Canadian Underwriter March 2013 by Annex Business Media

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

M A R CH 2 0 1 3 A Business Information Group Publication #40069240

Risk, Interrupted BY ANGELA STELMAKOWICH

Admitted or Not BY SURESH KRISHNAN

Telling Telematics BY STUART ROSE

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VOL. 80, NO. 3, MARCH 2013 CANADA’S INSURANCE AND RISK MAGAZINE. PUBLISHED BY BUSINESS INFORMATION GROUP

www.canadianunderwriter.ca

COVER STORY

Risk, Interrupted

Contingent business interruption can occur following many events, but notably natural catastrophes, at home, across the country or around the world. What needs to be done by organizations to manage this potentially costly risk? BY ANGELA STELMAKOWICH

FEATURES

12 Solvency II

Concussion Lawsuits

As key global players, Canadian property and casualty insurers would do well to get acquainted with regulatory practices elsewhere, including Solvency II.

High-profile lawsuits in professional leagues, such as the NFL, have raised questions about liability and injury prevention. Some sports entities in Canada are focusing more on risk management.

BY JEDANNAH VIEIRA

BY CRAIG HARRIS

Intellectual Property Insurance

Limitation Periods

Intellectual property insurance may once have been sought mostly by those in high-tech. However, more organizations with lower-risk profiles are now looking at the option.

An Ontario court ruling that a one-year limitation period does not apply to multi-peril policies could signal the death knell of that limitation in fire statutory conditions.

BY ERIK ALSEGÅRD

BY MICHAEL TEITELBAUM

16 Climate Change

46 Exporting Risk

Canada is one of the few developed countries exposed to a wide array of natural hazard risks. It has been relatively quiet in recent years, but has that just been luck?

Brokers and insurers wanting to ensure that their clients are in compliance with multinational insurance must look beyond “non-admitted prohibited” and consider how risk is exported.

BY ANDREW CASTALDI

BY SURESH KRISHNAN

20 Insurance Industry Demographics A new demographics analysis from the Insurance Institute of Canada shows encouraging signs, but those positive moves will need to continue. BY INSURANCE INSTITUTE OF CANADA

28 Mandatory Sprinklers Ontario has tabled regulatory changes to building and fire codes that would mandate installation of fire suppression sprinklers in retirement homes and other institutions housing vulnerable individuals. BY GREG MECKBACH

48 Canadian Collision Industry Forum 2013 The 2013 Canadian Collision Industry Forum offered an array of cutting-edge topics in collision repair. Are industry players headed for a safe drive or are they on a crash course? BY GREG MECKBACH

57 Telematics By weeding out unimportant variables, analytics can help companies to develop, test and use the best techniques to create new auto insurance pricing models. BY STUART ROSE

March 2013 Canadian Underwriter

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VOL. 80, NO. 3, MARCH 2013

PROFILE

Editor Angela Stelmakowich astelmakowich@canadianunderwriter.ca (416) 510-6793 Associate Editor Greg Meckbach gmeckbach@canadianunderwriter.ca (416) 510-6796

10 Navigating Risk Dan Heaman and Steve Matterson, co-chairs of the RIMS Canada Conference in 2013, invite risk managers to set their compass to Victoria and set sail for a bit of risk management discovery. BY GREG MECKBACH

SPECIAL FOCUS

Editorial

Marketplace

60 Moves & Views 62 Gallery

Online Editor Harmeet Singh hsingh@canadianunderwriter.ca Twitter: @CU_Harmeet (416) 442-5600 ext. 3652

Senior Publisher Steve Wilson steve@canadianunderwriter.ca Twitter: @InsuranceMedia (416) 510-6800 Art Director Gerald Heydens Art Consultation Sascha Hass Production Manager Gary White (416) 510-6760 Subscriptions/Customer Service Gail Page gpage@bizinfogroup.ca (416) 510-5187

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EDITORIAL

Model Proposition

“Models will always be wrong and there will always be non-modelled factors.” Angela Stelmakowich, Editor astelmakowich@ canadianunderwriter.ca

Canadian Underwriter March 2013

A model may be a standard or example for imitation or comparison — although when it comes to preparing for natural catastrophes, it sometimes feels more akin to a hope and a prayer. But even hopes and prayers can be based on solid information that provides the best chance of weathering whatever storm happens along. It is likely with that view of being prepared (financially and otherwise) and able to cope with whatever exposure presents itself that the Office of the Superintendent of Financial Institutions (OSFI) has issued its final revised earthquake exposure guideline. The stuff of public consultations since last August, Earthquake Exposure Sound Practices (Guideline B-9) seeks to update the information and understanding that was available in 1998. There was plenty to discuss, including emphasizing and strengthening the principlesbased approach to managing earthquake exposure; updating the description of best practices in earthquake exposure management; and increasing OSFI’s flexibility in the collection of relevant data. The guideline is scheduled to take effect January 1, 2014. OSFI has refreshed its guidance to reflect the lessons learned and technological changes that have taken place since 1998, Mark Zelmer, assistant superintendent of the regulation sector, has said. It “will help Canadian insurance

companies continue to be well-prepared for the financial consequences if a major earthquake were to occur in Canada,” Zelmer noted. OSFI will work with the Insurance Bureau of Canada and provincial regulators to incorporate any future changes to the Minimum Capital Test (MCT) Guideline. Being prepared is critically important in light of the high costs, both insured and to the economy in general, that can occur. Aon Benfield notes in a recent report that, in 2012 U.S. dollars, the Japan earthquake and tsunami in 2011 was the catastrophe with the highest economic loss since 1950, at $217 billion, and an insured loss of $36 billion. Hurricane Katrina in 2005 had a lower economic loss, $146.1 billion, but a higher insured loss, $78.2 billion. Different events, different exposures perhaps, but surely the same message. The need to prepare for what may/will happen must be top of mind. The before/after is evident in countless efforts, including everything from a San Francisco ordinance mandating seismic safety retrofits for certain wood frame, softstorey residential buildings to the partial reopening of New Jersey’s Island Beach State Park in January, a testament to recovery and clean-up efforts after Sandy. With increasing urban development in areas that may be seismically active, coupled with older buildings and aging infrastructure, costs

following catastrophic events perhaps should be expected to be higher than expected. Models are key to not only reflect information that is currently available, but also to indicate where that information may lead in future. But there are cautions about how much faith should be attached to models — be these for earthquake or other catastrophes. “Models will always be wrong and there will always be non-modelled factors,” notes a recent report from brokerage firm Lockton. Insurance professionals are encouraged to account for factors such as a concentration of exposures, location of critical suppliers and the time since the last catastrophe in an area, Lockton states. A report from Fitch Ratings adds Sandy is likely to inspire some companies to revisit if pricing in the northeast United States is adequate and if contract wording is appropriate for the risk being assumed. “There were several areas related to flooding risk exposure that the models did not fully capture and companies did not fully anticipate, despite robust modelling” for the region. The below-hurricane status landfall event was able to cause an extensive level of damage and a significant dollar amount of insured and uninsured losses, it adds. Models must be based on the most current information, but also need to be viewed as living things, constantly evolving to have a chance at addressing the what-ifs.

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MARKETPLACE Sign up to receive Canadian Underwriter’s free Insurance Headline News Email Alert: http://bit.ly/cuenews

Regulation NDP PRESSES ONTARIO TO LOWER AUTO RATES The Ontario New Democrats continue to press the ruling Liberals to commit to cutting auto insurance premiums. In December, NDP leader Andrea Horwath said in the provincial legislature that she wants the Liberal budget for 2013-2014 to include measures to reduce premiums. In February, Horwath proposed that the Financial Services Commission of Ontario be mandated to cut auto insurance rates by 15% by March 2014. “The rubber hits the road in a budget, and in that budget I want to see affordability measures, particularly on auto insurance,” Howath has said. Liberal MPPs have reiterated the need to focus on moving ahead with recommendations of the Auto Insurance AntiFraud Task Force and adopting the regulatory changes that were tabled in January. In late February, officials for the Insurance Bureau of Canada met with Horwath to discuss auto insurance rates.

NEED TO REVISE BACKWATER VALVE LANGUAGE: ICLR Urban flooding in Canada: Lot-side risk reduction through voluntary retrofit programs, code interpretation and by-laws, a research paper released in February by the Institute for Catastrophic Loss Reduction, calls for revising provisions in building

8 Canadian Underwriter March 2013

and plumbing codes related to installing backwater valves. The paper recommends rewording or clarifying sentences in the National Plumbing Code and other provincial building and/or plumbing codes to ensure they are clearly and consistently interpreted and applied. An alternative would be to “provide guidance to local authorities about how code wordings related to protection of homes from sewer backflow should be interpreted. This guidance should outline that code wordings be interpreted in a way that requires the mandatory installation of backwater valves in all or most new Canadian homes.” Requiring valves is justified because of the “substantial costs associated with sewer back-up insurance claims, the legal liability of municipalities generated by regional sewer back-up events, health and home liveability risks posed to households created by sewage flooding and the fact that urban flooding and sewer back-up occurrences are likely to increase as a result of increasing frequency of extreme rainfall caused by climate change.”

Claims MEDICAL ASSESSMENT FIRM SUED OVER AUTO CLAIMS State Farm Mutual Automobile Insurance Company is suing a Toronto-based assessment centre and four people for more than $11 million.

In a statement of claim filed with the Ontario Superior Court of Justice, State Farm argues treatment plans for motor vehicle accident claimants were filled out by Assessment Direct, and/or individuals also named in the lawsuit, “in the name of health professionals who either never worked at Assessment Direct, were not employed by Assessment Direct at the time the treatment plan was assigned, did not have the qualifications represented on the treatment plan, and/or who never recommended the services and/or assistive devices allegedly that recommended therein.” The allegations have not been proven in court. Among other things, State Farm is seeking $3 million in damages for fraud, fraudulent misrepresentation and/or unjust enrichment, $3 million in damages for conspiracy and $5 million in aggravated and/or punitive damages.

Canadian Market M&A ACTIVITY REACHES RECORD HIGH IN 2012 Merger and acquisition activity among insurance agencies reached a record high in 2012, bouncing back after a few years of low activity, notes a new report outlining reported transactions in the United States and Canada. There were 291 reported transactions in the U.S. and Canada in 2012, notes the

annual survey from OPTIS, an investment banking and financial consulting firm. Privately owned agencies were the biggest buyers, making 93 acquisitions; banks were also active, buying 24 agencies in 2012. M&A activity is expected to remain strong throughout 2013 since many principals of companies in the agentbroker space are part of the aging “boomer” population.

“RAPID EXPANSION” OF TELEMATICS PREDICTED AMONG INSURERS Research firm Strategy Meets Action (SMA) in the United States is predicting that 2013 will likely see “rapid expansion” of telematics and usage-based auto insurance (UBI) programs among North American insurers. SMA indicates 70% of auto insurers are in some stage of executing, developing or planning UBI programs. There are 18 insurers with UBI programs active in at least one state or province. Most insurers who are using telematics for UBI are using the method to provide discounts, but almost 30% also have value-added services, notes the report. Among the companies using UBI programs to calculate discounts, mileage is the most frequently used data element, followed by time of day, braking and speed. Respondents cited benefits like customer retention, more accurate rating, reduction in costs and claims control.

MARKETPLACE

Risk Management OSFI RELEASES FINAL REVISED EARTHQUAKE EXPOSURE GUIDELINE The Office of the Superintendent of Financial Institutions (OSFI) released the final revised version of its Earthquake Exposure Sound Practices (Guideline B-9) in late February. A working group was created in 2010 to update the 1998 earthquake guideline to do the following: emphasize and strengthen the principles-based approach to managing earthquake exposure; remove references to outdated Default Loss Estimates; update the description of best practices in earthquake exposure management; increase OSFI’s flexibility in the collection of relevant data; and remove the details of the capital formula from Guideline B-9. Insurers have been asked to assess their practices compared with the new guideline by September 30. The revised guideline is to take effect January 1, 2014.

MOST EXECUTIVES EXPECT TO BENEFIT FROM ORSA More than four in five surveyed executives for North American insurance firms say they will benefit from an own risk and solvency assessment (ORSA), but Towers Watson reports they have a way to go before

completing the assessments. The Towers Watson seventh biennial global enterprise risk management (ERM) survey, which involved 539 senior insurance executives, shows that 68% of North

American respondents indicated their company will be required by regulators, or intend themselves, to perform an ORSA. That said, only 20% of respondents noted they “have outlined a

road map for their project plan,” just 7% said they had educated the directors on their boards on their new oversight responsibilities, and 12% had produced an initial “dry run.”

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March 2013 Canadian Underwriter

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PROFILE

Navigating Risk Greg Meckbach Associate Editor

Dan Heaman and Steve Matterson, co-chairs of the Risk and Insurance Management Society (RIMS) Canada conference in 2013, plan to incorporate a nautical theme and welcome everyone to join the discovery. In the early 1790s, Royal Navy Captain George Vancouver faced numerous risks, including disease and conflict, while mapping the west coast of North America. Two centuries later, the risks of marine travel off the British Columbia coast may be different, but the Risk and Insurance Management Society (RIMS) Canada is incorporating the name of Vancouver’s ship, Discovery, into the theme of its annual conference, set for October 6 to 9 in Victoria. “Our conference is intended to focus on exploration and discovery for all attendees,” says Dan Heaman, co-chair of the RIMS Canada conference. “We’re drawing up the theme of discovery,” says Heaman, director of risk management and insurance for Central 1 Credit Union in Vancouver.

