-latitude storms. This process can sometimes re-energize the storm and concentrate the winds in nar-
24 Canadian Underwriter September 2010
rower bands resulting in damages beyond what would have been expected from a decaying hurricane.Tropical cyclones or hurricanes strike Atlantic Canada about every one to three years (most often Newfoundland). The frequency is about one every six to seven years for Quebec and about once every 11 years for Ontario; hurricanes only very rarely affect British Columbia. Hurricanes, also called typhoons outside the western hemisphere, are classified on a scale of one to five (the Saffir-Simpson Scale) based on their wind speed and destructive potential (which depends as well on precipitation). A category 4 storm has winds in the range of 211-249 km-h resulting in storm surges in excess of 4 metres. This category of storm typically results in damage to roofs and major flooding, leading to evacuations. The higher winds of category 5 storms cause major damage to buildings with some complete building failure and flooding leading to massive evacuations. Hurricane Juan was a category 2 hurricane. No category 4 or 5 hurricane has made landfall in Canada in the last 150 years.
IMPACT OF CLIMATE CHANGE What is the impact of climate change on hurricanes? Since climate change will result in warmer oceans, with more areas above 26°C
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Climate change isn’t increasing storm frequency so much as it is creating stronger, more intense storms.
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and higher atmospheric water energy, a warmer climate would be expected to have more hurricanes. It is, however, more complicated because of other atmospheric factors such as wind shear and variations in El Niño-Southern Oscillation and monsoons.There is considerable scientific literature on this topic with analyses based on dynamical and modelling studies and detailed examinations of historical records from weather observations, satellite imagery and land-falling storms with human impacts. Each has its biases and sometimes the debate centres on these issues. This article will focus on the more intense category 4-5 hurricanes, which have the major impacts and where the scientific basis is stronger. In the 2007 Fourth Assessment Report of the Intergovernmental Panel on Climate Change the IPCC noted that although changes in hurricane frequency and intensity are masked by large natural variability, total global numbers of cyclones and cyclone days has generally decreased slightly since 1970, but there has been a large
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increase in numbers and proportion of strong hurricanes. The number of category 4 and 5 hurricanes increased by about 75% with the largest increases in the western North Pacific, Indian and Southwest Pacific Oceans. The numbers of hurricanes in the North Atlantic had also been above normal in nine of the last 11 years, culminating in the recordbreaking 2005 season. Based on a range of climate models, the IPCC concluded it is likely that future tropical cyclones will become more intense, with larger peak wind speeds and heavier precipitation associated with ongoing increases of tropical sea surface temperatures. In 2009, an international team of leading scientists prepared The Copenhagen Diagnosis, 2009: Updating the World on the Latest Climate Science. Several studies since the IPCC report have found more evidence for an increase in hurricane activity over the past decades. A complete reanalysis of satellite data since 1980 confirmed a global increase of the number of category 4 and 5 tropical cyclones. A 1°C global warming corre-
sponded to a 30% increase in these storms. However, they concluded that there is not yet “robust capacity” in models to project future changes in tropical cyclone activity.
EDUCATING ABOUT DISASTER RISK REDUCTION From a disaster risk reduction point of view it seems very appropriate to assume that there will be increasing risk of more intense hurricanes, with stronger winds and heavier precipitation. Combined with rising sea levels, this will lead to more extreme storm surges and flooding. When Typhoon Nargis affected Myanmar in 2008, 113,000 people died — most drowned in oceanic storm surges. On Aug. 19, 2005, a single heavy rain event in the Greater Toronto Area, not a hurricane, resulted in flooded basements and other damages. The event cost the insurance industry $500 million — the costliest insurance event in Ontario’s history. Heavier rain events, due to actual and transforming hurricanes does not fore-
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tell well for the future. Hazards will continue to occur but they do not need to result in disasters. It is our vulnerabilities that allow these events to become disasters. Actions to reduce disaster risk and adapt to climate change have proven to be effective. Bangladesh and Myanmar are both densely populated countries with low-lying deltas vulnerable to typhoons. In 1970,Typhoon Bola struck Bangladesh causing 300,000 deaths; in 1991, Gorki killed 139,000 people. Bangladesh instituted a 48-hour early warning system and educational and construction programs leading to effective community-based disaster preparedness and mitigation. When Typhoon Sidr struck in 2007, only 3,000 people died — tragic, but a much smaller death count than the previous events. Myanmar did not have disaster risk reduction systems in place when Nargis struck. Here in Canada, the first-ever Safer Living Home was completed in Prince Edward Island in November 2006. The home, paid for by The Co-operators
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and based on the Institute for Catastrophic Loss Reduction’s Safer Living Program, was designed and constructed to withstand winds of 200 km-h. New ICLR guidelines on reducing losses due to intense precipitation are now available. The United Nations International Strategy for Disaster Reduction has joined with the International Council for Science and the International Social
Sciences Council to create a new international research program, Integrated Research on Disaster Risk (IRDR). The program will address the challenge of natural and human-induced environmental hazards. Methods to reduce risk and curb losses through knowledgebased actions need to be built on disaster risk reduction research integrated across the hazards, disciplines (including natural, socio-economic, engineering and health sciences), and geographical regions. Research will focus on the characterization of hazards, including how they will change with climate, vulnerability and risk and effective decision making in complex and changing risk contexts.The desired legacy is that when similar events happen in the future there are major reductions in the impacts and loss of lives. Research and implementation of knowledge-based disaster risk reduction strategies can save lives and reduce losses, even as the intensity of hurricanes augments with a warming climate.
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Raising the Bar
Part I of a two-part series
Robert McDowell Financial Institutions and Services Group, Fasken Martineau Dumoulin LLP.
Koker Christensen Financial Institutions and Services Group, Fasken Martineau Dumoulin LLP.
This is the first part of a two-part series summarizing recent regulatory developments relating to reinsurance. The first part, published below, analyzes a draft of Guideline B-3–Sound Reinsurance Practices and Procedures. The second part, to be published in October 2010, will look at Draft Guidance for Reinsurance Security Agreements, which establishes a new regime for obtaining a capital/asset credit in connection with unregistered reinsurance. Canada’s solvency regulator, the Office of the Superintendent of Financial Institutions (OSFI), released a draft of Guideline B-3–Sound Reinsurance Practices and Procedures on Aug. 6, 2010, representing the latest development in its broader policy review of its regulatory and supervisory approach to reinsurance. It follows the release of OSFI’s Response Paper: Reforming OSFI’s Regulatory and Supervisory Regime for Reinsurance in March 2010. As expected, the draft guideline sets a high standard regarding reinsurance practices. The draft guideline applies to all federally regulated insurers, including Canadian companies and fraternal benefit societies and branches of foreign companies in respect of their insurance business in Canada (which are collectively referred to in the draft guideline as “FRIs”). The draft guideline takes a principles-based approach. However, in some areas, the draft guideline does set out OSFI’s expectations in a
28 Canadian Underwriter September 2010
relatively detailed manner. Consequently, members of the insurance industry who previously expressed concern that Guideline B-3 would be overly prescriptive will likely have concerns regarding the draft guideline. Comments on the draft guideline are due by Oct. 1, 2010. OSFI intends to release a final version of Guideline B-3 in the fall of 2010.The guideline is intended to become effective Jan. 1, 2011 and will be coordinated with OSFI’s recommendation that the 25% limit on unregistered reinsurance and the 75% fronting limit be repealed.
KEY PRINCIPLES As detailed below, Guideline B-3 outlines four key principles: 1) a sound risk management plan, 2) a sufficient level of due diligence, 3) clear terms and conditions in reinsurance contracts and 4) taking care to ensure policyholders are not adversely affected by the terms and conditions of a reinsurance contract. 1) FRIs should have sound and comprehensive reinsurance risk management plans, subject to the oversight of the FRI’s board of directors and implementation by senior management. OSFI expects FRIs to have a reinsurance risk management plan (RRMP), which should address the significant elements of the FRI’s approach to reinsurance — including the objectives for seeking reinsurance, risk diversification
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objectives, risk concentration limits, ceding limits and practices and procedures for managing and controlling reinsurance risks. The draft guideline says FRIs generally should not in the normal course of their business cede 100%, or substantially all, of its risks in the main areas in which they conduct their business. However, the draft guideline states a FRI may occasionally cede some or all of a specific line of business or a particular type of risk that is ancillary to its core business; cessions of 100% of existing lines of business may, depending on the circumstances, also be acceptable to OSFI. Given this approach, some uncertainty remains about when “fronting” will be treated as unacceptable. The draft guideline states a FRI must assess the adequacy and effectiveness of the reinsurance arrangements under its RRMP to ensure that exposures to large and catastrophic losses are adequately mitigated by reinsurance and that there are no gaps in reinsurance coverage. This may require stress testing of extreme but plausible scenarios. The draft guideline says the RRMP should be overseen by the board of directors and implemented by senior management. At a minimum, OSFI expects boards to review and approve the RRMP as part of its annual review of the enterprise-wide risk management plan. The board is also expected to establish internal controls and procedures relating to the RRMP and to ensure senior management has the appropriate experience and expertise to develop a RRMP. Senior management is responsible for ensuring the RRMP is operationalized. It is noteworthy that the draft guideline expressly provides that OSFI’s Guideline on Corporate Governance extends to reinsurance with respect to ensuring effective oversight and risk management policies and procedures. 2) A FRI should perform a sufficient level of due diligence on its reinsurance counterparties on an ongoing basis to ensure the FRI is aware of its counterparty risk and is able to assess and manage such risk.
30 Canadian Underwriter September 2010
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Credit risk is obviously a major concern for OSFI. OSFI expects FRIs to evaluate the ability of all current and prospective reinsurance counterparties to meet their liabilities under exceptional but plausible adverse events on an ongoing basis. The draft guideline provides the following examples of what FRIs should consider as part of their due diligence: • the reinsurer’s claims payment record; • the reinsurer’s expected future claims obligations; • the reinsurer’s balance sheet strength; • the reinsurer’s funding sources; • the reinsurer’s management, including the quality of its governance practices and procedures; and,
The draft guideline takes a principles-based approach. However, in some areas, the draft guideline does set out OSFI’s expectations in a relatively detailed manner. Members of the insurance industry who worried Guideline B-3 might be overly prescriptive will likely have concerns. • the reinsurer’s retrocession arrangements and the impact they may have on the FRI’s arrangements with the reinsurer. Due diligence is expected to be commensurate with the degree of exposure. It should not be any less when the reinsurer is a related party. The draft guideline makes it clear cedants are expected to do their own due diligence. Generally, they should not rely solely on third parties, including rating agencies and brokers. The draft guideline says OSFI expects a higher level of due diligence in respect of unregistered reinsurance. This includes a review of the unregistered reinsurer’s regulatory and supervisory regime, as well as its legal and insolvency frameworks. It also includes an assessment of how the reinsurer and its
affiliates are likely to react during a period of extreme but plausible stress. Conducting the sort of due diligence OSFI expects will likely be a source of significant new work for many cedants. Those concerned that OSFI is taking an overly prescriptive approach might be concerned about the approach taken in the draft guideline to articulating OSFI’s due diligence expectations. OSFI expects federally regulated reinsurers to conduct due diligence on the risk management and risk assessment criteria of ceding companies. This is a significant new regulatory expectation and it will be very interesting to see how it is applied over time. 3) The terms and conditions of the reinsurance contract should provide clarity and certainty on reinsurance coverage. The draft guideline says processes and procedures should be in place to ensure that comprehensive, written and binding contracts are executed before the effective date of coverage. If a comprehensive agreement cannot be executed until after the effective date of coverage, OSFI expects FRIs to: • obtain contractually binding, signed summary documents prior to the effective date of reinsurance coverage that set out specified terms; • address within the summary document any material issues most likely to arise, including all variable or unique agreement terms; and • ensure all comprehensive reinsurance contracts, including any amendments thereto, are signed by authorized persons within a relatively short timeframe (120 days is given as an example). 4) A ceding company, its policyholders and its creditors should not be adversely affected by the terms and conditions of a reinsurance contract. The draft guideline says the terms and conditions of a reinsurance agreement should not raise legal questions regarding the availability of funds to cover policyholder claims in the event of a cedant’s insolvency. Cedants should ensure all reinsurance contracts contain an insolvency clause (i.e., a clause spec-
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ifying that the reinsurer must continue to make full payments to an insolvent cedant without any reduction resulting from the cedant’s insolvency). Reinsurance contracts should not contain provisions that may limit a troubled or insolvent cedant’s ability to enforce the contractual obligations of a reinsurer (e.g., off-set and cut-through clauses). In a funds withheld arrangement, the FRI should ensure that the funds are under the continuous control of the FRI and form part of the property of the FRI’s general estate. OSFI expects all reinsurance contracts in which a FRI is a cedant to be subject to Canadian laws or to the laws of another acceptable jurisdiction. In the latter case, OSFI expects to receive a submission from the FRI’s counsel regarding why the applicability of nonCanadian laws will not disadvantage the FRI. Reinsurance contracts should also provide that any disputes will be subject to the non-exclusive jurisdiction of a Canadian court and that any foreign or non-Canadian counterparty has taken steps to ensure it may be served in Canada to commence a legal proceeding.