10 Canadian Underwriter March 2013

The course being charted is to book plenary speakers who will “share their discoveries” in risk management with people attending this year’s conference, he says. “Our goal is to identify new challenges on the horizon for risk managers and assist them as they sail into the future, navigating obstacles and spying out for opportunities,” Heaman says of this year’s conference program. “Essentially, we’re going to do that with sessions that help them navigate and identify issues on the horizon.” Although the conference will not necessarily focus on marine risks, Heaman’s co-chair, Steve Matterson, has become familiar with marine risks in his current day job, as director of risk and insurance at Victoria-based British Columbia Ferry Services Inc. B.C. Ferries provides service, shuttling people and cars mostly between Vancouver Island and the mainland, on 25 routes among 47 terminals. The largest vessels in its fleet are capable of carrying 2,100 people and 470 vehicles. “When you’re dealing with transporting people back and forth on ferries... a lot of the general risks are the same that most companies face,” Matterson points out. “We just face some that are on top of water and some that are on top of land.” Matterson has had some hands-on experience with risk. Before joining B.C. Ferries

in 2005, he worked on the mainland as a risk manager for the City of Surrey. At the same time, he was a paid on-call firefighter for the Township of Langley, east of Surrey, which used on-call firefighters as first responders since it did not have full-time firefighters at the time. “The two of them go hand in hand,” Matterson says of his past roles as full-time city employee and part-time firefighter. “I’ve been out there and I’ve seen the actual damage. It’s not theoretical to me. I’ve seen the consequences, which helps me to explain to people... why we want to put prevention into place.” Matterson took economics at the University of Victoria before beginning work life as a computer salesperson in the early 1980s and then moving to Hudson’s Bay Company as a manager. His foray into insurance began with an auto claims adjusting position at the Insurance Corporation of B.C. (ICBC). “This was not a career path I selected,” he says of insurance and risk. “Like many, it kind of chose me.” After seven years at ICBC, Matterson moved to the City of Surrey, initially working in claims. “Soon after I started, loss prevention became part of my responsibilities, in part because I was a volunteer firefighter,” he relays, adding his firefighting duties have taught him “the need and benefits of being prepared to respond to an incident.”

Matterson got his Fellow Chartered Insurance Professional (FCIP) qualification in 1997 from the Insurance Institute of Canada and attained a Fellowship in Risk Management from RIMS. He also became actively involved in RIMS Canada at that time, helping the chair of a western RIMS conference. He has been on the executive of RIMS Canada’s B.C. chapter,

Risk managers need to have a sense of direction, which is why Heaman and Matterson are incorporating a compass into the logo of this year’s conference. BCRIMA, as treasurer, vice president and then as president in 2007-2008. “The number of risk managers in any one company tends to be small. I’ve worked in groups of three or four in different areas of my career. RIMS gives that much larger network when you’re looking for someone else to talk something through,” Matterson says. Like Matterson, Heaman has been BCRIMA’s treasurer and chapter president in 2002-2003, and also served as chairperson for the RIMS Western Regional Conference Delegates Committee from

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PROFILE

“It seemed a natural progression to have a career in the insurance industry grow into working in risk management, managing claims within a risk management department on the demand side

says, adding that he has certainly seen some changes over the years. He sees as the biggest challenge, whether an organization is public or private, “the recognition of the importance of applying

arising risk management issues,” Heaman says. Again like Matterson, he did not initially set his sights on a career in insurance. He studied geography at the University of Victoria in the early 1980s, graduating in the midst of a “significant recession.” A career in the resource industry at the time was “not an option,” he says. Instead, Heaman began his career in claims with Continental Canada Insurance Company Ltd., which later became Lombard General Insurance Company of Canada, now owned by Northbridge Financial Corp.

of the industry,” he says. Heaman has since attained the FCIP qualification and the Canadian Risk Management (CRM) designation. In his current job at Central 1 Credit Union, where he has worked since 1995, his responsibilities have grown steadily. Initially, Heaman was a claims manager for its captive and risk finance program; now he oversees the claims, underwriting and fraud prevention groups. For client credit unions, Central 1 provides both risk management and loss control services, Heaman

enterprise risk management across the organization to make sure that the organization or the company can meet its objectives, identify obstacles to those objectives, overcome those obstacles and identify opportunities.” Offers Heaman, “The recognition of the role of risk management to an organization’s success has never been more pre-eminent, and I think that’s a really good development.” RIMS can certainly help in that regard by providing a means for risk managers to network with their peers and learn from colleagues.

Photo: Leanne Scherp

2009 until 2011. “I find that RIMS provides risk managers with outstanding opportunities to network with their peers, to learn from colleagues and to stay on the leading edge of risk management knowledge and the ability to deal with

“When risk managers attend risk management conferences and they hear from speakers of enterprise risk management, their preference tends to be hearing from risk managers who have encountered their own obstacles and challenges in implementing risk management and share their successes and share their lessons learned,” he says. “They generally range from establishing an enterprise risk management culture, from the top to the bottom of the organization, delivering success with enterprise risk management, showing value throughout the organization and identifying fast, emerging issues, which, if not threats to the organization, are significant challenges that need to be addressed by risk managers,” he adds. To respond to these challenges, Heaman suggests risk managers need to have a sense of direction, which is why he and Matterson are incorporating a compass into the logo of this year’s conference. The event will be held at the Victoria Conference Centre, not far from the BlackBall Ferry terminal, which provides passenger service across the Strait of Juan de Fuca to the United States, over part of the area that Captain George Vancouver explored two centuries ago. Heaman makes a pledge: “The conference will offer opportunities for discovery for all levels of risk managers, whether they be novice sailors or admirals of their fleets.”

March 2013 Canadian Underwriter

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Jedannah Vieira Canadian Programme Leader, Solvency II, RSA Canada

Some Canadian property and casualty insurers may not consider that Solvency II has any bearing on operations here at home. But as key global players, Canadian p&c insurers would be well-advised to take a look at the global picture and become more acquainted with regulatory practices elsewhere. Solvency II continues to be a hot topic in the global insurance regulatory space. But if you think Solvency II does not apply to Canadian insurers, think again. Canada continues to outperform its peers on the international stage. As key global players, it

12 Canadian Underwriter March 2013

has become increasingly important for us as Canadian insurers to become more acquainted with regulatory practices around the world. Why? Because doing so allows us to see the big picture and to identify best practices that are gaining support and recognition. Solvency II has gained quite a bit of recognition with its suggested practices, and there are a few key reasons for this. In its Canada Insurance Market Report 2013, Marsh notes that the Canadian p&c market has continued to outperform the global and North American marketplace, allowing Canadian insurance costs to remain below the average benchmark in other areas of the world. Canada is primed to continue as a global insurance leader despite the current global economic environment. These significant advantages and the desire to play in global markets increase the need for Canadian insurers to keep abreast of best practices encouraging strategic growth. Solvency II plays an important role in this.

Illustration by Remy Simard/i2iart.com

Canadian Context

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THE PRIORITY LIST For most Canadian insurers, Solvency II is not something hitting the list of key priorities. This is mainly because the Solvency II Directive and its requirements apply to legal entities in countries — those considered European Economic Areas, Bermuda and Japan — that have adopted this regulation. Canada is not one of these countries, so Canadian legal entities are not in scope. Ah, yes.We can rest at ease. But should we? A few questions need to be asked: What can insurers gain from the directive being proposed? Should insurers bother to read it at all? Why should we pay attention? First, any regulation — whether in draft or final form — can drum up quite a bit of negative noise, especially where the requirements are seen as cumbersome and unnecessary. No doubt, there is quite a bit of negative noise out there. Some of that noise is warranted; another portion is successfully hiding complacency. Superintendent of the Office of the Superintendent of Financial Institutions (OSFI), Julie Dickson, highlighted this risk of complacency at KPMG’s 21st Annual Insurance Issues Conference this past December.When asked about a wish list for the insurance industry, Dickson responded: “I still get people saying to me,‘Why is OSFI doing this or that? Why are you picking up this rule that someone else has globally? We didn’t cause the crisis; we perform well; we don’t think that we need to change.’ And so I would pay very close attention to that risk [of complacency] and nip it in the bud if you ever see it.” Second, change is happening. Much consideration should be placed on the fact that many financial services organizations are global businesses — at least, if they are not yet, they are likely working on expansion. Regulation developed in key markets is commonly applicable to global players in those markets, thus piquing interest in its objectives. As such, where Canadian insurers hold

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their place on the world stage, keeping abreast of global regulatory developments is not just good practice, it is common sense. Finally, the Solvency II Directive incorporates a number of excellent ideas for enhancing governance at insurance enterprises. As part of its mandate, OSFI continues to monitor the global regulatory space and where appropriate, adopts global best practices within Canada. So it comes as no surprise that OSFI’s Guideline E-19 on Own Risk and Solvency Assessment (ORSA), released in draft form in December, offers the fol-

The European Solvency II Directive, while subject to difficulties in its resolution, has developed guidelines that seek to install sound governance practices. OSFI acknowledges global insurance best practices and adopts them where they fit for the Canadian marketplace. lowing as one of its objectives: consider international developments and standards, including advancements in risk and capital management techniques. The practice of conducting regular ORSAs (a concept developed to address the International Association of Insurance Supervisors’ Insurance Core Principle 16) is one of the good ideas highlighted in the Solvency II Directive. Therefore, while Solvency II regulation does not apply directly to insurers in Canada, consideration of its suggested practices should not be regarded as out of the question. In this case, it is an excellent indicator of what is likely to be coming down the pipeline. And while OSFI maintains a keen focus on a “made-in-Canada” approach, it is wise to ensure the country’s regulation is best-in-class. For insurers aiming

to be industry leaders, adopting a more globalized view on best practices will drive more efficient, and more resilient, governance frameworks.

FOREIGN CONNECTION The Canadian p&c market is home to numerous foreign players. In fact, several Canadian insurers are subsidiaries of Solvency II-regulated parent companies. For these insurers, Solvency II compliance might be required, especially where Canadian operations are proportionally material to the global business. For other Canadian insurers, some of the governance practices offered through Solvency II simply make good business sense. Those seeking to optimize local and global business operations and employ relevant, effective risk management will not tune out. So which best practices are likely to “catch on” over time?

Emerging trends and best practices Alongside ORSA, there are a few other themes within the Solvency II Directive that might make sense for Canadian insurers: 1) Increased Focus on Effective Capital Management: The primary purpose of the Solvency II Directive is to protect policyholders and hold insurers accountable for paying out on contractual obligations.The regulation calls on insurers to further buttress systems supporting the effective employment of capital and evolve measures for calculating the capital required to manage each significant risk. Employing analysis on risk-adjusted return on capital allocated to support capital assessments, as well as for use as reliable methods of evaluating economic performance, is a natural fit.The use of better capital analytics will prove insightful, especially given tough market conditions, where effective capital management is crucial. It may require further investment in management information systems to extract necessary data sets needed to

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conduct such analysis. Regardless, a better analysis of risk and required capital will help to support sound business decision-making and, ultimately, provide an enhanced view on an insurer’s capital adequacy and financial position. Where this analysis is conducted, boards and senior management will be eager to use it to better understand factors affecting capital efficiency. 2) Engaged Corporate Governance — Serving the Board with Better Information: Effective corporate governance over an evolving industry demands evolving information. As insurers grow and gain complexity, so too do the responsibilities and accountabilities of their respec-

tive boards. Greater board responsibility is outlined throughout the Solvency II Directive. In particular, the business strategy and risk appetite, as well as their supporting frameworks, are key areas where the ability to demonstrate board acknowledgement and approval are explicitly required. In Canada, the insurance ecosystem is also evolving and expanding. Both internal and external influencing factors and risks will continue to increase in

14 Canadian Underwriter March 2013

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their interaction and intricacy. As such, the need to offer better information and insight to boards will continue. Reliance on tick-box-type information packs and rolled-forward presentations will be a death sentence. Timely and forward-thinking information with a focus on offering insight will be in high demand. Boards will need multifaceted, objective information and analysis to employ effective governance and support the business in making sound decisions. All the while, the focus remains the same: maximizing shareholder value. As such, information that focuses on key risks and on capital management will prevail.The ability to extract better management information and showcase capital efficiency across lines of business will solidify the company’s focus on maximizing shareholder value and this information, undoubtedly, will be coveted by boards. 3) Silo Busting, Building on Capabilities and Knowledge Sharing: The Solvency II Directive calls for the installation of greater knowledge-sharing and collaboration across an insurance organization as a means for improving the internal system of governance. Fostering cross-functional knowledgesharing is a powerful way to build good governance practices and a culture that embraces a holistic view of the business. Thus, increased interaction across key functions and business operations will be a determinant of sound governance. Increased capabilities within risk functions and interaction with capital management teams will promote a better understanding of the relationship between insurance business risks and related capital management issues. Capital management teams will also stand to benefit from increased interaction with business operations, and gaining better assurance over the underlying data used to develop internal models, capital adequacy calculations and reserves.