SUPERVISORY INFORMATION The draft guideline says FRIs must provide a copy of their RRMP and a complete description of all reinsurance arrangements to OSFI upon request. OSFI expects a FRI to promptly inform the regulator if the FRI makes a material change to its RRMP, or if a problem has arisen or is likely to arise in connection with its reinsurance arrangements.
CAPITAL/ASSET REQUIREMENTS The draft guideline states that if a FRI fails to meet the principles set out in the guideline, OSFI may not grant a capital/asset credit for the reinsurance arrangement, or it might adjust the FRI’s capital/asset requirements or target solvency ratios. The draft guideline also states that federally approved provincial or territorial reinsurers may lose their status if they fail to meet the expectations set out in the guideline.
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REINSURANCE DECLARATION The draft guideline states that a senior officer of a FRI should make an annual reinsurance declaration to the board addressing specified matters relating to Guideline B-3 and attesting that: • the reinsurance arrangements convey a true transfer of risk, • the FRI’s reinsurance arrangements are
properly documented and binding, and • all reinsurance arrangements with related parties are on terms and conditions at least as favourable to the FRI as market terms and conditions. When a deviation from Guideline B-3 has taken place over such year, the nature, extent and proposed plan to address such deviation should be disclosed to the board and to OSFI.
EN L’AFFAIRE DE LA LIQUIDATION DU SECTEUR CANADIEN DES ASSURANCES DE RELIANCE INSURANCE COMPANY – FILIALE CANADIENNE (« RELIANCE CANADA »)
AVIS IMPORTANT À L’INTENTION DES TITULAIRES DE POLICE, DES ASSURÉS ET DES DEMANDEURS AYANT PRÉSENTÉ DES RÉCLAMATIONS D’ASSURANCE Le 3 décembre 2001, la Cour supérieure de justice de l’Ontario (la « Cour ») a ordonné la liquidation de Reliance Canada, en vertu des dispositions de la Loi sur les liquidations et les restructurations, et a nommé KPMG Inc. à titre de liquidateur (le « liquidateur »). Le liquidateur de Reliance Canada informe par la présente les titulaires de police, les assurés et les demandeurs ayant présenté des réclamations d’assurance que la Cour a fixé au 17 décembre 2010 la date limite à laquelle ils devront soumettre au liquidateur leurs demandes d’indemnisation relatives à la police de Reliance Canada. Si vous avez de telles demandes d’indemnisation (y compris toute demande existante, nouvelle, à venir ou éventuelle, connue ou inconnue, signalée ou non signalée, d’une somme déterminée ou indéterminée), vous devez remplir une preuve de réclamation pour réclamation d’assurance et la soumettre au liquidateur selon la procédure établie par ordre de la Cour le 3 août 2010. Veuillez prendre note que ni le présent avis ni l’accusé de réception ne signifient que la demande déposée soit payable en tant que réclamation d’assurance ou dans le cadre de la liquidation de Reliance Canada ni, si elle est payable, qu’elle fasse l’objet d’une priorité particulière. Pour obtenir de plus amples renseignements ou pour obtenir les documents relatifs à la preuve de réclamation, veuillez communiquer avec KPMG Inc., à l’aide des coordonnées fournies ci-dessous, ou visiter le site www.relianceinsurance.ca. Le présent avis est publié par suite d’une ordonnance rendue par la Cour le 3 août 2010. KPMG Inc. Liquidateur Reliance Insurance Company – filiale canadienne, en liquidation Bay Adelaide Centre 333, rue Bay, bureau 4600 Toronto (Ontario) M5H 2S5 Renseignements généraux : 416-777-8333 Courriel : reliance@kpmg.ca
September 2010 Canadian Underwriter
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Inn Opening s e t a ova g d tion the o o l F Increasing water damage is going to challenge the insurance industry to become more innovative.
Blair MacLeod President, B-eco Solutions Inc.
Increasing water damage might just be the precursor to innovation in the insurance industry. One of the many challenges facing our industry involves insured losses from water damage. In the article ‘From Fire to Flood’ (Canadian Underwriter, June 2009) Glenn McGillivray, managing director of the Institute for Catastrophic Loss Reduction, makes the following statement: “Indeed, basement flooding is a major concern for many (if not most) urban municipalities — and, thus, insurers — in Canada. Increases in the frequency and intensity of heavy rainfall events exacerbated by rising urbanization, deteriorating infrastructure and climate change will increase basement flood risk in the future. Effective management of flood risks requires improving sewer infrastructure, and also the cooperation of more informed homeowners.” The topic has seeped into the upcoming agenda at the National Insurance Conference of Canada, which is to be held in Montreal on Sept. 19-21, 2010. The NICC features a panel discussion exploring the topic ‘Water and Brimstone – The New Reality in Property.’ The following de-
32 Canadian Underwriter September 2010
scription of the panel discussion sets the stage: “Damage from water and other climate related perils have emerged in recent years to replace fire and theft as the largest claims cost for Canada’s property insurers. Lifestyle changes, aging infrastructure and change in the climate are some of the factors that have contributed to the rapid and sustained increase in insurance claims.” It seems to me that in order to properly address the water infiltration challenge, we need to understand the causes of water entry into basements.This can occur as a result of torrential rain storms, winter/spring melts and deteriorating municipal infrastructure. Poor home design can exacerbate the issue. This includes an absence of evestroughs/downspouts, improperly positioned downspouts, poor grading around the foundation, deteriorating weeping beds, lack of sump holes and a lack of functional sump pumps.
IDENTIFY AND EXAMINE POINT OF LOSS In sewer back-up claims, damage most commonly occurs in basements with a poured foundation (usually concrete).This usually involves at least some part of the basement area being finished. Although basements of old often were completely unfinished, today’s basements often include bedrooms as well as a family’s prime liv-
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ing space, increasing the risk of more substantial losses if water enters the basement. Here are a few characteristics of a typical basement that might augment the cost of the claim: • Flooring often features carpet, laminate or wood flooring with sub-floor, increasing demolition and restoration costs. • Furniture is often made using a soft material, close to floor level, and not ideal for a basement. • Contents are often plentiful and stored in cardboard boxes on the floor. • Electronics are often placed on floor level. With respect to personal property, many would agree that in most sewer back-up and grey water claims, an inordinate amount of contents end up in landfill sites at great cost to insurers and the environment. However, some innovations with respect to treatment of many of the contents have demonstrated some success. These include the use of ultrasonic cleaning equipment, which has been able to save some items that otherwise might have been written off. Contents to be discarded should be itemized before they are removed from the loss site. Typically a contractor initially scribbles down a list of contents to be disposed of, the insured completes the inventory and the adjuster performs the loss calculations. The process involves a lot of hand-written work. The process is long, frustrating, often flawed by errors and visually unappealing.
BUILDING RESTORATION With respect to building restoration, two response phases include emergency restoration and the ultimate repair. During the emergency response phase, the contractor will focus on extraction of water, drying with fans, dehumidifying and a ‘tear-out’ of building
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components deemed unresponsive to treatment. Construction materials removed during the emergency clean-up response include drywall, flooring and sub-flooring, etc.They usually end up in landfill sites. The generally accepted approach to the final restoration involves returning the risk to its previous glory (even if it isn’t water resistant). In view of what’s been said above, there are a number of opportunities to launch innovative projects.
Dealing with the issue of sending water-damaged contents to landfill sites provides a perfect example of a partnership opportunity that might be explored between insurers, municipalities and the construction industry. Partnering with others Failing infrastructures, including municipal sewer lines, pose challenges that can best be addressed when all the stakeholders begin to communicate and collaborate. The stakeholders include local, provincial and national levels of government, as well as the community associations and the insurance industry. The insurance industry is already sponsoring research for potential solutions to the water damage challenge. For example, it is currently behind the development of a new municipal risk assessment tool, which is designed to aid insurers and municipalities assess municipal their water damage risks. However, there may be further opportunities to partner with the construction industry and various levels of govern-
ment. Dealing with the issue of waste going to landfill sites provides a perfect example of such a partnership opportunity that might be explored between the insurance industry, municipalities and the construction industry.
Educate the general public Acknowledging that the Insurance Bureau of Canada (IBC) has launched a public awareness campaign on this issue, the public needs to hear more from the industry about how to deal with claims arising from water in the basement.What if every adjuster is provided with a check list when they attend a loss site? The checklist could form the basis upon which to review with the insured what might be done to make the policy holder’s basement more water resistant. At renewal, brokers or insurers could send a flyer reviewing best practices and offer discounts to insured’s that follow the practices. Perhaps insurers could provide an audit service to randomly selected policy holders and then show anonymized results of a video audit on the company Web site. Differentiate your policy or service Look at your own processes to see if they can be made more efficient, such as how you deal with your contents inventories. Offer your policyholders more information on how to avoid losses and reward policyholders’ pro-active actions. Offer more technology-based options for services. Look at different options instead of merely restoring the water damaged basement to its original state. Create an innovate-or-die culture in your organization, and ensure it works from the ground up and is rewarded from the top down. Organizations deciding to create a culture of innovation pervading the entire organization will not only survive, they will thrive!
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Building Blocks New expectations borne from the global financial crisis are spurring several trends in risk management, including the hiring of chief risk officers, the creation of independent risk committees at the corporate governance level and more comprehensive stress testing of companies’ financial strength. Some, but by no means all, insurers are leading the way in creating a new corporate culture of risk. BY Craig Harris
36 Canadian Underwriter September 2010
Insurers
are in the business of insuring others’ risks, but they are increasingly expected to look after risk in their own backyards. Property and casualty insurance companies’ balance sheets were not immune from the negative effects of the global financial crisis, which prompted a more thorough examination of how different variables can interact to cause unexpected (and unpleasant) consequences. While banks were at the forefront, several high-profile insurers were caught up in the turmoil of the market meltdown. In some instances, the very language of risk assessment and modeling has changed in the wake of the crisis. It is now not at all uncommon to hear chief risk officers talk about tail risks, correlations, aggregations of risk and ripple effects. Seemingly esoteric or arcane, these discussions relate to the very real and tangible scenarios of “black swans,” in which a number of different variables can coalesce to form a one-in-one-hundred-year event, wiping out billions of dollars in shareholder value and shaking to the foundations institutions that were previously thought to be “too-big-to-fail.” Several factors, including the widespread impact of the financial crisis, raised regulators’ expectations and emphasized the link between solid risk management and business performance. This in turn led to visible signs of change among insurance companies. For example, there are more examples of chief risk officers (CROs) at top insurers, with broader roles across the organization. Independent risk committees have formed at the corporate governance level. Stress testing is being tailored specifically to individual company risk profiles.
September 2010 Canadian Underwriter 37
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Even in the best of times, it is rare to find an insurer willing to take on all of your commercial property risk. That is, however, exactly what FM Global does. Even in these times. Why is this important? Because it’s a reflection of our belief that we can help you prevent loss in the first place. That’s why we’ve created a $100 million state-of-the-art research campus and employ more than 1,700 engineers around the world working to minimize your risk. In fact, for 175 years we’ve linked our underwriting to loss prevention engineering, culminating in a streamlined, efficient and stable insurance program. An approach that clearly distinguishes FM Global from insurers that do not base their underwriting on engineering assessments. Which is to say, all of them. We feel our clients are better protected when we assume all the risk ourselves. It’s a unique approach that makes all risk transparent, so there are virtually no surprises. Even when our clients do have losses, they tend to be smaller and less frequent. In our case, it’s all about understanding risk. Then assuming the responsibility for it. Underwriting through loss prevention engineering. That’s insurance evolved.
Insurance Evolved
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Building Blocks “I get a sense that, after the financial crisis, more organizations asked themselves: ‘Did we have someone asking the key questions about risk?’” says Gregg Dunn, chief risk officer for Aviva Canada. “There is a different focus now. Certainly groups like the Office of the Superintendent of Financial Institutions (OSFI) are looking more closely at risk through the depth of questions they are asking.”
the organization and integrated into business decisions, are the real driving force behind change. “This is not just about responding to regulators and filling out forms,” notes Alister Campbell, president and CEO of Zurich Canada. “There is a very real business benefit to incorporating an ERM strategy into your organization — and a very real downside to taking it too casually.”
The Changing Landscape of Risk OSFI says it has started to notice a change in the landscape as well. “Many of the larger Canadian incorporated property and casualty federally regulated (companies) have recently been enhancing their risk management capabilities, including hiring CROs and strengthening board governance processes in response to OSFI’s rising expectations,” says Penny Lee, senior director of OSFI’s property and casualty group. “Boards are being required to review and approve many of the risk management tools such as Dynamic Capital Adequacy Testing (DCAT), other stress testing, reinsurance risk management programs and internal capital target setting. This remains a focus for OSFI over the near term and we intend to continue working with the industry on this front.” Insurers stress this is not just a kneejerk response involving ticking off boxes to satisfy regulatory concerns. Rather, it is a wholesale examination of risk appetites and risk profiles geared to bottom-line business results. “Our risk appetite states we will not assume risks that are not well understood at the appropriate levels,” notes Michele Hengen, chief risk officer for The Co-operators Group Ltd. “This is unlike some companies hurt severely in the recent economic crisis that (faced) risk exposures that were not fully understood. We did not have this experience, which is a testament to our current risk management philosophy.” Others contend that enterprise risk management (ERM) models, in which a comprehensive set of external and internal risk factors are measured across 40 Canadian Underwriter September 2010
There is a very real business benefit to incorporating an ERM strategy into your organization — and a very real downside to taking it too casually. These trends and exercises in more active risk management are reinforced in other studies of insurance companies and risk. In a 2009 survey of more than 300 insurance executives from around the world, KPMG International found “the current environment has sharpened the focus of insurers on risk management… At board level, the proportion of time spent on both risk management and capital management has increased substantially — from 23% to 36%.” The survey, conducted by the Economist Intelligence Unit in March and April 2009, resulted in two publications from KPMG: A Glimmer of Hope and Getting
the Balance Right, both released in 2009. In these, KPMG observes: • the role and responsibilities of the CRO became more far-reaching, now embracing strategic activities; • the influence of regulators on risk management is increasing; and • insurers rate themselves highly on most aspects of risk management. This attention to operational risk has not always been the norm for property and casualty insurers. Although insurers are clearly “in the business of risk” and specialize in underwriting, pricing and risk selection, the application of best practices in risk management to their own operations has been uneven. In some instances, it has lagged behind that of their financial peers. “While the property and casualty industry has perhaps been ahead of the other sectors in the management of specific risks, the establishment of the CRO position and the processes that accompany it, which allow for quicker assessment of risk across an entire organization, have been slower to develop in the p&c industry to date,” OSFI superintendent Julie Dickson said at a risk management seminar for insurance companies in November 2009. “OSFI recognizes that the p&c industry has a diversity of institutions in terms of their size, number and complexity of business lines and risk appetite… However, I cannot overemphasize the importance of having an organization-wide enterprise risk management process in place.” For this article, 10 of the top Canadian property and casualty insurance companies (as ranked by net premiums written) were contacted about their approach to risk management. Four companies responded; others (both Canadian-owned and foreign branches or subsidiaries) either declined to participate or did not respond. The four companies that responded were Aviva Canada, The Co-operators, Intact Financial and Zurich Canada.
Establishing CROs and Risk Committees For these four companies, the re-evaluation of risk and the formalization of risk functions and models have taken place
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Building Blocks over the past two or three years. CRO positions were created at Intact Financial (January 2008), The Co-operators (April 2008) and Aviva Canada (March 2010). At Zurich Canada, a Canadian risk manager position has existed for the past 15 years, according to Campbell. In the example of both Aviva and Zurich, CRO positions for the group of companies have existed for several years. In addition, these insurers have all created Canadian-based risk committees at either the board of director or senior management levels within the past two years. Intact Financial, for example, formed an enterprise risk committee made up of senior officers that reports on an ongoing basis to the CEO, quarterly to the audit committee and at least annually to the board of directors, according to Claude Désilets, the company’s chief risk officer. “The committee, chaired by myself, identifies the risks that could materially affect our business and measures them from a financial or other impact standpoint,” he notes. “The committee also monitors the risks and develops the risk avoidance and mitigation strategies when the potential risks are not in line with the level determined by the board.” Similarly The Co-operators established a management risk committee in 2008, consisting of the CEO and senior executives. “In 2009, we worked closely with our management risk committee and board of directors to develop the top risk issues for the organization and then to define our risk appetite,” says Hengen. “We have a clear vision on which risks we desire and how much, and which risks are not to be tolerated.” Aviva’s group operations also have a separate risk committee at the board of director level, according to Dunn, while the Canadian operations maintain an audit and risk committee with specific and separate accountability for risk management. “Our risk management function is focused on the link between risk and business strategy,” he says. “There is a clear distinction between risk and audit, with the latter focusing more on compliance and controls. Our approach 42 Canadian Underwriter September 2010
and biggest priority is to align our approach to risk with our business units and embed our understanding of risk into day-to-day decision making.” Zurich’s group operation has had a separate executive risk committee in place since 2006, which “puts us ahead of the curve, I think,” says Campbell. “This committee establishes Zurich’s
Although insurers are clearly “in the business of risk” and specialize in underwriting, pricing and risk selection, the application of best practices in risk management to their own operations has been uneven. risk policy and the risk assessment flows directly from the board of directors. It is up to the senior executives in all our regions to implement that policy.” In Canada, Zurich has a local risk management committee, which is composed of the senior executive team and meets monthly, according to Campbell. “We regularly review specific areas of risk, including financial, insurance and operational risk, as well as regulatory compliance.”
While insurers have created their own risk management committees at the executive level, regulators are also carefully monitoring corporate governance and risk. This year, OSFI established a new corporate governance unit to supervise risk-based activity at the senior level of financial institutions. “A key part of the work of our new corporate governance unit will be a review of risk governance practices across our largest banks and insurance companies,” says Lee. “A major area of focus will be risk appetite — how it is defined, measured, monitored, controlled and reported.” Several property and casualty companies have sought to better understand their risk exposures and appetite through risk profile workshops. Campbell says Zurich Canada conducts an annual, daylong risk profile exercise that “identifies anything that could go wrong and the probability of it happening on a, for example, one-year, five-year or even 100-year frequency. This is a very useful exercise and from it we develop what we call our ‘total risk profile.’” Similarly, The Co-operators engages in risk-planning scenarios. “A thorough risk evaluation is regularly performed at the company level through risk planning workshops held with the management teams to determine the inherent and residual likelihood and severity of all risks in our universe,” says Hengen. “This is designed to be a cyclical process and our group of companies have now undergone their second round of risk profiling. New this fall is the expansion of risk profiling at the business level.” A common thread among insurance companies is the notion of taking risk management away from merely being a separate function geared towards compliance, and instead integrating it directly into business units. “As a CRO, I would not be doing my job if I was just checking off the boxes,” Dunn says. “Our risk management role is to be an independent, but friendly challenge to the business decisions we are making on a daily basis. We want to ensure that we are making valid risk decisions at the business unit level.”
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CLOSING DOWN THE FOOD BANK LOOKED LIKE THE ONLY VIABLE OPTION.
Sam knows what it’s like to be hungry and homeless. Since the 1980s the food bank has been his lifeline; for years it was the only place he could get regular hot meals for himself and his family.
WE SAW 112,000 GOOD REASONS TO HELP IT STAY OPEN.
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But in 2007 the distribution centre faced a serious threat of closure. Vir tually derelict, and unimproved since 1950, the building was considered unsafe. Yet they couldn’t shut the doors as they still had people to feed.
of people involved, and it was clear that a flexible, innovative and creative insurance solution would be required. This was just the kind of challenge that we have built our reputation on in the construction industry. The astonishing result was a greener, more efficient and more sustainable building that will be able to continue to provide food to over 200 facilities that assist over 112,000 people.
A local construction coalition stepped in with a radical idea to completely renovate the facility using building techniques that would allow the food bank to reduce their operating costs and to become a leader in energy efficiency.
Times have changed for Sam. He has a home, a job and food on the table every day. And for the last seven years, whenever he can, he has volunteered help at the food bank distribution centre – providing a lifeline for those less fortunate than himself.
And they could do all this without disrupting the ongoing work of the centre.
It’s amazing what happens when there is a real hunger for change.
They were going to need specialist help to insure the building works, though. Not least because the whole project was being done on a ‘pro-bono’ basis. Add to that the enormous complexity of the build and the sheer number
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Underwriting progress since 1710
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COVER STORY
Building Blocks Campbell cites a specific example at Zurich of how risk assessment and management is pushed directly to the level of business decision making. “One of the issues we identified as a risk management issue in our company was the lack of a modern claims management system,” he says. “This fell outside our risk tolerance level and justified the business case for a substantial investment in a new claims system, with which went live in June.”
Insurance company sources say they are in compliance with Guideline E-18, as well as the DCAT. In fact, many say they are moving beyond these regulatory measures to customize stress testing to their individual needs. “In addition to
Stress Testing Another rapidly evolving area of risk management for insurance companies is stress testing. In December 2009, OSFI put out Guideline E-18, which sets out expectations for federally regulated financial institutions. In it, OSFI defines stress testing as “a risk management technique used to evaluate the potential effects on an institution’s financial condition of a set of specified changes in risk factors, corresponding to exceptional but plausible events.” Guideline E-18 essentially widens the parameters for how and what insurance companies (and other firms) are expected to measure when it comes to their financial stability and solvency. In particular, OSFI notes the financial market turmoil has prompted more specific attention to certain risks, such as: • risk mitigation; • securitization and warehousing risks; • risks to reputation; • counterparty credit risk; and • risk concentrations. Insurers can use sensitivity testing, which measures changes in one or a limited number of risk factors over a shorter time horizon. Or they can employ scenario testing, which typically involves tracking changes in a number of risk factors, as well as ripple effects, conducted over a longer time period. OSFI notes one example of stress testing for insurers is the existing DCAT. But it also “expects to see evidence that stress testing is integrated into institutions’ internal risk management processes.” In addition, the regulator stipulates: “board and senior management involvement in the stress testing program is essential for its effective operation.” 44 Canadian Underwriter September 2010
While the property and casualty industry has perhaps been ahead of the other sectors in the management of specific risks, the establishment of the CRO position and the processes that accompany it, which allow for quicker assessment of risk across an entire organization, have been slower to develop in the p&c industry to date. the required stress tests like the annual DCAT and those required by insurance regulators, we are regularly running stress tests,” says Désilets. “These stress tests, while aimed at covering the full array of potential adverse scenarios, tend to focus on the investment risks and underwriting risks, including the risk of natural catastrophes. Refinements have taken place and continue to take place, in particular in the areas of correlation, tail risks and ripple effects.”