Better understanding of the underlying data can lead to increased capital efficiency. Knowledge-sharing across key functions will also address other strategic business initiatives, such as building internal information capital and succession planning.

LOOKING FORWARD Regulators across the globe are facing the challenge of ensuring their governance remains relevant to the markets and economies they serve. The European Solvency II Directive, while subject to difficulties in its resolution, has developed guidelines that seek to install sound governance practices. OSFI acknowledges global insurance best practices and adopts them where they fit for the Canadian marketplace. Canada’s focus on high-quality management information and governance has brought us global recognition and success. It has served us well through the recent challenging market conditions. As we continue to make waves in the global insurance marketplace, it will be our drive towards employing effective information and embedding sound business practices that will keep us solvent, relevant and successful.

Every file is different

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Alexander Holburn Beaudin + Lang LLP Brenton Kean Burchells LLP Gasco Goodhue St-Germain LLP Hughes Amys LLP McLennan Ross LLP Martin Whalen Hennebury Stamp Robertson Stromberg LLP European and International Affiliation: ARC Group Canada is proud to be formally associated with Insuralex Global Insurance Lawyers Group an international affiliation of independent law firms whose members provide high quality legal and risk related services to clients throughout and beyond Europe.

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EXPECT T the UnEXPEC ed Opinion/Analysis

Andrew Castaldi Head, Catastrophe Perils, Americas, Swiss Re

Canada is one of the few developed countries exposed to many different severe natural hazard risks, ranging from avalanche to freeze, drought, flood, tornado, wildfire and earthquake. The country has been relatively quiet over the last decade, but does that mean Canada has simply been lucky? During the last two decades there has been an alarming increase in economic and insured losses stemming from natural disasters (See Figure 1, Page 18). This has been a global phenomenon dating back to Hurricane Andrew (1992, United States) and to some implies an increase in the occurrence of extreme events. Annual insured losses of more than $20 billion, $35 billion and upwards to $70 billion, adjusted to 2012 U.S. dollars, have occurred within just the last decade alone and have left many insurers wondering about their catastrophe management strategy and technology. Extensive economic losses caused by major events such as earthquakes in Chile, Japan, New Zealand and Haiti, the tsunami in Japan, hurricanes and tornadoes in the U.S., wind storms and floods in Europe, along with flooding in Thailand and Australia, have exceeded our expectations. Even those events previously thought of as less severe (e.g., tornadoes) have surpassed our expectations. Many insurance professionals have attributed the increase in losses to a “new norm” of increased natural hazard activity and severity.

16 Canadian Underwriter March 2013

Canada is one of the few developed countries exposed to many different severe natural hazard risks, including avalanche, freeze, drought, flood, geomagnetic storm, hurricane, wind storm, surge, severe convective storms, tornado, wildfire, earthquake, landslide, tsunami and volcano. Over the last 10 years, Canada has suffered through many natural catastrophes, but none of them approach the severity of what has been experienced elsewhere. Most of the larger occurrence losses in Canada have come from the perils of drought or flood; still none of these events have exceeded $1 billion (CAD). Going further back over the last two decades, Canada’s largest — and the only event with losses exceeding $1 billion — was due to the 1998 winter storm. In today’s dollars (GDPadjusted) this event caused over $3 billion in insured and $6 billion in economic damages. Over the last two decades of global losses, even Canada’s largest loss event would not pierce the top 25 global natural disaster losses (See Figure 2, Page 18).Yet when looking at the developed nations’ natural catastrophe losses in

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Figure 1

60 40

2011: Japan, NZ Earthquakes, Thailand Flood

1999: Winter Storm Lothar

1994: Northridge Earthquake

1992: Hurricane Andrew

100

2001: 9/11 Attacks

120

2005: Hurricanes Katrina, Rita, Wilma

In USD bn, at 2011 prices

2008: Hurricanes Ike, Gustav

140

2004: Hurricanes Ivan, Charley, Frances

Global Catastrophe Losses 1970-2011 (source Swiss Re Economic Research)

20 0

1970

1975

1980

1985

1990

Earthquakes

1995

Man-made

2000

2005

2010

Weather-related

Figure 2

Top Natural Catastrophe Losses Loss (mn)

Year

75,000

2005

Hurricane Katrina

U.S.

16%

35,000

2011

Earthquake

Japan

38%

26,000

1992

Huricane Andrew

U.S.

25,000

2012

Hurricane Sandy

U.S.

21,000

1994

Earthquake

U.S.

21,000

2008

Hurricane Ike

U.S.

15,000

2004

Hurricane Ivan

U.S.

14,000

2005

Hurricane Wilma

U.S.

12,000

2011

Flood

Thailand

307%

12,000

2011

Earthquake

New Zealand

412%

12,000

2005

Hurricane Rita

U.S.

10,000

2004

Hurricane Charley

U.S.

9,000

1991

Typhoon Mireille

Japan

8,000

1989

Hurricane Hugo

U.S.

8,000

2010

Earthquake

Chile

230%

Event

Country

Loss in GWP%

10%

8,000

1990

Winter Storm Daria

Germany

11%

8,000

1999

Winter Storm Lother

Switzerland

54%

7,000

2011

Tornado

U.S.

7,000

2011

Tornado

U.S.

7,000

2007

Winter Storm Kyrill

Germany

6,000

1987

Flood Europe

U.K.

6,000

2004

Hurricane Frances

U.S.

5,000

1990

Winter Storm Vivian

Europe

5,000

1999

Hurricane Bart

Japan

5,000

2011

Hurricane Irene

U.S.

1% 1% 10% 1%

3,000

1998

Ice Storm

Canada

6,000

1999

Ice Storm Economics

Canada

19%

18 Canadian Underwriter March 2013

percentage of industry resources, the 1998 winter storm would rank as the 7th largest event (See Figure 3, Page 19). Still, even accounting for industry resources on a global scale, Canada has been relatively quiet during the last decade. Does this mean that Canada is exempt from this new norm or has it simply been lucky?

OUTSTANDING QUESTIONS The first question that must be answered is what is behind the global increased losses: Is it a change in hazard, exposure or something else? There remains some debate on whether or not some of the atmospheric hazards have or will be exaggerated by climate change. What we do know is that global temperature is increasing and sea level is rising, both of which create additional risk. Although it is not possible to attribute any specific weather event to climate change, we cannot ignore the strong possibility that climate change may have already had an impact on flood, drought and wind â&#x20AC;&#x201D; and that this influence will grow in future. Similarly, despite the recent string of damaging earthquakes affecting population centres, there is no strong evidence of an increase in earthquake activity worldwide. The main reason why these losses have exceeded our expectation is due to our own success as a society. Our wealth and the value of our homes, despite the recent housing downturn, has doubled over the last two decades, notes information from the National Association of Realtors, Canadian Real Estate Association and Haver Analytics. Our infrastructure has become more complex, our urban areas more congested, and our buildings (including homes) have gotten larger. We have become more interconnected and dependent on technology as a society. The winter storm of 1998 was one of the first modern disasters to demonstrate how vulnerable our technology and infrastructure is to natural disasters, and how costly in terms of time and money it is to replace. Since then, the recent events of the last decade have emphasized that our technology

been less precise when modelling the non-structural components of risk such as operations and business interruption. How does this impact Canada? Canada is no different than many of the other developed nations. Canadaâ&#x20AC;&#x2122;s cities, its infrastructure and lifestyles have become more complex and expensive. As in other developed nations, Canada is also very dependent on technology. Canada and some of its major population centres

Events of the last decade have emphasized that our technology is very vulnerable while our lives and businesses are more dependent on technology than ever before. Figure 3 Major Developed Nations Catastrophe Losses in Relation to Industry Resources Major Catastrophe Losses (1989-2011) in Relation to Industry Resources

MODEL COMPONENTS

Georges [1998]

%PHS

**Tornadoes [2011]

%DPW

Hugo [1989] Ike/Gustav [2008] 4xFl Hurricanes [2004] *Ice Storm [1998] Northridge [1994] WTC [2001] Andrew [1992] Katrina [2005] 0%

10%

15%

20%

Notes: Ice storm is the only event measured in proportion to Canadian industry statistics, all others refer to U.S. industry. **Year-to date November 2011 Source: PCS, A.M. Best. Legend: PHS=Policyholdersâ&#x20AC;&#x2122; surplus; DPW=Direct Premiums Written.

are also exposed to a number of severe natural events, with British Columbia earthquake having the largest potential. With respect to earthquake, B.C. is affected by a significant subduction zone and substantial crustal seismicity. As in the case of Japan, the hazard estimation could be understated. The B.C. coast could also be impacted by a tsunami, and much of the coastal or riverine areas are exposed to liquefaction. It is not unusual for large aftershocks to occur, some of which can be as devastating as the initial tremor. There is also a chance that some hazards are not fully modelled, if modelled at all. If a large B.C. earthquake were to happen today, we should not be surprised if the event damages are larger than we expect or are prepared for. Canada would not be exempt from many of the same conditions, increased wealth, supply chain (CBI), complexity of risk, and technology changes that have added significantly to the size of loss experienced by others. Canada should learn from what the recent events have shown us and should be prepared for what can no longer be considered unexpected. Canada has been fortunate in recent years, much like New Zealand had been before 2011. A natural catastrophe may be around the corner, but are we prepared for it? On February 7, 2013, Canadian Underwriter and Swiss Re hosted a free live webinar presentation, The Changing Canadian Risk Landscape, featuring Andrew Castaldi.The approximately 1-hour webinar is archived for free on-demand viewing at http://bit.ly/canadianriskwebinar.

Figure 4

Number of Large Earthquakes Per Year 100

1 79

Number of Earthquakes

Since Hurricane Andrew, the insurance industry has devoted a tremendous amount of time and resources to developing catastrophe-modelling technology. These models combine science, engineering, statistics and financial components into a comprehensive model that estimates natural hazard losses on a probabilistic basis. Over the years, these models have become more sophisticated in terms of information required for the specific risks to be modelled, and in terms of the scale and scope of the science and engineering information within the models. However, despite our best efforts, modelling can be misleading. Sometimes the science can be wrong (e.g., the underestimation of maximum possible magnitudes in the Tohoku region by Japanese hazard maps), not fully recognized (e.g., widespread occurrence of liquefaction during the Christchurch earthquake), or missing from our models (e.g., tsunamis). Generally, our models perform well with regards to direct physical building damage, but have

is very vulnerable while our lives and businesses are more dependent on technology than ever before. Todayâ&#x20AC;&#x2122;s technology (e.g.; computerized manufacturing, robotics, automated services, etc.) is more vulnerable, harder to replace or repair and, as such, can lead to massive costs (economic/ insured losses) before operations can be up and running again. The world is getting smaller. Our businesses are a mosaic of other business intertwined as suppliers and consumers (supply chain). Many of the same business concepts that have made the world more competitive have increased our risk. We have outsourced much of our operations to areas outside of our home country in areas prone to natural disasters. Although far apart, many businesses are symbiotic and can experience extreme disruption if any one or more of the links in a supply chain is disrupted. As a result, business interruption and contingent business interruption (CBI) claims are getting larger.

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Year

M8 Number of worldwide earthquakes between 1977 and 2012 at different magnitude levels (data source: www.globalcmt.org)

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A Matter of

Demographics

Insurance Institute of Canada

The latest demographic analysis from the Insurance Institute of Canada offers, by turns, good news and not-so-good news. However, lower-than-anticipated retirements mean recruitment and retention will need to increase substantially in future. It’s a good news/not-so-good news story being told by the institute’s new research report, A Demographic Analysis of the P&C Insurance Industry in Canada 2012-2022. First for the good news: substantial recruitment activity took place between 2007 and 2012, this despite the degree of economic turbulence in Canada since 2008. In addition, the level of recruitment appears to have compensated for the level of retirement witnessed by the industry to date. Now for the not-so-good news: The industry has not seen the level of retirement anticipated so, going forward, the impact of retirement will increase substantially.The level of recruitment (and retention) will also need to increase substantially. “When the first census was released in 2008, there was quite a bit to say about the high proportion of the boomer cohort in the industry (almost half), the low entry-to-exit ratios and the need for more targeted recruitment,” says Margaret Parent, director of the Insurance Institute of Canada’s Professionals’ Division, and project lead for the demographic research studies. “Since the first census five years ago, the research reports have shone a light on the industry’s labour issues, the employers have taken action, and Career Connections’ awareness and engagement strategies have increased and extended. As a result, I am pleased to see that change (i.e. recruitment) is evident.”

20 Canadian Underwriter March 2013

RECRUITMENT INCREASED The most profound change between 2007 and 2012 can be seen in an analysis of the boom, bust and echo cohorts. As demonstrated by Chart II-4 (See Page 22), when industry age structure is considered, the share of the echo cohort1 — ages 17 to 32 in 2012 — has increased from 12% in 2007 to 27% in 2012, at the expense of the share of the boomer cohort — ages 46 to 65 in 2012 — which decreased from 49% to 37% over that timeframe. “As a result, in 2012 the workforce of the property and casualty insurance industry is both younger and more aligned with the age structure of Canada’s labour force than was the case in 2007,” notes Richard Loreto, president of R.A.L. Consulting Ltd., and author of the research report. “This increase in the echo cohort is across every province, every region, every company type and size, as well as every occupational category (except management),” Loreto says. “The rise in the share of the echo cohort is an indicator of substantial recruitment activity,” Loreto states in the report. “The data from 20 companies who participated in both the 2007 and 2012 census clearly indicate that they have grown their collective workforce. Full-time employees working in the targeted occupations for these companies have increased by 40%.”

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Chart lV-11

RECRUITMENT MADE EASIER First Job Information by Source, 2009 and 2012 (Percent) 44

Family/Friend in industry referral

Classified advertisement Personal initiative Directly recruited by employer Recruitment agency Internet On-campus recruitment Government agency Job fair

2009

2012

News story 0

% of Respondents

Chart ll-4

RECRUITMENT MADE DIFFICULT Industry Cohort Shares, 2007 and 2012 (Percent)

60 2007

2012

50 40 30 20 10 0 Boom

Bust

Echo

David K. Foot with Daniel Stoffman, Boom, Bust & Echo: Profiting From the Demographic Shift in the 21st Century (Toronto: Stoddart Publishing Co. Limited, 2000).

Chart lV-14

35 2009

2012

30 25 20 15 10 5 0 1

3 Time Frame for Exit (Years)

22 Canadian Underwriter March 2013

Roles that are more difficult, and more urgent, to recruit include actuary, accident benefits adjuster and claims adjuster/examiner positions. These roles tend to be experienced roles and recruiting is made difficult by too few qualified internal and external candidates, uncompetitive compensation levels, and failing to accommodate work-life balance issues. More HR professionals report (54% in 2012 compared to 21% in 2007) that accommodating work-life balance issues is an important factor impacting recruitment.

IMPORTANT TO RETAIN

Intend to Leave – Time Frame, 2009 and 2012 (Percent)

% of Respondents Intending to Exit

In the survey of human resource (HR) professionals, respondents indicated that on average, recruiting for all insurance roles is somewhat difficult. Some roles, such as customer service and technical support positions in claims, underwriting and sales, are perceived as easier to recruit. These roles tend to be entry-level roles and recruiting is made easier by employee referrals, competitive compensation levels, being an employer of choice and accommodating work-life balance issues. Aligning nicely with HR’s perspectives on employee referrals is the finding that 44% of current employees indicated they got their first job in insurance as a result of a direct referral from a family or friend working in the industry (See Chart IV-11).

The results of the employee survey show job satisfaction is high among current employees — 89% are either somewhat or very satisfied.That satisfaction extends to career prospects, at both the company and industry levels, and with regard to specific aspects of work (for example, compensation). That being said, the research illustrates that in both 2009 and 2012, approximately one-third of respondents indicated they intend to leave their current employer within the next five years. Moreover, of those stating an intention to leave — for a higher salary, to pursue career advancement within the industry or to retire — one-half intend to leave within the next two years (See Chart IV-14).

IMPACT OF RETIREMENTS TO 2022 The census data demonstrate the gradual aging of the industry’s workforce over the last five years. Although the median age has remained stable at 41 years, the entry-to-exit ratio for those 25 and younger compared to those 55 and older has fallen from 0.53 to 0.42.The ratio of employees 35 and under to 55 and over has declined from 3.68 to 2.61. “This means that for every 10 employees over the age of 55, the industry was recruiting five, now only four, employees under the age of 25,” Parent explains. “And if we presume that over the next 10 years replacing retiring managers would come from within, then the proportion of under-35 employees should be increasing, not decreasing.” Add to this mix that employees in the insurance industry retire younger than the general Canadian labour market, by two or three years. “Between 2007 and 2012, the median age of retirement for men working in the p&c insurance industry was 60; for women, the median

age was 59,” Loreto notes in the report. “The industry remains in the vanguard of the early retirement trend.” The report projects a potential maximum decrease of 28% nationally in the industry’s workforce base by 2022 as a result of demographic factors. In terms of the industry’s management ranks, the potential maximum is a 43% reduction over the next 10 years, with the greatest hit affecting the senior management level. And these projections are three percentage points higher than in 2007. To date, the “substantial recruitment activity has allowed the industry to, at best, stabilize the aging trend and counter the impact of retirement,” Loreto writes. “However, in 10 years, the boomer cohort will all be older than 55 and, therefore, the impact of retirement should increase substantially. Going forward, it will be imperative to recruit (and retain) at a level that mitigates the potentially adverse impacts of demographic trends, in terms of both supply and demand pressures,” the report adds.

The report is the third demographic research study published by the Insurance Institute of Canada on behalf of the industry and authored by Richard Loreto. “We know that the first two studies have provided information that was of value to our stakeholders and the industry,” says Peter Hohman, president and CEO of the Insurance Institute of Canada. “We know it has informed the initiatives of the Institute’s Career Connections program, the FCIP program and other professional development offerings. We anticipate that this third study will provide further information for employers’ recruitment and retention strategies and that collectively, these demographic studies will help to address their future human resource requirements,” Hohman adds. Copies of the report are available on the Institute’s website at www.insuranceinstitute.ca/research. 1 David K. Foot with Daniel Stoffman, Boom, Bust & Echo: Profiting From the Demographic Shift in the 21st Century (Toronto: Stoddart Publishing Co. Limited, 2000).

March 2013 Canadian Underwriter

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Canadaâ&#x20AC;&#x2122;s intellectual property-rich business landscape is creating opportunity for niche coverage. Once sought mostly by companies in high-tech sectors, there is growing awareness of the value of IP to business, including among companies with lower-risk profiles.

Intellectual Property Underwriter, Corporate Insurance Partner, A Division of Great Lakes Reinsurance (U.K.) Plc, A Group Company Allegations of intellectual property (IP) infringeof Munich Re ment are becoming increasingly common, presenting a strong opportunity for the insurance industry to play a role in mitigating this risk. Publicly available data does not show the whole picture, as a significant number of disputes in Canada and elsewhere are settled before reaching court. The harsh reality is that without even

24 Canadian Underwriter March 2013

considering the question of culpability, a company defending allegations faces the prospect of substantial legal costs and possible settlement costs. Deciding to pursue an infringer also takes significant resources and needs to be weighed against the benefits of winning. In either defence or pursuit, an inability to effectively handle the matter could lead to loss of market share, severe financial impairment or even in extreme cases, particularly in the case of small and medium-sized enterprises (SMEs), bankruptcy. Clearly a significant part of protecting IP is having the financial ability to do so. As awareness of this has grown, companies have been increasingly looking at insurance to provide a solution. For example, Orbite Aluminae Inc., a clean technology company based in Montreal, recently announced in a press release that it had secured insurance coverage from a Munich Re company for its intellectual property, including its portfolio of patents, trade secrets and trademarks. In a press announcement, it was noted that the â&#x20AC;&#x153;coverage will allow Orbite to respond to any al-

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Intellect(Mar13)_AS_GM.qxp

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Over the past 10 to 15 years, the environment around patents in particular has become ever more litigious and it is now a playground in which entities with limited resources may find themselves bullied for their lunch money.

legations of infringement and defend its intellectual property rights without creating a financial burden on the company.”

TRENDS IN IP INSURANCE Intellectual property insurance usually refers to cover for costs and damages in relation to infringement claims, rather than cover for IP asset values. As such, a better name for the cover is perhaps IP infringement insurance. Cover may be available both for defence actions where the insured is accused of infringement, and pursuit actions, where the policyholder’s own IP is infringed by a third party. Predominantly written by the industry out of London (U.K.), this coverage has been available for a number of years. But, from the perspective of insurers, it is still a niche product. In the past, it has largely been companies in high-tech sectors that have sought this coverage. More recently, as awareness that the value of IP to the business has grown and that litigation is not restricted to the largest corporations, companies with lower-risk profiles have started to buy. As a result, IP insurers will now see a much more balanced portfolio.This trend has been accelerated through the development by insurers of underwriting mechanisms that enable them to produce terms and conditions that mirror the risk exposure of the individual insured company. Another trend is increased interest wherever emerging technologies create patent thickets. As companies jostle for positions as leaders in disruptive technologies, IP disputes may form part of the landscape in years to come.

26 Canadian Underwriter March 2013

Similarly, changes in human behaviour may force companies to take unprecedented action.As an example, copyright holders now have to deal with an increased lack of respect for copyright amongst the general public in relation to contents on the Internet. Such trends are naturally important for an insurer to

identify and handle with care, and it is possible that some challenges simply cannot be met by the industry. The available market capacity for IP infringement insurance has changed over time and the latest evidence suggests a growth in excess layer capacity rather than an increase in specialized IP primary insurers. While this may be of value for larger corporations buying

large IP infringement insurance limits to smooth quarterly cash flow, it is less so to the SME market where a company’s ability to protect its IP can be a matter of survival.

THE RISKS AND THE COVER As a consequence of the increasing number of sectors buying IP infringement insurance, the types of rights that are relevant are also increasing. Insurance can typically cover all intellectual property, including patents, trademarks, copyright, design rights and trade secrets. Over the past 10 to 15 years, the environment around patents in particular has become ever more litigious and it is now a playground in which entities with limited resources may find themselves bullied for their lunch money. In such an environment, insurance can be essential.Two scenarios illustrate this point: 1)Large Company v. SMEs: A larger entity may decide to accuse an SME of infringement as this offers a way to get rid of a company that is bringing strong products to the market, but which has not yet built a strong cash balance. A lawsuit may also bring down the market value of such a company, making it a suitable acquisition target later in the process. Alternatively, a large entity may decide to ignore the SME’s rights on the basis that there is nothing the small company can do about it. Taking a less cynical view, the large company may not be aware of the SME’s rights if the SME is not a known entity. Maintaining a patent portfolio is an expensive, yet ultimately futile, exercise if the rights cannot be enforced efficiently.

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2)NPEs v. SMEs: Non-practicing entities (NPEs), also known as patent trolls, often seek royalties from large numbers of companies that they claim potentially infringe their patent portfolio. From a defence perspective, NPE settlements or litigation can be costly and, in some sectors, frequent.They require a different approach to traditional disputes since the NPE is not a competitor in the traditional sense and has nothing to lose. Some believe that NPEs only target large corporate entities, but this is not the case. For many small companies, the largest threat is not an action against the company, but rather actions made against their customers or licensees, which they indemnify or hold harmless for IP infringement. Providing means to meet this obligation makes the insurance a true business enabler. The insurance should also cover all the related exposures that a company could reasonably face. Legal costs and damages or settlement amounts form part of this, but if a company wishes to pursue an infringer and request an injunction, it may also need an amount for cross-undertaking of damages, which the court may direct to be paid in order to grant such injunction. With IP litigation often being complex, the policy must be clear in its response to pre-emptive actions, counter-claims and multi-jurisdictional disputes in relation to a wide range of IP rights.

HOW TO TREAT THE RISK It is not unusual to find elements of defensive IP cover in, for example, multimedia, errors and omissions or general liability insurance.This may be sufficient, particularly where a policy is specifically designed for a sectorâ&#x20AC;&#x2122;s unique requirements. However, with the above complexities in mind, it is prudent to ask whether or not a policyholderâ&#x20AC;&#x2122;s risk warrants a separate policy for IP infringement exposures. In terms of pursuing infringers of own IP rights, such cover is not commonly offered under other policies. As IP risks are not typically related to other

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events, there is no obvious benefit in linking it to other insurance cover since it has to be underwritten and rated individually. As always, insurance should not be seen in a vacuum. Developing, logging and maintaining own IP rights, performing the IP searches suitable to the business activities and maintaining a

reasonable contract management should form part of the day-to-day IP risk management. Important IP decisions should be made at senior levels. Just as an insurer may demand sprinklers in order to provide property insurance, similarly an insurer will expect that a company takes appropriate steps to reduce its IP exposures.

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Snuffed OUT

The Ontario government has proposed changing provincial building and fire codes to mandate the installation of fire suppression sprinklers in retirement homes and other institutions housing vulnerable individuals. At least one insurer has voiced its strong support of the draft changes. Greg Meckbach Associate Editor

The Co-operators Group Ltd. of Guelph, Ontario has stepped up efforts to encourage the installation of fire suppression sprinklers in new private homes and is lending its support to Ontario’s proposed fire safety requirements that would apply to retirement homes, long-term care facilities, group homes, supportive housing and hospitals. In January, Ontario’s Ministry of Community Safety and Correctional Services published proposed regulations meant to improve fire safety. The draft requirements are based on recommendations from a technical advisory committee, initially announced last April, chaired by thenprovincial deputy fire marshal Bernie Silvestri. Submitted to the ministry in late 2012, the committee’s report includes a plan to require that fire sprinklers be installed in facilities housing vulnerable persons, including retirement homes. Committee members also made recommendations with respect to annual inspections and staff training. “The Ontario government is to be commended for taking action to better protect some of those who are most vulnerable in residential fires, including seniors and people with disabilities,” Leonard Sharman, senior advisor of media relations for The Co-operators, says in an e-mail. “We support the proposed changes.”