For Dunn, regulatory stress tests are a “minimum base we check to make sure our models are compliant. Unlike some companies that run a model to satisfy regulators, we are using our stress test models for business decisions and strategic purposes.” Campbell notes that in addition to regulatory compliance stress tests, the Zurich group of companies has developed a “top-down risk assessment model,” which identifies a set of variables for stress testing that change on a regular basis. “If we are doing portfolio management across the group of companies, for example, our group-wide diversification may mean that the effect of one variable is marginal,” he says. “But if you push it down to the local level, that variable may have a much greater impact. We don’t always know what this top-down risk assessment will be in any given year, so it certainly keeps us on our toes.” The Co-operators is in the process of developing a formal stress testing program that will fulfill regulatory requirements, “while also being tailored to suit our specific needs,” according to Hengen. “The more significant differences from our current stress testing practices include: • board and senior management involvement in creating the scenarios to be tested as well as risk mitigation strategies; • increased focus on ensuring that selected scenarios are ‘extreme enough,’ capture risk correlations and aggregation and include non-historical (emerging) risks; • formal documentation, including roles and responsibilities; • aggregation of risk across the entire organization; and • development of a process to embed the results into planning and decisionmaking.”
Choosing the Right Data One of the weak links in stress testing and risk management in general for insurance companies may be access to reliable, quality data, according to the KPMG International study. “Insurers have long complained about the quality and
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COVER STORY
Building Blocks
As a CRO, I would not be doing my job if I just checked off the boxes. Our risk management role is to be an independent, but friendly challenge to the business decisions we are making on a daily basis. We want to ensure that we are making valid risk decisions at the business unit level. availability of data, and forthcoming regulatory requirements will expose even greater shortcomings if nothing is done to address the problem,” KPMG states in the publication Getting the Balance Right. “Many insurers have hundreds’ if not thousands’ of legacy systems which make it difficult to extract the data they need and present it in a consistent format.” Campbell says insurance companies have always been good at gathering information about underwriting and pricing risk because “this is where we compete with each other. The operational risk side is the toughest one to get data on, in terms of what is happening in the business units on a daily basis. I don’t think gathering data is the hard part; it is identifying the important parts of data that can be used in risk assessment and risk management.” “We face the challenge of pulling the right data, which needs to flow into our risk models,” adds Dunn. “The data you gather and input into your risk management and stress testing models have to reflect day-to-day business operations. This may be less of an IT issue and more of an issue of where we are trying to take risk in our organization. This is not just about putting reports out, but making sure we are engaging our senior management with the right metrics and data.”
A Culture of Risk The data and information gathering issue may pale in comparison to the far broader challenge of creating a “culture of risk” in any given organization, according to KPMG International. 46 Canadian Underwriter September 2010
“Clear ownership and leadership of risk is essential in order to embed a broader culture of risk in the organization,” the consulting group notes in Getting the Balance Right. “So too is the need to ensure there is clear communication and coordination between the various risk functions. It is clear from the survey that this kind of coordination is something that does not come naturally to many insurers. Only half of respondents say that they are effective in creating an appropriate culture of risk in the organization, and 47% say that they are effective at embedding it.” Insurers interviewed in this article say they are on the track to creating a broader culture of risk in their organizations. The work of creating a strategic risk framework for many of these companies is already done, according to sources. “We are focusing our capabilities completely around insurance and financial risks,” says Dunn. “ In essence, we want to drive a different level of discussion and evaluation of risk throughout the organization and this is being pushed directly by our senior management.” Campbell notes Zurich Canada’s total risk profile workshop takes a full day of planning and is scheduled for a Friday this year. “Full-day planning sessions on a Friday are sometimes not greeted with great enthusiasm, but I can honestly say that people look forward to this risk planning exercise. It really allows people to ask ‘What if?’”
For insurers like The Co-operators, refinements will likely take place in areas such as emerging risks, better mapping out aggregations and correlations of risk, pushing risk modeling down to the business line level and more strongly linking risk management to capital management, according to Hengen. Similarly, Désilets says Intact Financial is not planning any radical changes, but intends to “continuously improve upon our approaches, our models and their sophistication and to adapt them to ensure the quality of our execution in the areas of risk identification and evaluation, as well as in our mitigation activities.” For other insurance companies, especially smaller to mid-sized firms, the process of investing in risk management expertise and resources may prove to be a formidable challenge in the years ahead. Based on the regulators’ increased expectations concerning risk management processes and standards, it will be up to individual insurance companies to determine how they will respond. In a 2009 report from the Economist Intelligence Unit sponsored by ACE and KPMG, called Beyond Box-Ticking: A New Era of Risk Governance, Duncan Wiggetts, an expert in risk governance at the global law firm DLA Piper, neatly summarizes the situation and choices for many insurers. “Companies tend to fall into two camps: those that have suffered a shock to the system and have woken up to the concept of risk, and those who haven’t — yet.”
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Constructive Adjustment Senior Account Manager, Control Adjuster, McLarens Canada, (Toronto West Office).
Solid investigation procedures and negotiating site access are among several key elements in the effective handling of a builders risk claim. Construction claims handling is a true niche market. Among the categories of construction claims, builders risk, otherwise known as course of construction claims handling, need not be of concern given proper claims handling experience and protocol. Some common misconceptions must be addressed regarding builders risk policy coverage. First and foremost, the builders risk policy is designed to insure projects under construction. This can vary from the smaller-sized projects — typically defined as less than $10 million in value and which might carry a standard builders risk wording — to the larger joint-venture projects that would require manuscript wording,
48 Canadian Underwriter September 2010
INVESTIGATING BUILDERS RISK CLAIMS In the handling of any builders risk claim, the key elements of investigation are necessary from the outset to maximize proper claims handling with a view toward establishing equitable results — and ultimately file closure — in a shortened time period. At the beginning of the investigation, it is key to arrive on scene and begin collecting scene information and data, including (but not limited to) photographing the causal elements and obtaining copies of prime and subcontracts (in-
Illustration by Sandi Nichols/www.threeinabox.com
Brian Lloyd
with specific policy coverage tailored to the project in question. Insurance examiners in today’s commercial insurance industry are called upon to handle an enormous caseload of various property and casualty claims. Many insurers have taken a specialized approach to allocating property losses of a large and commercial nature to the commercial property division. This can include risks of all sizes and severity typically falling within the “property” classification. It is difficult to gain a handle on specialized builders risk claims in such a diverse environment. Therefore, it is important to know the proper elements of both simplified and expert claims handling.
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cluding contract specifications and plan drawings, both architectural and structural), as the loss would require. The adjuster should attend the scene as promptly as possible.This will help to establish preservation of evidence to determine cause; it also helps to retain evidence, such as fractured victaulic couplings, for forensic inspection by a variety of parties and their respective origin and cause engineers.
conglomerates of public and private interests, to name a few. Site contacts are perhaps the foundation of any professional builders risk claim handling. The independent adjuster must use the most appropriate personnel, given the required information. For example, is a site superintendent, project manager, site co-coordinator, project engineer or perhaps site foreman best suited to meet and discuss the required information? From whom is the best individual to obtain the statement? What information can the person contribute? Knowing the role of each individual and the type of information they can provide is key in the fact-finding process. A named insured might also fall within the category of a general contractor. In this scenario, the contractor is the named insured and their respective insurers would be the handling insurer of the builders risk claim. In any builders risk policy, additional
IDENTIFYING THE INSURED PARTY First, it is important to identify the insured party. When preserving evidence at the outset of an investigation, it is important to be conscious of the policies that govern the construction project. Typically the named insured on a builders risk policy would be the owner of the project, commonly called the Owners Controlled Insurance Policy (OCIP). Owners can take many forms, including real estate developers and
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named insureds would typically enjoy the same level of coverage as the primary or named insureds; and yet, under other subcontract provisions, subcontractors and sub-subcontractors, architects, engineers, consultants and project managers might be bound by terms and conditions to cover the deductible apportionment of the builders risk claim should they receive indemnity. If the general contractor is the named insured or holder of the builders risk policy,this is also known as a Contractors Controlled Insurance Policy or program (CIPP). It is key at the outset to properly identify the named insured, additional named insured and the coverage therein. It is essential at the outset to obtain a copy of the project certificate of insurance as well as subcontract certificates of insurance to determine if and where other insurance may exist. Using this information, the insurance hierarchy can be identified, simplified and the necessary policies requested for review. Policy wordings are a must for identifying insured property that typically forms part of the construction project. This can include property in transit, awaiting construction, in storage, installation, demolition, reconstruction and/or repair.
GATHERING INFORMATION Another key element of the investigation focuses on the declarations page and the overall coverage grant to determine policy inception, expiry dates and applicable endorsements for any extension on policy periods. This may require the broker’s involvement to assist in identifying policy renewals from extensions and/or other project insurers. Certificates of insurance are frequently issued at the outset of a project and may not necessarily take into consideration newly agreed upon amendments, change orders, new phases of construction and other addenda. As such, amended certificates of insurance are sometimes required. A common misconception is that the gathering of subcontract documentation is not always necessary in a builders
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risk claim. In fact, subcontract documents can quite often contain the most important part of loss allocation through contractual transfer for risk control. Provisions allowing for subcontractors to bear a portion of the deductible can often be used and/or other contractual remedies exercised.
early-loss-period information that can be accessed for future reference. The more detailed the statement, the better and more accurate your investigation. Your questions can help to resolve early remediation, damages qualification, quantification and ultimately indemnification of the insured.
ACCESSING THE SITE
A common misconception is the gathering of subcontract documentation is not always necessary in a builders risk claim. In fact, it can contain the most important part of loss allocation through contractual transfer for risk control. In the instance of exercising contractual remedies outside of the insurance model, it is important for the insurance professional to assist in notifying the insured of these options. However, they may wish to separate themselves from exercising the contractual remedies unilaterally. It is interesting to note that statementtaking is often overlooked because the scene investigation might overshadow its importance. But it is imperative at the outset of a claim to take a comprehensive statement at the earliest opportunity in order to gain a proper snapshot of all
With reference to damages, the insured plays a pivotal role in providing access to the site, contractual documentation, invoiced work and work performed. It is often necessary to visit the site during the damages qualification and quantification process while the project is ongoing. As far as emergency work and remediation is concerned, most large constructors have emergency work protocols in place or agreements with the project owners to handle this internally using a member of the contractual hierarchy or outside contracted parties.The independent adjuster will retain outside service providers to attend and take an active role augmenting the emergency work process. The adjuster’s role then becomes an intermediary between the insured, the insurer and service providers on site. It is important to consult the project owners and/or constructors about job site regulations related to retaining restoration subcontractors.These subcontractors will often be working with people accustomed to a unionized environment. It is also important to consider that many insurance restoration contractors cannot act without a combination of onsite sub-trades and outside insurance contractors. The independent adjuster can make this a seamless and cooperative effort. The independent adjuster can also consult with project contractors and deploy a work strategy that best suits the loss and project parameters. In the example of unionized job sites, it is important to outline to the insured that builders risk insurers will require site access by outside contractors; this may or may not conflict with job site rules and regulations. The independent adjuster can act as a conciliator, arrang-
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ing for site attendance by the restoration subcontractor. For the insured, the first party prime contract is the first order of business. Work completion must go on at all times. Any builders risk scenario is generally a delay in the overall completion. Therefore, it will need to be determined whether or not these delays fall within the defined thresholds outlined in the Delay of Completion section of the policy. It is important to review and become comfortable with the coverage and extensions to that coverage that might include (but not be limited to) expediting expense and delay in completion. A thorough understanding of what the coverage entails is imperative to allow for proper indemnity. Tracing the connections between the prime contract, subcontract and certificates of insurance is essential for properly adjusting valuation during damages quantification. The connection between the certificate of insurance and the insurance policy for soft costs coverage and what this coverage provides is often overlooked. An experienced independent adjuster can promptly identify
Many insurance restoration contractors cannot act without a combination of onsite subtrades and outside insurance contractors. The independent adjuster can make this a seamless and cooperative effort. the need for and the application of soft cost coverage. Damage to a pre-existing adjacent property is often a source of deliberation. Does the affected area fall just outside of the project and yet forms a part of the overall pre-existing property? A complete understanding of the coverage grant and policy endorsements to ascertain whether pre-existing site coverage may apply will eliminate the need for other policies being triggered. Other policy provisions include (but
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are not limited to) wrap-around coverage.What policies are primary and what is the intent of this coverage? A thorough understanding of this section of the policy is necessary in the professional handling of the builders risk claim. Builders risk claims handling should not be seen as an unwieldy undertaking. In fact, with experience and expertise in hand, the independent adjuster can provide a one-stop claims handling solution.