28 Canadian Underwriter March 2013

A ministry spokesperson confirmed in December that the ruling Liberals had no plans at the time to re-introduce legislation that would require retrofitting retirement homes with fire sprinklers since the advisory committee recommendations could be implemented through regulation. If implemented, the proposed provincial requirements would include mandatory sprinklers for existing “care occupancies,” retirement homes regulated under Ontario’s Retirement Homes Act and long-term care homes. Mandatory sprinklers, however, would only be required for facilities housing more than four occupants. “I wasn’t happy with that,” New Democrat MPP Paul Miller says of that proposal. Representing the riding of Hamilton East-Stoney Creek, Miller adds, however, that he is “pleasantly surprised” the regulations would include sprinklers not just for retirement homes, but also for group homes and other facilities. Last year, Miller tabled Bill 54, the Fire Protection and Prevention Amendment Act (Retrofitting of Retirement Homes with Automatic Sprinklers),2012, which passed second reading in September, but could not proceed to third reading after then Premier Dalton McGuinty prorogued the provincial legisla-

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ture in October. Had the bill passed into law, it would have required that sprinklers be installed by 2018.

BETTER LOSS RATIO One of Miller’s NDP caucus colleagues, Teresa Armstrong, is a former insurance broker. “Commercial buildings with sprinkler systems are going to have a different rate of insurance, compared to a commercial building that doesn’t have a sprinkler system,” the NDP MPP for London Fanshawe said in the Ontario legislature. “That certainly won’t offset the cost of implementing a sprinkler system, but it certainly will be a better loss ratio for an insurance company, which will then also perhaps roll back to those commercial institutions where they can have a little bit of a break.” Bill 54 was not Miller’s first attempt to mandate the retrofitting of retirement homes with sprinklers. In June 2010, he introduced Bill 92, Mandating Sprinklers in All Ontario Retirement Homes Act, 2010, which died on the order table because it was not passed into law before the

Page 30

Commercial buildings with sprinkler systems are going to have a different rate of insurance compared to a commercial building that does not have a system. Though unlikely to offset the cost of putting in a sprinkler system, it will be a better loss ratio for an insurance company. provincial election in October 2011. “There have been six deaths since I first introduced the first bill,” Miller said in a recent interview. “Had (Bill 92) gone forward then, we would have had two years of the five-year implementation under our belts by now.” Miller says he is hoping the regulations proposed by the Ministry of Community Safety and Correctional Services in January — the public consultation for which ended February 28 — take effect

by May. At press time, the new leader of the Ontario Liberals, Kathleen Wynne, had been named and the provincial legislature was back in session. “As a society, I think we owe it to our seniors and others living in care facilities to make their residences as safe as possible,” says The Co-operators’ Leonard Sharman, characterizing the draft changes as a “step in the right direction.” Sprinklers are a “very worthwhile investment, and the proposals around safety plans, fire inspections and enhanced staff training are very positive as well.” Although the Insurance Bureau of Canada (IBC) does not take a position on sprinklers specifically, “anything that mitigates risk is a good thing,” an IBC spokesperson notes in an e-mail. As for State Farm Canada, “fire sprinklers have been proven to be an effective tool in reducing the impact and damage fires cause,” adds a company spokesperson. “Next to natural disasters, fires at unsprinklered facilities represent the greatest losses for our clients,” reports FM Global. “We believe it is worthwhile

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to install sprinklers even where local code doesn’t require it because sprinklers provide fire protection, save lives and make businesses more resilient,” notes a spokesperson for FM Global. Commenting in general on sprinklers, as opposed to the specific changes that were recently proposed in Ontario, Joe Kovoor, risk services manager for Northbridge Insurance, cites documents from the National Fire Protection Association (NFPA) in Quincy, Massachusetts. Kovoor suggests that NFPA 13D, a sprinkler design standard for one- and two-family dwellings, and NFPA 13R, a standard for low-rise residential buildings, are designed more to save lives than property. “It is not designed in the long run to actually put down a fire, but is to actually delay the fire (by) about 10 or 20 minutes, where it gives the occupants a chance to either get out or allow the firefighters to come in and take them out,” he says of the NFPA standards. In Ontario, the provincial building code currently requires all new residential buildings of four storeys or

Page 31

higher to have automated sprinklers, notes a spokesperson for the Ministry of Municipal Affairs and Housing. “Currently, the building code does not require sprinklers to be installed in new houses three storeys or less,” she writes in an e-mail, adding this is “consistent with the model National Building Code, which currently does not have sprinkler requirements for new houses.”

SPRINKLERS IN ALL NEW HOMES However,The Co-operators is encouraging governments to require that sprinklers be installed in all new homes, Sharman says. “What we’re calling for is not to have them installed in existing homes, because there is a lot of cost and inconvenience, but when you’re building a home to incorporate them in the design,” he says. “It can be done for about 1.5% of the cost of the whole home, comparable to, say, the cost of getting granite countertops or something along those lines.” The Co-operators is also sponsoring a three-year study by Toronto’s Sunny-

brook Health Sciences Centre, which is exploring the consequences and health care costs of house fires. Launched last summer, the study includes a demonstration in which two rooms are set on fire, although only one is equipped with an automatic sprinkler. The structure housing the rooms can be transported to different locations where the local fire department can do a demonstration. The sprinkler system “essentially puts the fire out before it really gets going, and then the other room beside it essentially burns to the ground,” Sharman reports. “It’s a really strong visual, so we wanted to grab people’s attention.” At its heart, the study will involve reviewing existing research and literature to “essentially try to put a price tag” on the economic and societal costs of residential fires, Sharman says. “It’s kind of like the discussion around seat belts 40 or 50 years ago,” he suggests. “A lot of people couldn’t see a reason to make them mandatory and now they’re accepted. We’re hoping that it will be the same way with fire sprinklers.”

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Risk, Interrupted Many events can cause business interruption, although natural catastrophes are the most obvious culprits. Whether close to home, across the country or around the world, these events can interrupt â&#x20AC;&#x201D; even break â&#x20AC;&#x201D; supply chains that allow businesses to run. To stop green light from turning to red, risk management at the front end and perhaps contingent business interruption at the back end is well-advised. ANGELA STELMAKOWICH

32 Canadian Underwriter March 2013

he slow-moving, massive system that was Hurricane Sandy is but a reminder. The storm brought with it wind and rain, that delivered damage through reach and surge, that then stretched recovery beyond days to months. Sandy shows perhaps less starkly â&#x20AC;&#x201D; but certainly more recently â&#x20AC;&#x201D; what lessons have (or should) be taken from catastrophic events not so long ago. The Japan earthquake and tsunami, as well as the Thailand floods, in 2011 produced heavy losses, delivered a hard economic hit and crippled certain supply chains, at least for a time, throwing them into harried catch-up mode. Today, there are, by turns, encouraging and disconcerting signs about whether or not available lessons have truly taken hold. Although the progress to date may not be everything that all may want it to be, there appears to be enhanced awareness of both business interruption (BI) and contingent business interruption (CBI) issues, in addition to the value of partnering proper risk management measures with appropriate insurance to help avoid the devastation that can be avoided, and to deal with what damage cannot.

March 2013 Canadian Underwriter 33

COVER STORY

Risk, Interrupted NOT SO GENTLE NUDGE Recent history is replete with events that could not have been avoided, but perhaps the effects and costs of which could have been mitigated. Natural catastrophes are a usual harbingers of damage for BI that may then lead to CBI. The 15-fold rise in insurance claims caused by weather events over the last 30 years is the result of a number of things, including an increase in insured assets worldwide and “the ongoing shift towards settlement in high-risk coastal regions,” Markus Stowasser, meteorologist at Allianz Re, notes in Allianz Risk Barometer 2013, based on responses from 500-plus risk management and underwriting professionals surveyed by Allianz Global Corporate & Specialty (AGCS) about global business risks for 2013. But recent history is also marked by an ebb and flow of attention paid to BI and CBI. On the face of it, however, awareness seems to be on the rise. “There’s definitely more focus on CBI from the customers’ side and especially from the insurers’ and reinsurers’ side,” reports Markus Franc, director of corporate underwriting at Zurich Insurance Company in Toronto. Allen Melton, a partner in assurance services at Ernst & Young in Dallas, would likely agree. “If you look at what has happened in the industry the last couple of years, going back to the 2011 Japan earthquake and tsunami, followed by the extensive flooding in Thailand, and now Hurricane Sandy, I think it certainly has raised awareness and the potential issues that are out there, from a supply chain standpoint,” Melton says. Citing the effects on the technology and auto sectors in 2011, he adds: “Just because you’re not physically located in a geography doesn’t mean you’re immune to these types of issues, and I think that was a real wake-up call to a lot of companies, as well as the insurance industry, about how big an issue this is.” Events like the Japan earthquake, tsunami and nuclear meltdown “seem unprecedented, and I think people start to realize that you can have more than one peril create several kinds of 34 Canadian Underwriter March 2013

catastrophes,” suggests Nowell Seaman, manager of risk management and insurance for the University of Saskatchewan in Saskatoon, and treasurer of the RIMS Board of Directors. But it is not just natural catastrophes that can interrupt business operations. There are also events as varied as labour

In the worst-case scenario, the potential economic damage caused by a very strong hurricane in the New York metropolitan area could rise to trillions of U.S. dollars by 2050 without mitigation measures. unavailability, IT glitches, government interference, transportation issues, political instability, civil unrest, limited suppliers, suppliers being located in a single area and regulatory orders. Most likely to file a CBI claim are “manufacturers in general, and those dependent on others, such as suppliers, key customers, single transportation corridors, single sources of energy and key local attractions,” notes Robert Harder, head of Robert Harder Risk Consulting Inc. in southern Ontario.

A TWIST ON CLAIMS Hurricane Sandy, transformed into a post-tropical storm by the time it made landfall in New Jersey on October 29, reduced parts of the Garden State to drenched debris. The storm was equally unkind to New York City, flooding certain areas under a record storm surge. NewYork and Washington, D.C. “ground to a halt,” at the hands of Hurricane Sandy, notes Allianz Risk Barometer 2013. The Sandy Update from Fitch adds the event will produce a loss split of 60% to 65% commercial lines and 35% to 40% personal lines, reverse that for most hurricane events. “Much of this shift is due to flooding from the record storm surge being such a significant component of catastrophe damages, particularly in large commercial areas, including lower Manhattan,” the report states. “As global warming progresses, there is a risk that sea levels will rise in the future,” Stowasser says in Allianz Risk Barometer 2013. “This means that in the worst-case scenario, the potential economic damage caused by a very strong hurricane in the New York metropolitan area could rise to trillions of U.S. dollars by 2050 without mitigation measures,” he adds. “With the pressure on global supply chains today, weather-related incidents do not have to be catastrophic. It could be very localized, not devastating, but cause enough of a disruption that it results in downtime, fines, penalties or loss of reputation that can add up to meaningful dollars quickly,” suggests Michael Loeters, vice president and risk management practice leader (Ontario) for BFL CANADA Risk and Insurance Services Inc.

CLOSE TO HOME Perhaps, however, no event sends a message more clearly than the one that hits operations and demonstrates the value of risk management efforts. “There is nothing like a disaster to spark interest in one’s own vulnerability,” Harder points out. “If a company has not experienced a loss, especially where there’s business interruption involved or even contingent BI, they may not truly understand

COVER STORY

Risk, Interrupted the exposures,” says David Black, vice president and industry leader of manufacturing for Cowan Insurance Group, which provides insurance and risk management products and services to businesses, organizations and individuals. Black characterizes the majority of Cowan clients as “large multi-million dollar companies rather than large multi-billion dollar companies.” For those who took part in the AGCS survey, supply chain risk is an issue that is top of mind. Business interruption/ supply chain risk topped the list for the respondents, cited by 45.7% as among their top three risks — more than the 43.9% for natural catastrophes, and the 30.6% for fire and explosion. The heightened concern may have something to do with both supply chain risk exposure and frequency of incidents being on the rise. So suggests results from a survey last year by Deloitte Consulting LLP, which involved 600 executives at manufacturing and retail companies, the majority located in North America, Europe and China, with a minimum of $100 million in annual revenues. In its report, The Ripple Effect: How manufacturing and retail executives view the growing challenge of supply chain risk, 53% of executives reported that these events have become more expensive over the last three years, including 13% who reported they had become much more costly. Ranking among their top two picks, responses indicated the most costly outcomes of risk events in the supply chain are margin erosion, 54%; sudden demand change, 40%; physical product flow disruption, 36%; product quality failure, 32%; regulatory non-compliance and/or worker-safety failure, 21%; and social responsibility failure, 17%. Beyond the what was the where. Locations in the supply chain of the most costly outcomes of risk events over the last three years were company-owned supply chain operations, 38%; Tier 1 (direct) suppliers or third parties, 37%; Tier 2 suppliers, 27%; direct customers, 27%; company-owned functions that support supply chain operations, 23%; 36 Canadian Underwriter March 2013

upstream logistics partners, 21%; indirect customers, 17%; and downstream logistics partners, 11%. Looking beyond Tier 1 is critically important to get a full picture of risk. “Your immediate customer or supplier may be okay, but it’s the supplier of the supplier

With supply chains becoming more interconnected and global, they have also become more vulnerable. As such, there are now more potential points of failure and less margin of error for absorbing delays and disruptions. where the issue might have occurred,” says Melton. “There were clients that we worked for after the Japan earthquake, who traditionally don’t really know who all those Tier 2 suppliers are. Their contracts are with Tier 1 suppliers who, as long as the Tier 1 supplier is contracting with somebody who can provide the right componentry, the right quality and so forth, it’s not visible.” With supply chains becoming more interconnected and global, they have also become more vulnerable, Deloitte

reports. There are now more potential points of failure and less margin of error for absorbing delays and disruptions. Deloitte has documented 200-plus significant sources of supply chain risk under four categories: • macro-environment risks, such as natural disasters and downturns in the global economy, that can have an impact on any portion of the supply chain risk, or across the entire supply chain; • extended value chain risks, stemming from problems with upstream or downstream supply chain partners; • international operational risks, which can occur anywhere along the chain from product development and manufacturing to distribution; and • functional support risks — in areas such as legal, finance, human resources and IT — that can lead to such things as a lack of needed talent to interruptions in the vital flow of operational data.

NEED FOR RESILIENCE Central to avoiding costs is adopting appropriate risk management that, at its core, involves a careful and thorough assessment — wherever risks may fall along the supply chain. “It’s important that the organization identify and assess its exposure to supply chain disruption,” Seaman emphasizes. “That’s really where you have to start.” That start will necessitate asking obvious, but still vital, questions: What is your risk? What is the magnitude? How vulnerable are you to the risk? What would the impact be? “Then from there, determine whether or not contingent business interruption insurance needs to be part of the solution,” Seaman says. “When most companies are evaluating the resilience of their supply chain, they tend to focus on well-known areas of exposure, such as regions prone to earthquakes, forest fires, hurricanes, flooding, etc.,” Loeters says. But the Japan tsunami, the Thailand flooding and Sandy “have caused people to reexamine their supply chains because these were events that no one expected and caused significant global disruption to certain industries,” he says. “Many

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COVER STORY

Risk, Interrupted Canadian companies have started to look at their preparedness, and re-evaluate their supply chain resilience criteria.” Franc suggests that an “absolutely key driver” in choosing a supplier revolves around customers asking suppliers for their business continuity plans. “We are finding clients are more interested in discussing the scope of coverage and proactive ways to mitigate their supply chain risk,” notes an e-mail response from Marsh Canada Limited’s Andrew Clark and Gayle Mitcham. “We have also seen increased interest from clients wanting to ensure that their business continuity plans are in place and effective,” reports Clark, vice president and department manager of small/medium enterprise insurance and risk solutions, and Mitcham, vice president and national practice leader of the business continuity practice for Marsh Risk Consulting. “If companies have developed, continue to evolve, and test their business continuity program with the help of third-party professionals, we typically find that they are prepared for most situations,” Clark and Mitcham point out. “However, we often find business continuity planning either does not exist at all or is something that was done to ‘tick the box,’ and a ‘canned’ business continuity plan sits on a shelf and is not updated or tested to ensure it meets the evolving needs of the organization,” they add. “There are many things that come into selection of a supplier and one of the challenges is ensuring that this becomes part of the criteria when you’re considering a supplier,” Seaman says. “Ideally, you’d like a supplier that has its own plan for redundant supply or multiple operations or spread of risk.” There is a need for an organization to understand its “full supply chain right down to the production of the raw materials, in many cases, in order to create a risk management plan that will be effective,” Loeters emphasizes. “If I can’t get supply of raw material, I can’t make a product. And if I can’t get raw material because my supplier suffered a loss, I’m going to suffer 38 Canadian Underwriter March 2013

a business interruption unless I can source material elsewhere,” Black says, adding that he is not certain clients understand the extent of their exposures. “As a risk manager, you would want to understand where the client’s revenue is derived from, who are their largest customers, how do they protect against that, where does their supply come from, do they have redundancy in their supply chain,” he adds.

“The tsunami in Japan, the flooding in Thailand and now the hurricane in New York and New Jersey have caused people to re-examine their supply chains because these were events that no one expected and caused significant global disruption to certain industries.” Although risk management best practices to mitigate CBI loss are available, Loeters suggests that many organizations are selective about which best practices they choose to implement. Deloitte reports the most common risk management strategies to prevent or recover from supply chain risk events are as follows: developing business continuity and risk contingency plans, 45%; building stronger extended value

chain relationships, 41%; and building the ability to rapidly adapt the production or distribution network, 41%. That said, just 36% of respondents reported using predictive modelling, risk sensing data and worst-case scenario modelling. “The limited use of such tools may contribute to challenges associated with implementing risk management strategies, measuring program benefits, establishing effective performance metrics, and supply chain risk governance.” While trends like lean manufacturing, just-in-time inventory, reduced product life cycles, outsourcing and supplier consolidation, “have yielded compelling business benefits, they have also introduced new kinds of supply chain risk and reduced the margin for error,” the report adds. Notes Franc, “There are more and more companies doing just-in-time manufacturing. They only keep a very thin inventory. That leaves very little room for error and even a relatively small-scale supply chain disruption can result in a relatively large financial loss.” It may also be important to secure agreements with others to help avoid shutdowns should, for example, a key machine go down and stop production, Black says. These agreements “will allow you to have redundancy in your production, even at a higher cost. That’s better than being totally shut down,” he says. “Insurance can fill that higher cost through extra expense coverage.”

UNDERSTANDING COVERAGE Despite the estimated BI and CBI claims in the wake of Sandy, Fitch noted last fall, many firms do not purchase CBI insurance and related losses have been underestimated in previous disasters. But the marketplace is underwriting the exposure more than it has in the past, says Loeters, including managing limits, geographical concentration and reinsuring more of the risk. “Underwriters want to see evidence that companies are being proactive and implementing meaningful risk management controls before they are willing to offer significant levels of coverage.”

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COVER STORY

Risk, Interrupted

“Underwriters want to see evidence that companies are being proactive and implementing meaningful risk management controls before they are willing to offer significant levels of coverage.” Although “insurance is a critical component of your risk management strategy,” Seaman says, it is only one piece of the puzzle. “When you go out and purchase contingent business interruption insurance, you have to realize its limitations. It will undoubtedly have exclusions and limitations,” he cautions. “If I’m a risk manger, I really want to understand what my exposures are, what my coverages are, what my sublimits are,” Melton says. It needs to be about weighing all of those factors and the cost benefit, he says. “I’m sure most companies would prefer to keep the business running than collecting from insurance.” Clark and Mitcham emphasize it is “important to review each insurer’s CBI clause in the context of your business needs as they typically differ. The trigger and waiting period/deductible are two areas clients typically need to understand better then they do.” While most brokers understand what CBI coverage is, they may not understand “all the ways it can be customized to meet their insured’s specific needs,” Loeters points out. That may be because many brokers do not have a risk management model that is readily available, they are not trained on how to use such a model or they are unable to tap into internal resources, he adds. As it currently stands, PwC notes in its Top Insurance Industry Issues in 2013 report that modelling for CBI risk is in an analogous stage to natural catastrophe modelling following Hurricane Andrew in 1992. But encouraging steps are being made. “Employing agent-based modelling techniques, geographical information systems and industrial supply chain 40 Canadian Underwriter March 2013

information can be constructed,” PwC states. “This information can be practically incorporated into an agent-based CBI model, the output of which can quantify supply chain vulnerabilities both for specific firms and in the aggregate, irrespective of peril.” The report suggests widespread adoption of a model by insurers would lead to added capacity for CBI risk protection, which would help to mitigate industrial risks and offer growth for the property and casualty market overall.

MATTER OF FOCUS The Deloitte survey shows organizations are often unsure where to focus their risk-management efforts, and when they do take action, they often underinvest in dealing with risk. One thing that is likely to drive action is putting a hard number on risk. By quantifying exposure, “the underwriter will be able to offer specific terms and limits on the specific price, again depending on how many physical supplies and suppliers would have to be insured,” Franc says. “Most of our insureds know they have a risk, but they lack the tools to fully understand its scope and quantify the risk to their organization. Once this is properly quantified (generally in terms of dollars) an organization can more easily justify the business case to allocate appropriate resources and implement a meaningful plan,” Loeters suggests. “BI and CBI needs to start as a business discussion, not an insurance discussion.” Enterprise-wide risk management “will address potential interruptions to business from many causes, direct or on a contingency basis. Addressing CBI as

an insurance coverage issue overlooks many potential risks to an organization,” notes Harder. “If you talk about Cat specifically, it’s probably safe to mention the insurance industry is going away from providing unnamed contingent business interruption and indirect contingent business interruption,” Franc says. “If you as an insurer provided unnamed CBI, you basically provide coverage and have no idea of where the supply is located,” he says. “You don’t know whether the location is in a designated Cat area or not.”

POSITIVE SIGNS “To improve supply chain resilience, many companies consider adding back some redundancy into lean supply chains, even if this reversal of widely used single-supplier sourcing incurs additional costs,” Paul Carter, global head of risk consulting at AGCS, notes in Allianz Risk Barometer 2013. “Global catastrophic weather events like Sandy and the Japanese tsunami, combined with increasing utilization of ‘just-in-time’ delivery are driving more interest around de-risking the organization — putting the focus on contingent business interruption, supply chain and business continuity management,” say Clark and Mitcham. “Operating in a global village means that we have to think globally, and not just about our regional or national exposures. Even though a company may source locally, the reality is that when you dig deeper the exposure is almost always global. Many organizations are reactive in this area, but this can often be too late,” Loeters says.

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Head On Craig Harris Freelance Writer

Anytime there is a major lawsuit against a professional sports organization, it’s big news. Combine that, however, with legendary football names, such as Junior Seau, Tony Dorsett, Eric Dickerson and hundreds of other players, in a class action lawsuit against arguably the world’s highest-profile league — the NFL — and the impact sends powerful shock waves around the sporting world. As of late January 2013, more than 4,000 retired professional football players had sued the NFL over head injuries suffered during their time on the field, according to a database kept by The Washington Times. In all, 204 lawsuits have been filed. Most of the concussion lawsuits have been consolidated before U.S. District Judge Anita B. Brody in Philadelphia. They generally allege the players suffered serious brain injuries while playing in the NFL, and that the league and its teams never informed them about the long-term effects of football’s repeated head trauma, including diseases such as chronic traumatic encephalopathy (CTE).

42 Canadian Underwriter March 2013

Insurance companies have been dragged into the legal fray, with the NFL initiating a lawsuit against 32 insurers in California state court in August 2012.The league argues that its insurers should pay for legal defences in injury-related lawsuits, and it wants the court to order insurers to pay injury-related judgments and settlements. The insurance companies have advanced various responding arguments over their portion of responsibility, if any, including that they wrote policies for a limited occurrence period or that they provided coverage only for the NFL’s marketing arm, not the league itself. A lawsuit against the NFL by Travelers Cos., also filed last August, seeks to move the jurisdiction to New York State Supreme Court. Experts say that the player-based litigation against the NFL could take as long as 18 months, and could wind up costing the league as much as $10 billion. “Insurance carriers are watching this,” Chicagobased sports lawyer Timothy Epstein noted in a January 31, 2013 Toronto Star article. “If the NFL

Illustration by Remy Simard/i2iart.com

High-publicity concussion lawsuits in professional leagues such as the National Football League (NFL) are shining a spotlight on liability and injury prevention practices. In Canada, the focus for many sports organizations has sharpened on risk management.

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is found on the hook for these damages — the premiums are already going up. It’s going to keep going up to the point of,‘Is it affordable to do this anymore?’” The raft of litigation does not apply strictly to professional sports in the United States. A similar lawsuit was filed against the National Collegiate Athletic Association (NCAA) for “negligence and inaction with respect to concussions and concussion-related maladies.” Law firm Hagens Berman initiated the action in U.S. District Court in Illinois in September 2011, involving former Eastern Illinois football player Adrian Arrington. University of Central Arkansas football player Derek Owens and Ouachita Baptist University (Arkansas) soccer player Angela Palacios also have been named as plaintiffs, as well as former University of Maine hockey player Kyle Solomon. This heightened legal activity in the U.S. has raised concerns about the trickle-down effects of head injuries on various professional and amateur sports organizations. “Insurers will be tightening up their own coverage and make sports more expensive,” Robert Boland, who teaches sports law at New York University, said in a December 10, 2012 New York Times article. “It could make the sustainability of certain sports a real issue.”