IN THE MATTER OF THE WINDING-UP OF THE INSURANCE BUSINESS IN CANADA OF RELIANCE INSURANCE COMPANY CANADIAN BRANCH (“RELIANCE CANADA”)
IMPORTANT NOTICE TO POLICYHOLDERS, INSUREDS AND CLAIMANTS WITH POLICY LOSS CLAIMS On December 3, 2001, the Ontario Superior Court of Justice (the “Court”) ordered the winding-up of Reliance Canada, under the provisions of the Winding-up and Restructuring Act, and appointed KPMG Inc. as liquidator (the “Liquidator”). The Liquidator of Reliance Canada hereby gives notice that the Court has fixed December 17, 2010 as the last day for policyholders, insureds or claimants with Policy Loss claims to submit to the Liquidator their claims for loss under or arising out of a Reliance Canada policy. If you have any claims for loss under or arising out of a policy of Reliance Canada (including any existing, new, future, contingent, known or unknown, reported or unreported, liquidated or unliquidated claims), you must complete a Proof of Claim for Policy Loss Claim (“POC”) and submit it to the Liquidator in accordance with the procedure set by the Court by Order made August 3, 2010. Please note that neither this Notice nor an Acknowledgment of Filing means or implies that any claim filed is payable as a claim under a policy or in the winding-up of Reliance Canada, or that it bears any particular priority if it is payable. For further information or for a POC package, please contact KPMG Inc. in writing as set out below, or visit www.relianceinsurance.ca. This Notice is being given pursuant to the Order of the Court made August 3, 2010. KPMG Inc. Liquidator, Reliance Insurance Company – Canadian Branch, in Liquidation Bay Adelaide Centre 333 Bay Street Suite 4600 Toronto, ON M5H 2S5 General Inquiry Line: (416) 777-8333 Email Inquiry: reliance@kpmg.ca
September 2010 Canadian Underwriter
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r a e g v o e C Before the Fact
Opinion/Analysis
J. Alvin Speers Author
In condo and other lines of insurance, it is extremely important to ensure proper coverage in anticipation of a possible event. A fire at a condominium complex some time ago left more than 300 people homeless, with damages estimated in the multi-millions of dollars. Later, it was discovered that too many of the unitholders did not have their own insurance for (a) possessions, (b) liability, plus (c) cost of living expense while their residence was being restored. A condominium corporation can only insure the structure, excluding (a), (b), and (c) above. One resident affected by fire had individual owner insurance. They were well-looked-after. Their coverage included non-standard upgrades the insured had added and that the condo corporation policy did not cover.The individual owner’s policy was available for an inexpensive premium. Regulations introduced since the building above had been completed require somewhat wider fire protection inclusion with replacement, so some delay was involved in arriving at a decision about repair or, alternatively, demolition and reconstruction. Naturally, that adds to the burden for uninsured unit owners; this is in contrast to residents who have their own individual owner policies, who could just carry on paying the mortgage if such is involved. This situation underlines perceived responsibility and opportunity for condo developers, re-
52 Canadian Underwriter September 2010
altors selling units, condo buyers renting to tenants, etc., as well as insurance agents and brokers, to circulate information pamphlets and stress the crucial need for the individual condo owners to ensure their own insurance coverage is in place from the date of possession. As a former successful broker, I had clients sign acknowledgement of advice regarding needed insurance coverage so if such a suggestion was ignored, there was a record of them being forewarned. I will end this treatise with one prime example of the importance of proper insurance coverage before the fact. We had a small land development project in B.C.’s Okanagan Valley. I came to believe we would increase the value of our small village site if we removed four Douglas Fir trees. After arranging insurance rider coverage on our residence policy for the undertaking, our sons and I felled two of the 105-foot-high behemoths. As I proceeded to repeat the exercise with the third tree, disaster struck.As a result of inexperience, I cut the “hinge” that skilled woodsmen leave across the middle of the stump to allow wedging, thereby forcing the tree to fall in the desired direction. Accidentally cutting the hinge allowed the teetering monster to do an ‘allemande left’ and fall across the neighbour’s rented house, which by arrangement was empty of humans at the time. The monstrous load did not bounce; it sheared the roof ridge to the soffit line, doing extensive interior damage as well. Thanks to the precautionary arrangement for insurance protection, the $9,800 cost of repairs, plus the adjuster’s fee, did not come out of our pocket. A “word to the wise” should be sufficient.
INSURANCE MEDIA GROUP INSURANCE – we have it covered. Canadian Underwriter’s Insurance Media Group is committed to providing the most timely and relevant news, information and resources to insurance professionals from all segments of the industry, providing marketers with a range of specialized and highly effective marketing communications opportunties.
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Considering the
Consumer David Gambrill Editor
CARSTAR’s 20-20 Vision Conference, held August 18-20 at the Deerhurst Resort in Huntsville, Ontario, focused a great deal on the changing expectations and economic environment of auto insurance and car collision repair consumers across the country. Tom Connellan, author of the book Winning With Customers, kicked off the conference by talking about the importance of trying to see the collision repair industry’s service through the eyes of its customers. He noted consumers are increasingly comparing across industries, and so, rightly or wrongly, consumers are comparing the service of car collision repair centres against service they receive from their banks, restaurants, airlines or even tourist destinations like DisneyWorld. Adapting to these apples-to-oranges service comparisons requires car collision repair centres to recognize the importance of managing a consumer’s memory of the service they received, Connellan said. To this end, he urged franchise owners to make sure consumers remembered a
54 Canadian Underwriter September 2010
good experience for each of the various ‘touch points’ at which a consumer comes into contact with the collision repair centre. In part, this requires centres to identify what could go wrong over the course of servicing a person’s car, and then adapting policies and procedures for handling these situations when they arise. Connellan told CARSTAR franchise owners from across the country attending the conference that they could do the best paint or repair job in the world, but if the consumer left the place remembering unclean shop conditions or poor service, they would not be acting as brand advocates for the collision repair franchise. In this context, George Cooke, president and CEO of The Dominion, called on collision repair centres to focus on the head space of the consumer requiring auto repairs after the implementation of the Ontario auto insurance reforms. The reforms are designed to give consumers more choice in customizing their own auto insurance products. As of Sept.1, 2010, Ontario consumers will see medical and rehabil-
Illustration by Sandi Nichols/www.threeinabox.com
20-20 Vision CARSTAR Industry Conference 2010
Collision repair centres need to adapt to consumers’ changing expectations about service. This might involve recognizing consumer confusion related to Ontario’s new auto insurance reforms.
IBAO CUW SEPT 10
8/6/10
9:37 AM
INSURANCE BROKERS ASSOCIATION ONTARIO
Page 1
90 th Annual Convention Wednesday, October 20th – Friday, October 22nd, 2010
Sheraton on the Falls Hotel & Conference Centre, Niagara Falls, Ontario Thursday, October 21st, 2010 IBAO’s Annual Convention is the biggest and most exciting insurance broker event on the Canadian insurance industry calendar.
There is simply no other event quite like it!
KEYNOTE SPEAKER:
Jeremy Gutsche, Founder of Trendhunter.com, Author of Exploiting Chaos Times of change and uncertainty can spark the greatest opportunities for innovation. Many multibillion dollar corporations like Hewlett-Packard, Disney, and Microsoft were started during periods of economic recession. Jeremy Gutsche, North America’s most sought after authority on trend hunting, shows you how to gain an edge in business by harnessing the creativity that will help your company survive and flourish in any economic climate. With a respected understanding of exploiting what’s cool and predicting future trends, Gutsche shows how to create a culture of innovation in your company, maximize the exposure of your marketing message, and think big while acting small. A fascinating and valuable talk, Gutsche details how to stimulate creativity and unlock the powerful strategies of trend-hunting to help your business thrive in these uncertain times.
EDUCATION PROGRAM AT A GLANCE: CSR SEMINAR: Jargon Busting - The Importance of Explaining Insurance Coverages in Plain Language (RIBO CE - 3 Personal Skills Hours)
Jo Anne Mitchell - Effective Training & Communications Plus
MEMBER’S SEMINAR: CEO PANEL Back by popular demand, our CEO Panel will be moderated by Evan Solomon - CBC Television Broadcaster, Journalist, Author and one of Canada’s best moderators to participate in a round table discussion with our CEO’s. This year, the Panel will be comprised of five top executives from leading property and casualty underwriters.
Friday, October 22nd, 2010 EDUCATION SEMINARS:
Banquet & Ball featuring: 3rd Annual Award of Excellence Gala
The Do’s & Don’ts of Social Media and Web 2.0 (RIBO CE - 3 Personal Skills Hours)
Amber MacArthur - MGI
Hot Topics 2010 (RIBO CE - 3 Technical Hours) Moderated Panel of Industry Experts
Performance Management – Lessons from the Pros
For a complete program and a registration package, please call IBAO at 416-488-7422, 1-888-ASK-IBAO or visit our Website: www.ibao.org
(RIBO CE - 3 Management Hours) Neil Curtis - ENGAGE Human Resources Solutions Inc.
This year, don’t question whether or not you should stay for our closing night. IBAO will be hosting its 3rd Annual Award of Excellence Gala where we will be recognizing brokers for their contributions to the industry and community. Also featuring the entertainment of singer, songwriter, producer, arranger and fervent jazz-pop musicologist Matt Dusk one of Canada’s most beloved male vocalists.
Be one of more than 500 guests who will be on hand to support the nominees, cheer for the winners and celebrate their peers!
Platinum Sponsors:
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itation benefits for their standard, mandatory auto insurance coverage reduced from $100,000 to $50,000, although they will have an option to buy back coverage of up to $100,000 or even a $1.1-million limit. Some mandatory benefits in the old package — such as caregiving and home maintenance benefits — will be converted into optional benefits. Although these changes are designed to give Ontario consumers more choice,
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they are likely to create confusion for the consumer during the early period of the reforms. Recent statistics bear this out. Shortly after the CARSTAR conference, a survey sponsored by RSA suggested many Ontario consumers still don’t fully understand the province’s auto insurance reforms. The RSA study found that nearly 70% of Ontario drivers did not understand the impending auto insurance reforms or how the reforms would affect their auto insurance
coverage. Leger Marketing was commissioned to conduct the survey, which polled 1,524 Canadian adults. Of these respondents, 625 resided in Ontario. Only two per cent of Ontario drivers surveyed by Leger said they had a confident grasp on the legislation and its effect on costs. “These statistics show there is a real opportunity for brokers to educate drivers on the host of improvements the auto reforms will bring,” Irene Bianchi, RSA’s vice president of claims and corporate services, said in a press release announcing the survey results. It also provides an opportunity for collision repair centres across the country, Cooke suggested. He said to the
extent that collision repair centres empathized with consumers’ confusion — and their shrinking pocketbooks — and pointed them to available resources that would help explain the reforms, the centres stood to gain a service advantage over their competitors. “Part of the immediate future is that [when an insured comes to a repair centre with] a claim on the 15th of September or the 2nd of November, they’re likely to be a lot more confused about their insurance coverage than [prior to the reforms],” Cooke told the CARSTAR franchise partners. “To the extent that you guys ...[have] a little broader understanding of the situation in which
56 Canadian Underwriter September 2010
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Mom or Dad find themselves in, vis-àvis their entire insurance purchase, that gives you an advantage on somebody else that’s in a different location. I suggest to you that a broader understanding is valuable in the sense that it might just help you relate more so than somebody else to how that particular consumer is feeling.” Sounding a bit of a warning shot across the bow for the insurance industry as a whole, Cooke said his advice had a wider application than just in Ontario. “It’s a period of great change for them in this particular province
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things, help with the transfer of warranty, obtain priority service for insureds and their vehicles, add additional accountability in the repair stage of the system, eliminate potential blocks in the appraisal process and generally expedite the cross-border claims process, thereby potentially saving “tens of thousands of dollars.” Wong said the cross-border claims management system would prevent unnecessary wait times that add to con-
sumers’ claims costs and frustration. He cited one cross-border situation in Saskatchewan in which a block in the appraisal process caused a two-week waiting period. At the end of two weeks, the car was written off for $12,000. A repair facility representative in Saskatchewan expressed frustration that had the block in the appraisal process not occurred, he could have repaired the vehicle for $3,000 and sent the customer on his way in three days.
Announcing new members of the team Jon Schubert, president and CEO of the Insurance Corporation of British Columbia, is pleased to announce two new appointments.
MARK BLUCHER
(LEFT)
SENIOR VICE PRESIDENT OF INSURANCE
Mark Blucher has been appointed senior vice president of Insurance. Mr. Blucher has extensive experience in the insurance and financial services industries. He most recently served as chairman of AA Insurance, a personal insurance company primarily focused on auto insurance. He also held a number of senior executive positions at Suncorp Metway Limited, an Australian-based financial services company. Mr. Blucher is an associate of the Financial Services Institute of Australasia and a graduate of the Advanced Management Program at INSEAD, an international graduate business school and research institution.
[of Ontario],” he said. “And I suspect that that kind of reform is going to migrate East and West of here.”
CROSS-BORDER CLAIMS MANAGEMENT CARSTAR’s Care Centre, a call centre for assigning claims to CARSTAR locations, has enabled the development of a crossborder claims management program. “There is a lot of demand from our insurance partners for a U.S. claims solution, with CARSTAR in Canada but also integrated with CARSTAR in the U.S.,” CARSTAR national account manager Bing Wong said at the 20-20 Vision CARSTAR industry conference in Huntsville, Ontario. “We are currently in the pre-pilot stage of this program.” The Care Centre would, among other
WARD CHAPIN (RIGHT) CHIEF INFORMATION OFFICER
Ward Chapin has been appointed chief information officer. Mr. Chapin most recently worked for the Vancouver Olympic Organizing Committee for the 2010 Olympic and Paralympic Winter Games (VANOC), where he served as CIO since 2005. He has also held progressively senior positions working for HSBC Bank in Canada and abroad. Mr. Chapin’s educational background includes a Bachelors degree from McGill University. Most recently, his career accomplishments were recognized by the B.C. Technology Industry Association when he received the 2010 Person of the Year Award. icbc.com
We’re driven to ensure the well-being of drivers. We’re working to keep rates low and stable, providing hassle-free service and proactively partnering to reduce crashes and loss.
September 2010 Canadian Underwriter 57
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The
BMS
Gold Mine Pat Durepos President, Keal Technology
A lot of information required to maximize the efficiency of a brokerage is already located in the brokerage’s BMS — it’s just a matter of leveraging technology to employ it. The way we communicate has drastically changed. Tools have become more complex to support our highly sophisticated customers’ needs. Think of your telephone. We all still talk on the phone, but the tools and capabilities certainly don’t compare to the old rotary dial! Now think about your computer. How productive are you without it? How quickly would panic set in if it were suddenly to become unavailable? These are critical tools to function in business today. So is the broker management system (BMS), but too many brokers aren’t exploiting the available capabilities — and it’s hurting them.
58 Canadian Underwriter September 2010
The keynote speaker from the 2010 P&C Insurance Technology Conference, Kimberly HarrisFerrante, vice president of insurance services at Gartner Inc., stated: “What has worked in the last 100 years selling insurance will not work in the next 10.” What will your brokerage look like in 10 years? Who will your clients be and will you meet their expectations? Technology has and will continue to change the way we do business with clients, carriers and staff. Consumers’ access to information will continue to get easier, especially with social media’s popularity. Consider the stats: • Facebook has 400+ million users, 13+ million in Canada alone; • Twitter has 60 million users; and • LinkedIn has 58 million users. Many of your competitors and staff are online too. Fear of how staff will respond is often the reason cited for not changing brokerage workflows, not going paperless or not switching broker management systems. But technological change is nothing new for any of us. It just needs to be managed properly.
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Complacency will stifle your business. Is the ‘We’ve-always-done-it-this-way’ mentality hurting your business? The Top 5 ways to exploit your BMS to benefit your brokerage include:
Workflows Brokers have told us the necessity for them to change technology is driven by insurers, BMS vendors, rating software companies, consumer communication preference and so on. Karen Gale, president of the CSU (Canadian sigXP Users), recently told delegates attending a property and casualty insurance technology conference audience: “We have no time to evaluate and implement all the new technology that comes our way, let alone adapt
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What percentage of your BMS do you think you use? Our consulting team recently reviewed a daily renewal process with a client. Each renewal averaged 22 minutes and transferred hands five times among three different people. By leveraging BMS functionality, the process was reduced by 10 minutes per renewal. HowW many renewals do you process
each day, week or year? For this client, shaving 10 minutes off the renewal time saved $11,000 annually per TSR processing renewals. Leveraging automation within the BMS will save you money, but you have to look for it.
Call recording and BMS integration Banks and direct writers have been using this technology for at least 10 years,
WHEN DISASTER STRIKES
Each renewal averaged 22 minutes and transferred hands five times among three different people. By leveraging BMS functionality, the process was reduced by 10 minutes per renewal. our workflows accordingly. We are busy serving our clients and bringing in new ones.” The need to question each and every workflow to evaluate cost versus benefit has never been more important. A popular workflow to tackle first is new business.This relates to all other departments, including finance, where we see automatic billing as another time saving workflow that isn’t being fully used. Most BMS vendors provide workflow consultants and best practices documentation.The documentation is adapted to the latest release of the software and contains proven procedures that can be easily applied to your brokerage. Hiring a workflow consultant can quickly provide you with a balance sheet showing the state of your brokerage.The consultant can help identify the most important areas requiring change and a roadmap to introduce new workflows.
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September 2010 Canadian Underwriter
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and it has played a significant role in their increased market share. The technology used to be complex and costly, but it has evolved considerably. Now brokerages of all sizes can gain from this kind of technology. Here’s how it works: all incoming and outgoing calls are recorded with digital, analog or IP phones. Your existing phone system doesn’t likely need to be changed. Calls can be linked in the BMS activity log at any point during the call. Listening to calls is available from the BMS, or from the management console of the call recording software.
Brokers are even binding business over the phone using a verbal signature with no paper. A handful of companies now accept audio signatures, saving a great deal of time. Tracking employee efficiency becomes much easier, too. Why does it take one employee 12 minutes to complete an application over the phone and another employee 20 minutes? Listening to calls is critical in identifying where employees need coaching. Developing customized scripts for telemarketing campaigns or to help overcome price objections will enhance retention. Brokers are even binding business over the phone using a verbal signature with no paper. A handful of companies now accept audio signatures, saving a great deal of time. What about E&O? Defending the brokerage in court is more straightforward when telephone calls are recorded and stored in the BMS client file to provide a more accurate, inclusive picture.
Paperless A third way leveraging technology can make the business more efficient is by allowing the brokerage to go paperless. 60 Canadian Underwriter Setember 2010
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Gartner Inc. and PricewaterhouseCoopers say 7.5% of all documents get lost, and it costs $220 to recreate each lost document. Now consider the fact that more than 80% of corporate memory is on paper. The hidden costs — not to mention the liability exposure — of a paper-rich environment cannot be ignored.
Web Integration Your marketing efforts should include driving prospects to your Web site.What they do there will have a significant impact on your ability to sell business. Take the following example. Once at your Web site, a prospect completes an online application that generates a quote in real-time. The prospect has a question, so he or she initiates a live instant message chat with a CSR during the process. The prospect clicks to accept the online quote, which electronically sends the data directly into the BMS for paperless processing. The policy is issued. Using call recording, the broker calls the new client and binds the business using audio signatures. No written signature is required. This technology is available now. Are you using it? Are your competitors? Brokers need to accept business in a variety of ways and communicate with clients using a method the client wants. Web integration facilitates that. Business intelligence Think of this as a dashboard continuously monitoring your brokerage and telling you about areas requiring your attention. Here’s an example of how this works. One of our clients, Robert, commutes to work on the train. Every Monday morning, he reviews a report outlining the producers’ results for the past week. Using this information, he knows who to congratulate and who needs support. He can review the cash flow for the brokerage. He can review the retention
figures for the various departments, etc. He does all of this on his personal handheld device. By the time he gets into the office, he can invest his time exactly where it is needed. Your BMS is a gold mine of information. But it’s completely useless if you aren’t using that data in a meaningful way. To determine if you are making practical use of the data, ask yourself these questions. Are you: • evaluating in real time your retention results by producer, executive, CSR, office/branch, based on PIF counts, premiums or commissions? • monitoring staff productivity and tracking lost business by activity type? • creating individual X-date reports by executive with customer phone numbers or email addresses? • viewing renewal totals by month and planning staffing requirements? • identifying your top producers and customers?
Brokers need to accept business in a variety of ways and communicate with clients using a method the client wants. Web integration facilitates that. • analyzing premium volume and commission by insurance company, line of business, transaction type, executive and representative? • measuring and comparing departmental productivity? • comparing actual results to your budget projections? Collecting well-thought-out information and analyzing it effectively will help you cultivate revenue through enhanced retention, up-sells, referrals and enhanced employee performance. Your BMS has all the information. All you need to do is define what information you need. Most BMS providers can help you create the dashboard that will work for you.