LESS OF A HIT Yet in Canada, the influence of concussion-based litigation on insurance and premiums has been relatively weak. Sources in sport insurance say they have witnessed little movement in terms of limits to availability, restrictions on coverage or rate increases. “We have not seen much of a reaction among underwriters in Canada,” reports Murray Morrison, president of British Columbia-based All Sport Insurance Marketing Ltd. “They have been asking very few questions and not poking around too much. The reality is that insurance coverage is so reasonable today; the pricing is cheap and there is certainly no problem with availability,” Morrison notes. Other sources in the sports insurance

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industry note a similarly minimal impact on coverage and pricing. “There hasn’t been a dramatic change in terms of rates for insurance coverage for the types of sports organizations we deal with,” says Alan Hollingsworth, vice president and partner with Hub International, who is also the brokerage’s sports and entertainment practice leader. “Large organizations with sound risk management programs are still seeing favourable rates. For smaller organizations that may not have the budget or

“Sports leagues are much more aware of head injuries as the medical knowledge and treatment of concussions have advanced significantly in recent years,” says Sutton, whose firm provides disability insurance to players in major professional leagues in football, hockey, basketball and baseball. “There have been rule changes and investments in equipment, but this has not really changed how we approach underwriting rules for a given player,” he says. Sports leagues with a high proportion of Canadian players — such as the Canadian Football League (CFL) and National Hockey League — have not been the subject of any litigation to date on head trauma.While current and former players in these leagues have suffered many of the same types of concussion-based injuries as those in the NFL, along with evidence of CTE, none have filed a lawsuit against their respective leagues. “I think there is a sense that other leagues, and insurers, are carefully watching what happens to the NFL lawsuit,” Sutton offers.

EVOLVING TARGET

“There has been a palpable increase in the public’s awareness with respect to concussions. That increase in awareness has led to a demand for greater oversight and regulation.” resources for a comprehensive risk management system, we are seeing less flexibility on rates and deductibles,” he adds. For Greg Sutton, president and CEO of Sutton Special Risks, sports injuries have followed an evolution from major knee problems to eye concerns now to concussions.This has prompted greater awareness, but not a drastic change in underwriting guidelines.

This does not mean there is an absence of liability exposures for head (or other) sports injuries in Canada. Law firm McCague Borlack cites several leading cases on sports litigation in a recent paper, Concussions and Injuries in Canadian and American Contact Sports:A Legal Perspective, co-authored by Jim Tomlinson, Adrian Nicolini and Stefanie Vescio. One of the leading cases in sports injury related to tort principles involves Robitaille v. Vancouver Hockey Club Ltd. In this case, Robitaille experienced neck, shoulder and arm pain when he was body checked in a game against the New York Rangers on January 2, 1977. Although Robitaille reported the pain to his trainer and coach, he played in three following games, including January 19, 1977 when he suffered a spinal cord injury from another body check. After considering the evidence at trial, the judge ruled that “the defendant (Vancouver Hockey Club) breached its duty of care in failing to react reasonably to

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Robitaille’s complaints and symptoms, in failing to provide appropriate medical care and in putting pressure on him to ignore his injuries, which resulted in the permanent damage,” McCague Borlack notes in the paper. While not a concussion injury per se, the paper’s authors add that “this case is the leading decision dealing with the duty of care of a professional team and an example of the challenges that team physicians face in balancing their duties as a doctor with the pressures exerted by team management.” Some sources suggest the liability of sports teams, medical personnel and coaching staff may be an evolving target in the legal arena.“I think in today’s litigation environment, an adult who is cleared to re-enter a game after suffering a concussion, there very well could be a determination of legal liability,” Morrison says. “The problem is that when the lawsuits start coming down the pipe, they could arrive like a train. What happens if a surgeon cannot operate because of shaky hands due to a brain injury from playing a contact sport for 15 to 20 years?” This liability is potentially more pronounced at the amateur level, particularly for children and adolescents involved in sports. McCague Borlack observes that in football injury cases such as Dunn v. University of Ottawa and Thomas v. Hamilton (City) Board of Education, courts have held that the “appropriate standard of care to be required of coaches and trainers is that of a careful and prudent parent.”

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HEIGHTENED AWARENESS, PREVENTIVE ACTION The increasingly high visibility of head injuries has spurred education and injury prevention programs at several major sports organizations, such as Hockey Canada and the CFL/Football Canada. Hockey Canada, for example, has created apps, pamphlets and videos on concussion awareness, while also changing rules in minor hockey at the start of this season to prohibit any direct contact to the head. Many leagues and associations have put in place new concussion protocols for assessing concussions based on the latest medical evidence. The CFL and Football Canada also have prepared concussion flyers and posters with distribution aimed at 100,000 players, parents and coaches in amateur football, 3,200 high schools with 750,000 student athletes and 52 university programs representing 2,000 football players and 10,000 other athletes. These preventive steps in risk management are part of what every sportsrelated organization should be doing, argues McCague Borlack’s paper. It lists several risk measures that associations and leagues can adopt, including increasing education and awareness, adopting adequate methods of detecting and diagnosing concussions, implementing strict return to play guidelines and post-concussion management, and changing attitudes and behaviour toward head injuries. “I think larger sports organizations are paying attention to risk management for

several reasons,” says Hub International’s Alan Hollingsworth. “One, they want to have and promote a safe environment; two, they want to prevent injuries and they want to be seen as taking this seriously; and three, they take their brand and their reputation seriously,” adds Hollingsworth. Concussions are receiving a great deal of attention in “high-risk” contact sports such as football, hockey and rugby. However, other sports, not traditionally considered to be “full contact,” may also bear the burden of liability for head injuries, including soccer, basketball and baseball. “The law in Canada relating to liability for concussion-related injuries is still in its nascent stages of development,” notes McCague Borlack’s paper. “There has been a palpable increase in the public’s awareness with respect to concussions. That increase in awareness has led to a demand for greater oversight and regulation.” This growing concern has prompted the introduction of safety protocols, education initiatives and injury prevention programs at many sport organizations. Time will tell if these efforts are enough to stave off lawsuits by former players. The courts will ultimately be responsible for determining issues of liability, as seen by the ongoing NFL and NCAA class-action lawsuits. Many in the sports profession and insurance industry will be closely monitoring the outcome of these legal actions — and any copycat lawsuits they may engender.

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RISK Export Looking beyond “non-admitted prohibited,” it is time to focus on how risk is “exported.” Brokers and insurers eager to ensure their clients are in compliance with multinational insurance have traditionally asked whether non-admitted or “unlicensed” insurance is permitted or prohibited in any given country. This is a starting point, but failing to move beyond that point may miss the key part of the analysis.

Suresh Krishnan General Counsel, Multinational Client Group, ACE Group

It is an interesting paradox that the march of corporate globalization has not yet been matched by any meaningful attempt to successfully harmonize insurance regulation at a global level — or even frequently at a regional level. Understandably, given the fragmented array of local insurance laws multinational companies must negotiate, concerns about the regulatory and tax implications of multinational insurance appear to be on the rise among risk managers. In the Federation of European Risk Management Association’s European Risk Management Benchmarking Survey 2012, 42% of risk managers identified compliance with multinational insurance as one of the issues likely to have the greatest effect on insurance terms and conditions over the next three years. Eagerly seeking a greater measure of certainty for their clients, today’s broker and insurer will typically scour their repositories of insurance regulatory information for licensing rules, placement rules, premium payment rules and tax rates. As they do so, the first question they

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have traditionally asked is whether non-admitted or unlicensed insurance is permitted or prohibited in any given country. However, this is a starting point at best. At worst, it may miss the key part of the analysis.

PERMITTED, WITH CONDITIONS It is often said that many jurisdictions prohibit non-admitted insurance. In fact, most countries allow non-admitted insurance. However, they set out conditions regarding the process by which risk can be exported to an unlicensed insurer. At the simplest level, many laws specify that a risk can only be exported if there is no available local capacity. Various conditions — some more onerous than others — may then be applied as to which lines or classes of business can be exported, whether a local broker is required for placement or is expressly prohibited, whether the insured has to make certain representations about local capacity or local terms and conditions, and whether or not premium taxes are to be remitted.

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Even though multinational programs are frequently negotiated and placed centrally, a more appropriate analysis when designing one is to look at the export process. That’s because local regulations are focused on exporting insurance at least as much as on who is permitted to transact insurance. The analysis should, therefore, consider whether or not the right protocols are followed to export local risk — and not just whether or not the carrier can lawfully insure such risk. Canada and a number of regional examples help to make this point. In Canada, the various provincial laws differ, but all permit an unlicensed insurer to insure local risks provided (a) local capacity is unavailable for certain lines of insurance; (b) the local market does not support the terms and conditions or (c) the broker or the insured assumes liability for paying applicable premium taxes on the premium exported. In the United States, almost all states expressly permit an unlicensed insurer to insure local risks, provided that the unlicensed insurer does not transact insurance business in those states without authorization. The local risk may be exported to the non-admitted market through a special broker — a surplus lines broker, or directly to an unlicensed insurer under either “independent procurement” rules or where a “sophisticated” insured is permitted to access the unlicensed insurer without a broker. Brazil permits the export of local risks provided no local capacity is available. However, this must be evidenced by 10 declinations. The applicable premium tax must be withheld before the premium is exported. India also expressly allows insurers outside India to insure local risks provided that insurance business is not transacted in India and the Reserve Bank of India expressly consents to the export of Indian risk. Although subject to appeal, the Delhi High Court in May 2012 concluded that (a) unless an overseas insurer is transacting insurance business in India, it does not have to be registered with the Insurance Regula-

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tory and Development Authority and (b) Indian insurance laws may not regulate an overseas insurer’s activities outside of India unless the insurer is transacting insurance business in India. Finally, Chinese law permits the export of local risk when local capacity is not available. However, an insurer transacting insurance business within China without a licence is subject to heavy fines and penalties. A claim paid by such an insurer in China is also potentially subject to confiscation, fines and penalties. So Indian multinationals may insure their global exposures in India; Chinese insurers may insure their cross-border liabilities in China; a corporation in Texas or Alberta may insure its New York or Ontario risks with a Texas or Alberta insurer. But all the insurance

Improving our understanding of who is regulated when local risks are exported to a non-admitted insurer is essential to ensure that cross-border insurance programs meet designed expectations. “transaction” activities (solicitation, negotiation, issuing a policy, invoicing or collecting premium, and in some instances, paying a claim) must be conducted in the jurisdiction where the insurer is licensed (or admitted) to transact the business of insurance. What’s more, since this is the case, then it should logically follow that under the local laws of the insurer’s jurisdiction, an insurer may also offer excess insurance or umbrella insurance to cover any gaps in local policies or offer higher limits in connection with risks located worldwide. The insurer simply has to make sure that when a claim is paid, it performs consistently with the laws where such payment is made. In fact, the ultimate objective of any multinational program should be to en-

sure that a valid claim will be paid compliantly. In some countries — Singapore, Hong Kong, Thailand, Chile, Peru, the United Kingdom and, from July 2013, Colombia, are all excellent examples of jurisdictions that are least restrictive — an unlicensed insurer can directly pay a claim provided export rules are followed and the insurer did not transact insurance business without a licence. In other countries, local regulations may impose adverse fiscal consequences on the local insured or broker if a claim is paid directly in the local jurisdiction by an unlicensed insurer. However, simply focusing on the question of “admitted v. non-admitted” gives us incomplete answers. Parties involved in designing multinational insurance programs will do better to start by first asking: How may a local risk be exported? Answering this question highlights the importance of local policies. It also helps determine whether or not a non-admitted excess policy premium should be allocated, and whether or not a claim can be paid in a local jurisdiction without penalty to the local broker or local insured, without any additional fines or taxes levied on that payment, and without it being subject to confiscation. As multinational businesses expand, particularly into emerging markets, the demand for multinational programs is increasing. The scope of risks considered for multinational programs is also growing beyond traditional property and casualty lines. Business travel and personal accident, professional indemnity, directors’ and officers’ liability, and environmental risk are all increasingly likely to be the subject of a multinational program. Someday, improved clarity of local law and enhanced predictability of enforcement may be achieved. But until then, the value of local policies should not be underestimated. In the meantime, improving our understanding of who is regulated when local risks are exported to a non-admitted insurer is essential to ensure that cross-border insurance programs meet designed expectations.

March 2013 Canadian Underwriter

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Cra sh Course 2013 Canadian Collision Industry Forum (CCIF) (Toronto)

Greg Meckbach Associate Editor

The automotive repair industry faces some conflicting demands. Will these set in motion the possibility of a collision down the road, or will players respond by working together to smooth out the issues? Hundreds of repair professionals gathered in Toronto on January 26 as part of the 2013 Canadian Collision Industry Forum (CCIF), an event for the collision repair industry to share information, best practices and a means to develop solutions to common issues and challenges. Attendees were treated to an array of sessions touching on technology, repair challenges and the need to attract and retain qualified people.