9/4/10
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INSURANCE INTERNET DIRECTORY ASSOCIATIONS Canadian Independent Adjusters' Association (CIAA) "The voice of Independent Adjusters in Canada" www.ciaa-adjusters.ca Honourable Order of the Blue Goose—Ontario Pond Our fraternal organization has been dedicated to fellowship and charity since 1908. www.bluegooseontario.org The Insurance Institute of Canada The professional educational arm of the industry. www.insuranceinstitute.ca
Informco Inc. Integrated Graphic Communications Specialists. www.informco.com
CONSULTING FIRMS
INSURANCE COMPANIES
Cameron & Associates Insurance Consultants Ltd. Claims consultants to the insurance and reinsurance community. www.cameronassociates.com
Aviva Canada Inc. Home Auto and Business Assurance. www.avivacanada.com
Keal Technologies Complete technology solutions for insurance brokers. www.keal.com
CONSTRUCTION CONSULTANTS Risk & Insurance Management Society Inc. Dedicated to advancing the practice of effective risk management. www.rims.org
MKA Canada, Inc. Providing creative solutions to the Construction, Legal and Insurance Industries. www.mkainc.ca
CLAIMS ADJUSTING FIRMS
DAMAGE COST CONSULTANTS
ClaimsPro Inc. Committed to providing leading-edge claims management services. www.scm.ca
SPECS Ltd. (Specialized Property Evaluation Control Services) Providing Innovative Solutions to Control Property Claim Costs www.specs.ca
Crawford & Company (Canada) Inc. Enhancing the customer experience, every day. www.crawfordandcompany.com Cunningham Lindsey International independent claims services. www.cunninghamlindsey.com Kernaghan Adjusters Doing What Is Right®. www.kernaghan.com McLarens Canada International Loss Adjusters and Surveyors. www.mclarens.ca PCA Adjusters Limited Adjusting to Meet your needs™ www.pca-adj.com
GRAPHIC COMMUNICATIONS
Quelmec Loss Adjusters Identifying, Investigating, Resolving...for over a quarter century! www.quelmec.ca
EMPLOYMENT ONLINE I-HIRE.CA Canada's Insurance Career Destination. www.i-hire.ca
ENGINEERING SERVICES Giffin Koerth Forensic Engineering and Science Investigate Understand Communicate www.giffinkoerth.com Rochon Engineering Inc. Forensic Consulting Engineers & Code Consultants. www.rochons.com
Catlin Canada Underwriting Ambition. www.catlincanada.com Chartis Insurance Company of Canada Your world, insured. www.chartisinsurance.com FM Global The leader in property loss prevention. www.fmglobal.com Grain Insurance and Guarantee Company Commercial Lines Underwriters www.graininsurance.com RSA Leading car, home and business insurer. www.rsagroup.ca Sovereign General Insurance Company of Canada Since 1953 www.sovereigngeneral.com The Guarantee Company of North America “Specialized insurance products...professional service” www.gcna.com Wawanesa Insurance Earning your trust since 1896. www.wawanesa.com
INSURANCE LAW Walters Forensic Engineering Inc. Providing scientific answers to complex engineering incidents. www.waltersforensic.com
62 Canadian Underwriter September 2010
The ARC Group Canada Inc. Your Partner in Insurance Law & Risk Management. www.thearcgroup.ca
INSURANCE SOFTWARE APPLICATIONS Keal Technologies Complete technology solutions for insurance brokers. www.keal.com
REINSURANCE Guy Carpenter & Company The world’s leading reinsurance intermediary. www.guycarp.com Munich Reinsurance Company of Canada Complete reinsurance coverage from Canada’s largest reinsurer. www.mroc.com Swiss Reinsurance Company Canada The leading P&C reinsurer in Canada. www.swissre.com Transatlantic Reinsurance Company For all your reinsurance needs. www.transre.com
RESTORATION SERVICES Winmar Property Restoration Specialists Coming Through For You! www.winmar.on.ca
RISK MANAGEMENT The ARC Group Canada Inc. Your Partner in Insurance Law and Risk Management. www.thearcgroup.ca
SPECIALTY INSURANCE William J. Sutton & Co. Ltd. Insuring Special Risks since 1978 www.wjsutton.com
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Sunny
Days Ahead Insurance Bureau of Canada (IBC) applauds the leadership of municipalities in adapting to climate change by taking steps to reduce water damage. Mary Lou O’Reilly
Vice-President, Public Affairs and Marketing, Insurance Bureau of Canada
“Rain, rain, go away/Come again another day.” This childhood mantra could well be what insurers are singing when they look to the skies these days. Far from going away, however, the rain keeps pouring down with greater frequency and force. Speak with anyone in the insurance industry these days and you’ll likely find yourself in a conversation about some recent severe weather event, and the amount of insurable damage it caused. Often, and especially at this time of year, severe storms bring with them lots of rain. This in turn translates into sewer backup claims for both personal lines and commercial writers. Insurers aren’t the only ones worrying about this problem. The water damage story reaches into every community. Rainstorms, melting snow, overflowing rivers and increased precipitation are all growing concerns for consumers and governments.The issue of water has, if you will pardon the expression, reached its boiling point.
I wrote about this water problem in the December 2009 issue of Canadian Underwriter. Insurance Bureau of Canada (IBC) was adamant then — and remains so today — that this problem can be solved; that we can adapt our practices to minimize losses. One such adaptation tool is the development of a risk assessment scoring mechanism that will help communities pinpoint vulnerabilities in their water and sewer system infrastructure.This ground-breaking tool will also provide unprecedented data for the industry to help insurers better understand and underwrite the types of risks they face. The project is progressing well. In fact, we are currently collecting data in Hamilton, Fredericton and Winnipeg. But in the meantime, many communities across the country have taken it upon themselves to do something about keeping their basements dry. Some of the work is so impressive that IBC recently recognized these communities, bestowing them with what we call the Watershed Awards. IBC introduced the Watershed Awards in partnership with the Federation of Canadian Municipalities (FCM) in 2010. The entries received from communities across the country have been remarkable. These municipalities are trailblazers when it
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CU Seminar ad Sept 2010
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Putting the pieces together.
Events and Seminars Calendar You work hard to protect your clients’ property. Now, it’s time to ensure that you apply the same kind of energy and commitment to your own success. CIP Society Events and Seminars give you the opportunity to learn, to network, to catch up on industry developments and to think about your career.
CIP Society Events and Seminars Toronto - CIP Society Annual Fellows’Golf Tournament . . . . . . . . . . . . . . .September 20
St. John’s - Boiler and Machinery/Equipment Breakdown . . . . . . . . . . . . .September 29
London - PROedge Seminar: Advanced Business Interruption . . . . . . . . . .September 22
London - PROedge Seminar: Trends in Litigation . . . . . . . . . . . . . . . . . . . . . . . . .October 1
Saskatoon - Ethics and the Insurance Professional . . . . . . . . . . . . . . . . . . .September 22
Toronto - John E. Lowes Breakfast with Fred Ketchen . . . . . . . . . . . . . . . . . . . .October 14
London - NHL Pre Season Game – Leafs VS Flyers . . . . . . . . . . . . . . . . . . .September 23
Toronto - Coverage and Liability Cases of 2009-2010 . . . . . . . . . . . . . . . . . . . .October 26
London - CIP Society Golf Tournament . . . . . . . . . . . . . . . . . . . . . . . . . . . . .September 24
Toronto - Palette to Palate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .October 28
Hamilton - Speakers Luncheon with Lea Algar . . . . . . . . . . . . . . . . . . . . . .September 28
Ottawa - Finance for the Non-Finance Professional . . . . . . . . . . . . . . . . . . . . .October 28
Regina - Ethics and the Insurance Professional . . . . . . . . . . . . . . . . . . . . . .September 29
Toronto - At the Forefront with Fabian Richener . . . . . . . . . . . . . . . . . . . . . .November 23
Keeping you at the forefront of the P&C industry. The CIP Society. MEMBERS BENEFIT. www.insuranceinstitute.ca/cipsociety
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comes to reducing infrastructure vulnerabilities. They should be considered leaders in adaptation to climate change. IBC is holding them up as fine examples of what can be done at the local level to reduce the risk of damage caused by severe weather. As the industry’s work on adaptation to climate change continues, we hope to encourage other municipalities across the country to implement innovative techniques of their own to reduce the risks associated with having too much water and no place for it to go. The inaugural year of the Watershed Awards was quite successful. IBC hoped to receive at least 10 submissions, and entries trickled in over the first few weeks. Imagine our delight when, three minutes before the deadline, our inbox was inundated with submissions, bringing the total to 35. The vast majority of the submissions would have been worthy recipients of the award, but a few in particular stood out. For example, Saskatoon invested in “superpipes.” Foundation drainage systems that drain directly into basement floor drains — known as household weeping tile systems — were causing significant flooding from sanitary sewer systems after severe rainfalls. Now when a large rainfall occurs, the extra flow generated by the weeping tile systems overflows directly into the superpipes instead of into the basements. The Newfoundland and Labrador towns of Appleton and Glenwood adopted a back-to-nature approach that uses vegetation to purify wastewater. It has the benefit of significantly increasing the storage capacity, reducing the risk of sewer backups. Quebec’s regional winner, Ville de Saint-Jérôme, uses drainage basins to catch stormwater instead of allowing surface runoff to enter storm sewers immediately. The project illustrates how an infrastructure project can be multi-functional, offering utilitarian, ecological and recreational benefits. Then there’s Central Saanich in British
Columbia. It came up with an ecofriendly, integrated stormwater management plan tailored to the area’s unique needs. Members of government agencies, area farmers, representatives from local interest groups and district staff worked together to develop proactive solutions to deal with the changes to the district’s stormwater system and natural habitat brought about by urbanization. Ontario featured co-winners. Toronto was recognized for adopting an ambitious, integrated system approach for preventing basement flooding, while Richmond Hill’s work on updating its
Municipalities are trailblazers when it comes to reducing infrastructure vulnerabilities. IBC is holding them up as fine examples of what can be done at the local level to reduce the risk of damage caused by severe weather. flood control facility and implementing a multi-faceted stormwater management project was also worthy of an award. Finally, Edmonton, winner of the national Watershed Award, demonstrated ingenuity in creating a very cost-effective flood control system that doubles as a school playing field in normal circumstances. This innovative solution uses a school playing field to provide stormwater management and flood control when there is extreme rainfall. It is one of a number of projects implemented by the city in response to an extreme rainfall event in 2004 that flooded more than 4,000 basements throughout the city, resulting in $171 million in insurance claims. It’s difficult to bring these projects to life in writing, so IBC has produced videos to showcase each of the inventive solutions I’ve described. They are available on YouTube or on IBC’s website at www.ibc.ca.
So why do all these improvements matter to insurers and their customers? Insurers see first-hand the havoc that severe weather is having on individuals and communities. As primary bearers of the risk associated with increasingly severe weather, insurers know effective adaptation strategies are vital to protecting homeowners and businesses.The investments made by these communities to improve their infrastructure and introduce other mechanisms to contain water will help minimize the number of largely preventable claims insurers will have to pay after severe weather hits in these municipalities. And, policyholders will suffer less damage to their properties and belongings. This is why IBC will continue to encourage this type of innovation as we work to help communities adapt to climate change. Our efforts will include advocating for better municipal infrastructure and creating innovative programs and partnerships that promote the creation of more sustainable communities. Our industry’s long-term goals with respect to adaptation to climate change are clear: communities must be ready to withstand the impacts of climate change; all levels of government must contribute to making the necessary changes to bolster preparation; and individual citizens must recognize how they, too, can play a role in adaptation and how they can make a difference through how and where they live. Canada’s property and casualty insurance industry has not jumped on the climate change bandwagon simply to reap the benefits of communicating its corporate social responsibility. Our industry has championed action on adaptation to climate change because, if it doesn’t, it has something very tangible to lose. Wishing for the rain to go away won’t solve the problem. Introducing adaptive measures however, will help us all adjust to our new climate reality with more grace.
September 2010 Canadian Underwriter
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MOVES & VIEWS
UPCOMING EVENTS: FOR A COMPLETE LIST VISIT
www.canadianunderwriter.ca
AND CLICK ‘MY EVENTS CALENDAR” ON THE HOME PAGE
1
Elliott Special Risks LP (a Markel International company) has announced a series of appointments and promotions. They include: • Isabel Treggia 1[a], senior underwriter; • Colleen Kenny 1[b], property underwriter; and • Bob Bousfield 1[c] has been promoted to assistant vice president.
2
Marsh has appointed Gerry Russ 2[a] as its managing director and construction and design practice leader for Canada. Russ most recently held the position of Canada practice leader for construction and surety at Aon. He brings more than 30 years of surety and construction risk management experience to his new role. Also, Jay Sharma 2[b] has accepted the newly created role of multinational client service director. In this role, Sharma will work with specialists in more than 100 countries to deliver solutions and service to Marsh clients. He will initially focus on Marsh’s U.S. and Canada division and will lead initiatives to improve network management operations.
3
Inspection and loss control provider iv3 Solutions has merged with Canadian Underwriting
Services (CUS). The merger creates the second-largest provider of unique property information, inspection and loss control services in the Canadian property and casualty industry, with the goal of becoming North America’s largest inspection and property data services company within the next five years, says an iv3 release. CUS/iv3 will provide customers with access to unique property data on up to 6-million properties in Canada by 2011, the release adds.
4
SGI provided $50,000 to the RCMP to outfit two vehicles with Automatic License Plate Recognition (ALPR) systems. The ALPR equipment checks for unregistered or expired plates, stolen vehicles and whether the vehicle owner was suspended or is wanted for another matter. It automatically scans license plates as the officer drives, enabling police to check a large number of vehicles without having to type the numbers in themselves, increasing efficiency. “We estimate that the ALPR allows our officers to complete the same amount of vehicle checks in one hour as they would normally require 900 hours for. It’s a real time saver for us,” said Inspector Andy Landers of OIC “F” division traffic services.
66 Canadian Underwriter September 2010
1a
1b
5
Manitoba Public Insurance (MPI) launched a Web application that enables glass repair facilities to register claims on behalf of customers. ‘eGlassClaim’ interfaces with MPI’s claims systems and enables customers to initiate glass claims at the repair shop of their choosing. Under the old system, customers were required to report claims to MPI’s call centre first. Glass repair shops will also be allowed to submit invoices to MPI electronically and get paid automatically. Participation in the new program is open to all glass repairers, but is optional.
6
ACE Canada has appointed Bruce Walker as its chief financial officer. Reporting to CEO David Brosnan, Walker will have overall responsibility for ACE Canada’s finance and information technology groups. He is expected to provide leadership in budget management, financial reporting, in-
1c ternal controls, audit and the strategic direction of its information technology division. Walker’s insurance career spans almost 20 years. He joins ACE from a directorship with a privately-held financial consultancy firm in the United States.
7
Insurance companies can now validate lightning strikes using the lightning strike data archive launched by The Weather Network. In Canada, lightning is responsible for more than $5 billion in total insurance industry losses annually, The Weather Network reports. The archive of data is designed to help companies authenticate lightning strikes
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MOVES & VIEWS
2a
2b • amplitude (strike strength
measured in amperes); and • type (cloud-to-cloud/cloud-
to-ground).
6 as a possible cause for forest fires, power outages or property damage. The service is an extension of the Pelmorex Lightning Detection Network (PLDN). The PLDN uses the timing precision of GPS technology and super-refined triangulation techniques to pinpoint accurately the location of lightning strikes across Canada. This results in a lower false strike rate and increased confidence in strike location relative to important assets, according to The Weather Network. The data provided for each individual lightning strike includes: • date and time; • latitude/longitude; • polarity (positive/negative);
8
Zurich in Canada, as of press time, is poised to launch ZurichBuildersRisk.ca, a new Web-based system designed to rate, quote and issue builders risk policies in less than nine minutes. The new service provides course of construction coverage for new residential and commercial structures, renovation or installation projects. The service will rate, quote and issue policies on a desktop PC. Policy limits are $4 million for frame and $5 million for non-combustible construction. The product is not just for use by Zurich customers. All clients can be insured on ZurichBuildersRisk.ca.
9
RSA has launched a new product designed to protect homeowners and small businesses that
sell renewable energy to the Ontario government in the event of lost income.The product covers the actual equipment against all risks of direct physical damage and loss of income up to $5,000 directly resulting from the interruption of power generation and sale of energy caused by an insured loss to the building or equipment. This new product from RSA is intended to allow customers to take advantage of an Ontario government program called microFIT. The program enables customers to sell renewable energy generated through wind turbines or solar panels on their properties back to the electricity grid.
10
Can-Sure Underwriting Ltd. acquired Chutter Underwriting Services’ property division and its book of business. Bruce MacKinnon and John Woodcock, both partners at Chutter, are now members of Can-Sure’s senior management team. As of Sept. 1, 2010 all policy transactions are being processed through Can-Sure. All policies will be transitioned into CanSure’s policy management system upon renewal, or will remain in effect with no changes in coverage, premiums or insurers for the cur-
rent term. “This acquisition further supports Can-Sure’s strategy to become Canada’s leader for underwriting solutions providing innovative products that meet the goals of its brokers and their clients,” a CanSure release says.
11
Sedgwick Claims Management Services Inc. expanded its professional liability business to include an errors and omissions claims management product for professional service organizations. The E&O specialists manage risks, resolve claims and administer settlements for professional service providers facing allegations of inaccuracy or oversight in the performance of their work.“Sedgwick CMS Professional Liability is the ideal partner for organizations such as financial advisors and financial services providers, realtors, property managers, architects, engineers, accountants, attorneys and others whose insurer, captive insurance company or self-insurance arrangements allow for independent expert assistance in the management of E&O claims,” said Tim C. Over, senior vice president and national director of professional liability claims operations.
September 2010 Canadian Underwriter
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GALLERY
The Toronto Insurance Women’s Association (TIWA) celebrated summer in style with their 7th Annual Summer Social (formerly Pub Night) on July 8. Insurance industry guests enjoyed a summer evening at Fionn McCool’s in downtown Toronto.
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APPOINTMENT
GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery
Paul Meinschenk, CIP, BA
Michael McLachlan, President of Berkley Canada Inc., is pleased to announce the appointment of Paul Meinschenk to the position of Vice President, Broker Distribution. Paul is an experienced veteran in the insurance business, having spearheaded the sales effort at a leading Canadian MGA. He will be responsible for overseeing Berkley’s broker relationships, with an initial focus on leading the sales program for Berkley Canada’s recently launched online quoting system. Berkley Canada Inc. was formed in 2008 to underwrite on behalf of the Canadian branch of Berkley Insurance Company, a 100% owned subsidiary of W.R. Berkley Corporation. Offering an innovative and competitively priced suite of specialty property and casualty products, Berkley’s Underwriters are committed to meeting the varied and complex needs of a wide range of businesses. Applications and contact information can be found at: www.berkleycanada.com
Berkley ™ C A N A D A
September 2010 Canadian Underwriter
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GALLERY
A zealous group of 221 golfers attended the 11th annual WICC Ontario Golf Tournament on July 12 at Angus Glen Golf Club in Markham, Ontario. Attendees enjoyed a day complete with a barbeque lunch, silent auction, raffle and excitement well beyond the ordinary, everyday tournament — with a hole-inone scored by Elizabeth Kepes of Desjardins General Insurance. The winning play of the day was made during WICC’s cheque presentation to the Canadian Cancer Society: that’s when golf committee chair and WICC director Lyna Newman presented the CCS with a cheque in the amount of $200,000.
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APPOINTMENT
GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery
Pamela Lowry Derksen BA, FCIP
David Crozier, Vice President – Commercial Insurance of The Economical Insurance Group® (TEIG®) is pleased to announce the appointment of Pamela Lowry Derksen, BA, FCIP, to the position of Division General Manager, Western General Insurance®, TEIG’s farming and agribusiness insurance operations. Since joining TEIG as Regional Commercial Manager, Western Region, Pamela has applied increased discipline to underwriting while contributing innovative vision to TEIG’s Commercial Insurance operations. Prior to joining TEIG, Pam held positions of significant and increasing commercial underwriting responsibility for other well-known property and casualty insurance companies. The Economical Insurance Group is one of the largest property and casualty insurers in Canada with $4.6 billion in assets and a surplus of nearly $1.2 billion. Based in Waterloo, Ontario, this Canadian-owned and operated company services customers’ needs through branches and service offices across Canada and in the United States.
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APPOINTMENT
GALLERY
Ian Clayton
Anne Coppens, President, Creechurch International Underwriters Ltd. is pleased to announce the appointment of Ian Clayton to the position of Assistant Vice President, Marketing. Ian brings several years of experience in underwriting and marketing to Creechurch, having held numerous increasing roles with global insurers. Ian will be responsible for the marketing of Creechurch’s products and services to our broker community. He will also be instrumental in expanding Creechurch’s product line and enhancing broker service levels. Creechurch International Underwriters is a leading Management General Agent (MGA) company in Canada, offering specialized insurance solutions for independent businesses and trade associations. Creechurch products are distributed exclusively through licensed Canadian insurance brokers through its offices in Toronto and Montreal. Additional information can be found at www.creechurch.com.
Think Creechurch Intelligent Insurance 72 Canadian Underwriter September 2010
The 20-20 Vision CARSTAR Industry Conference 2010 kicked off at Deerhurst Resort in Hunstville, Ontario with a beach party on Aug. 18 that featured a boat ‘safety’ demonstration, followed by a number of notso-safe water-skiing tricks performed by very capable professionals. On Aug. 19, after breakout sessions with a number of insurers, CARSTAR franchise owners fraternized at the event’s afternoon Expo & Lunch.
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APPOINTMENT
GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery
Tom Mallozzi BA, FCIP
Catherine Coulson, Vice President – Personal Insurance, of The Economical Insurance Group® (TEIG®) is pleased to announce the appointment of Tom Mallozzi, BA, FCIP, to the position of Division General Manager, Perth Insurance®. Tom will be playing a dual role, continuing his Underwriting Services accountabilities. Accordingly, he will retain his title of Assistant Vice President, Personal Insurance. Tom brings with him years of industry experience, specifically in personal insurance. He is uniquely positioned for this role, having successfully led personal insurance teams at various wellknown property and casualty insurance companies. His knowledge and proven expertise in the non-standard business will help drive our efforts to re-position Perth Insurance in that marketplace. The Economical Insurance Group is one of the largest property and casualty insurers in Canada with $4.6 billion in assets and a surplus of nearly $1.2 billion. Based in Waterloo, Ontario, this Canadian-owned and operated company services customers’ needs through branches and service offices across Canada and in the United States.
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APPOINTMENT
GALLERY
Steve J. West
Anne Coppens, President, Creechurch International Underwriters Ltd. is pleased to announce the appointment of Steve J. West to the position of Vice President, Claims. In this newly created role, Steve will be instrumental in developing and implementing Creechurch’s in-house claims department. As an accomplished executive, Steve brings over 28 years of claims and management experience and holds an Independent Adjusters License for handling all lines of General Insurance. Steve held various claims positions and brings a wealth of knowledge from his background working for both domestic and international insurers. Creechurch International Underwriters is a leading Management General Agent (MGA) company in Canada, offering specialized insurance solutions for independent businesses and trade associations. Creechurch products are distributed exclusively through licensed Canadian insurance brokers through its offices in Toronto and Montreal. Additional information can be found at www.creechurch.com.
Think Creechurch Intelligent Insurance 74 Canadian Underwriter September 2010
With insurance, dealer and supplier partners in attendance, Assured Automotive recently held the Grand Opening of its new facility located in Kitchener, Ontario. Assured purchased the collision centre from Steve Scherer Chevrolet Buick and continues to be their exclusive collision repair centre. “Kitchener Waterloo is an important market for Assured Automotive,” said Assured president Tony Canade. “We are extremely confident that we will be in a position to better serve our insurance and dealer partners with the addition of Assured Kitchener.”
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“The process was
open,
fair, efficient.”
and very
- Terry, Customer
Around 2PM on July 12th, an epic hailstorm ripped through Calgary and the lives of Calgarians like Terry. Within hours our Catastrophe Response Team was starting the process of helping customers get back on track. Terry wrote to tell us about his experience, “I just wanted to say how pleased I was with the outstanding service I received from your employees.” At Intact Insurance we know it’s people that make Calgary such a great place to live. Like the members of our Claims Team who worked so hard to provide your customers with a fair, easy and respectful claims experience during a time of profound disruption. Judging by Terry’s comments, they certainly did their job, and some. Thanks for the note Terry. You made our day.
HOME • AUTO • BUSINESS Certain conditions, restrictions and exclusions may apply. Services are not available in Saskatchewan or Newfoundland. The BIP logo is a registered trademark of the Insurance Brokers Association of Canada (IBAC) used with permission. All other trademarks are properties of Intact Financial Corporation used under license. © 2010, Intact Insurance Company. All rights reserved.
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