MATERIALS, ELECTRONICS A CHALLENGE Vehicle electronic systems, lightweight materials and collision avoidance systems will be challenging to insurers and the repair shops who fix damaged vehicles, speakers suggested. Asked if insurance claims and collision repair personnel have “timely, accurate, actionable, technical repair methodology available to properly assess and repair vehicle damage,” 55% of audience members who responded at the 2013 CCIF pressed buttons on wireless transmitters to respond “No.” “Considering that everybody in this room is in the business of repairing cars and restoring lives... back to their normal flow, that’s a fairly poor assessment,” said presenter Matthew Ohrnstein, managing director of Symphony Advisors LLC in Irvine, California. “If I asked a room of physicians who are all heart surgeons, ‘Does everybody know the proper methodology to do bypass surgery,’ and 45% said yes and

48 Canadian Underwriter March 2013

55% said no, that would be a little bit disconcerting,” Ohrnstein offered. During a panel discussion at CCIF, one collision repair executive noted the increased use of lightweight materials, such as aluminum and carbon fibre, is having a significant impact on repair shops fixing vehicles damaged in accidents. “I don’t think a lot of people realize what investment is required to participate at this level,” said Flavio Battilana, chief operating officer of CSN Collision & Glass. Complying with the certification standards of original equipment (OE) manufacturers is a big concern for Prochilo Brothers, owner Paul Prochilo suggested during the panel discussion. “OE certification is going to be a real game changer,” Prochilo said, adding that “manufacturers are becoming more and more innovative and it’s going to require more specialized personnel to be repairing these vehicles, and that’s going to be a tremendous challenge for pretty much everyone in the business.” Electronics systems are also increasing complexity for collision centres. “One day, we’re probably going to have to have an (information technology technician) on staff just to deal with the vehicles,” Battilana predicted. Automobile manufacturers have an “increased propensity” to use lighter materials such as aluminum, plastics and carbon fibre, to provide

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better fuel efficiency, but that could drive up prices for the raw materials, Mike Anderson, vice president of data and analytics for San Diego-based Audatex, noted during Audavision, a conference organized by Audatex, held at the same venue one day earlier.

INSURER RELATIONS A TOP PRIORITY Vehicle technology, reparability and OE certification were among the top three priorities identified by audience members at 2013 CCIF. Asked to identify top priorities from eight listed on a presentation slide: 34% cited vehicle technology; 42% noted attracting, retaining and training employees; 47% cited gross margins; and 54% pointed to insurer relations, programs and consolidation. Symphony Advisors’ Matthew Ohrnstein told audience members “there is some potential conflict” between vehicle manufacturers’ certification programs — which are more prevalent in the United States than in Canada — and direct repair programs (DRPs) available through insurance firms. One example involved an unidentified OE vehicle manufacturer program that requires its paint to be used, said Ohrnstein. “If you want to be a certified shop for that OE, you have to buy that paint that has their logo on it, pay more for it and charge the insurance company for it. That’s a conflict that we need to work through,” he argued. Industry players taking part in a panel discussion acknowledged that conflict sometimes exists, but emphasized the importance of working with insurers. Shops sometimes need to negotiate the different demands of vehicle manufacturers, customers and insurance partners, suggested CSN Collision & Glass’s Flavio Battilana. “Sometimes what happens is, the needs and the wants of the OE in protecting the brand, the vehicle quality, the customer’s expectations and experience, and the insurance partner trying to manage costs, sometimes the shop gets caught in the middle and sometimes we get stuck with a bill.” Michael Macaluso, chief operating officer of CARSTAR Automotive Canada, said repair shops must work with insur-

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ers to figure out how to make a profit and still get vehicles fixed quickly. Citing new procurement models and partnerships with parts vendors, collision centre executives should say to insurers, “We understand your strategy, we want to be at the table. How do we work together for continuous improvement?’” Macaluso suggested.

CONCERN OVER PARTS ORDERING With investment returns dropping and loss ratios remaining constant, insurance carriers are looking to cut costs on auto repairs, Symphony Advisors’ Matthew Ohrnstein told delegates to CCIF. Citing State Farm’s PartsTrader program — the shop orders parts online in some U.S. markets where its clients’ vehicles are being repaired — Ohrnstein said “State Farm is one of 10 (carriers) that are looking at getting between the collision repairers and the supply chain, and for differing reasons.” Audience members were asked how

While total losses account for 17% of auto claims in Canada, many are never dismantled for recycled parts. many parts ordering systems they have, including those mandated by their insurers: 17% had five or more, 20% had four, 22% had three, 22% had two and 19% had one. “The more processes that you have, the more costly it is to operate your business and the more inefficient you become,” Ohrnstein said. “Think about all the other industries that have standards.We’re lacking that.” He presented a table listing the market share for replacement parts from the vehicle manufacturers themselves, recyclers and after-market suppliers in the U.S. While the manufacturers have 63.2% market share, the after-market suppliers have about 16.1% in the U.S. and about 13% in Canada. Recycled parts suppliers have about 13% market share in the U.S., he said, noting that those suppliers get their parts from vehicles assessed as total losses. While total losses account for about

17% of auto claims in Canada, many of these never get dismantled for recycled parts, Ohrsnstein reported. “They get rebuilt and a huge percentage, somewhere around 40 or 50%, go offshore,” he said. In response, some carriers no longer take the total loss vehicles to auctioneers, but instead to firms that dismantle them, knowing the parts will be available for future repairs. In North America, about US$33 billion is spent every year on auto repair, while the insurance industry spends another US$20 billion annually on total losses. Ohrsnstein suggested the collision repair industry would benefit if consumers could be persuaded to repair vehicles that would otherwise be assessed as total losses. “A total loss is not good for the consumer, nor is it good for the (manufacturer) because there is a higher propensity for consumers to switch brands,” he said.

SKILLS SHORTAGE IN NEED OF REPAIR Speakers also reported a problem faced by collision repair centres that is an issue for other industries as well: finding qualified people. In a poll of audience members, Leanne Jefferies, director of the CCIF skills program, asked if they were hiring technicians, how long would it take to find a qualified, licensed technician? Slightly more than half, 53%, said it would take longer than two months. “We definitely don’t have technicians beating down our door,” Jefferies said. During the afternoon panel, Sam Piercey, vice president and general manager of Budds’ Collision Services Ltd. in Oakville, Ontario, suggested some repair centres pay entry-level workers minimum wage and do not offer them sufficient opportunities. “In a lot of shops, they have to sweep floors and they have to do all the Joe jobs,” Piercey said. “They don’t get the hands on and they get discouraged.” One organization involved in hands-on training is I-CAR Canada, the training and recognition program run by the Automotive Industries Association of Canada. Andrew Shepherd, director of collision, said I-CAR Canada now has 81 courses and 55 active trainers.

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Announcing the

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Once again this year, the Quarter Century Club plans to continue to make a donation in the name of Doug Hurlbut to the Insurance Institute Scholarship Fund and other charitable organizations. Design compliments of

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Michael Teitelbaum

Partner, Hughes Amys LLP

Hughes Amys LLP is a member of The ARC Group Canada.

A ruling by Ontario’s Superior Court of Justice declares that a one-year limitation period does not apply to multi-peril policies. Although under appeal, unless the ruling is overturned, it appears to signal the death knell for the one-year limitation provided for in the fire statutory conditions given that fire-only policies are a rarity. OVERVIEW Last November, Justice Michael Quigley of Ontario’s Superior Court of Justice held that the two-year limitation period in the province’s Limitations Act, 2002 applied to a claim under a business insurance policy that included multi-

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peril property coverage. In Boyce v. Co-operators General Insurance, the insurer had asserted that the one-year limitation incorporated into the policy by way of the fire insurance statutory conditions applied. The claim revolved around the removal of a foul odour from a fashion boutique owned by the plaintiff insured. The plaintiffs argued that the odour was the result of vandalism, but The Co-operators, taking the position that the odour was caused by a skunk, denied the claim. The plaintiffs sued their insurer more than one year and less than two years from the date of loss. The insurer responded by moving for a summary dismissal on the basis that the limitation period had expired. The Co-operators took the position that the fire statutory conditions incorporated into the policy, which provided for a one-year limitation period, meant that the basic two-year limitation period did not apply. The insurer also took the position that the insurance policy was a “business agreement” under section 22 of the Limitations Act, 2002, which allows for an agreement

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Beyond Limits

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that varies or excludes the basic twoyear limitation period. Justice Quigley dismissed the defendant’s motion and rejected both its arguments. First, the judge found that the fire statutory conditions did not apply to a multi-peril policy; second, he concluded the policy could not be considered a “business agreement” because it did not meet the requisite criteria of such an agreement.

ISSUES The Superior Court of Justice was asked to determine three issues between the parties, the first two of which are discussed below: 1) whether the one-year limitation period contained in statutory condition 14 applies to multi-peril policies of insurance; and 2) whether the limitation period was varied by agreement pursuant to section 22 of the Limitations Act, 2002.

BACKGROUND FACTS The plaintiffs operated a women’s fashion boutique in Merrickville, Ontario. On October 29, 2010, the insureds locked up the store at the close of business. Returning the next day, they noticed a foul odour was emanating from the store. The police were called and the defendant insurer, The Co-operators, was notified. The police investigated and concluded that the smell was a result of vandalism a couple of days before Halloween. The Co-operators denied the claim on the basis that the smell had been caused by a skunk, which was not covered under the plaintiffs’ policy. In its November 11, 2010 denial letter to the plaintiffs, The Co-operators advised them that any legal proceeding against the insurer is “absolutely barred” unless commenced within one year after the loss or damage occurs. The plaintiffs issued their statement of claim on February 17, 2012 — more than a year after the date of loss, but within two years of that date. The Co-operators brought a motion for summary judgment, arguing in general that the claim was prescribed by the one-year limitation period, but more specifically that the plaintiffs were bound by the inclusion of section 14 of the fire “statutory conditions” in the policy. The insurer further argued the policy constituted a “business agreement” and, as such, it was an exception to the prohibition on agreements to vary limitation periods under section 22 of the Limitations Act, 2002.

The Co-operators denied the claim on the basis that the smell from the fashion boutique had been caused by a skunk, which was not covered under the plaintiffs’ policy. The plaintiffs were informed that any legal proceeding against the insurer is “absolutely barred” unless commenced within one year after the loss or damage occurs. APPLICABILITY OF THE STATUTORY CONDITIONS The Co-operators argued that although most claims fall under the purview of the basic two-year limitation period under Ontario’s Limitations Act, 2002, the

one-year limitation period found in section 148 of the Insurance Act is expressly preserved by the Limitations Act, 2002. While the policy in question was a multi-peril policy, the defendant included all of the statutory conditions contained in section 148, including statutory condition 14, which sets out a one-year limitation period. In addition, the policy contained the following provision: the statutory conditions apply to the peril of fire and, as modified or supplemented by forms or endorsements attached, apply as policy conditions to all other perils insured by this policy. The defendant took the position that these statutory conditions were binding on the insureds. In rebuttal, the plaintiffs argued the claim was governed by the basic two-year limitation period set out in section 4 of the Limitations Act, 2002. They stated that the one-year limitation period contained in statutory condition 14 did not apply to multi-peril policies. In arguing this, the plaintiffs relied on KP Pacific Holdings v. Guardian General Insurance Company of Canada, a 2003 decision by the Supreme Court of Canada that held a multi-peril policy was not governed by British Columbia’s fire insurance legislation, which included a shortened limitation period, but by the general provisions of the province’s Insurance Act. Justice Quigley applied the rationale from the decision. “[A]s the legislation in Ontario uses substantially the same wording as the legislation in British Columbia referred to in KP Pacific Holdings, it appears clear that a multi-peril policy, such as the one issued to the plaintiffs, cannot be considered fire insurance,” the judge reasoned. As such, the peril of fire is an “incidental peril” to the coverage provided and is excluded from the application of Part IV of the Insurance Act, which deals with fire insurance. Justice Quigley emphasized the fact that the Supreme Court of Canada concluded the multi-peril policy could not be considered fire insurance despite the B.C. legislation contemplating that

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the fire insurance provisions could include insurance against other risks. Conversely, the Ontario legislation contains no such provision. Therefore, Justice Quigley determined the policy issued to the plaintiffs could not be construed as fire insurance to trigger the one-year limitation period contained in section 148(14) of the province’s Insurance Act.

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form a part of the policy at all. “It is difficult to see how a policyholder can be said to have truly ‘agreed’ to these provisions when they are directed to believe, at least partially, that they are mandated by statute.” In the 2007 decision, Co-operators v. Burry, the Supreme Court of Newfoundland and Labrador (Court of Appeal) called this practice into question.

tracts as “peace of mind” contracts sold to members of the public, which were not intended by the provincial legislature to be included as “business agreements.” Last, Justice Quigley found that an “after-the-fact attempt” by the defendant insurer to unilaterally impose a limitation period on the insureds via a letter from an adjuster to one plaintiff was ineffectual and non-binding.

APPLICABILITY OF SECTION 22

COMMENT

The Co-operators also argued that the limitation period in the plaintiffs’ policy was properly varied by operation of section 22 of the Limitations Acts, 2002. Any attempt to shorten a limitation period is not permissible unless one of five exceptions outlined in section 22 applies. The insurer argued that section 22(5), which permits a limitation period to be varied or excluded in the context of a “business agreement,” was applicable here. As such, Justice Quigley had to determine whether or not the presence of “statutory conditions” attached to a policy of insurance constitutes an agreement to vary the limitation period. Citing the 2012 ruling by Ontario’s Superior Court of Justice, Bell Canada v. Plan Group Inc., the judge concluded that an “agreement” must include the following: 1)specific reference to the statutory limitation period; 2)clear and unequivocal language that the parties are intending to vary the application of the statutory protection contained in the applicable limitation period; and 3)provisions that clearly alert the prospective claimants they are foregoing a statutory right to a longer limitation period within which to make a claim. Justice Quigley determined the language used in the policy did not meet these criteria; rather, he observed the policy language “misleadingly” suggests that the limitation period contained in the “statutory conditions” was mandated by legislation, not contract. Justice Quigley also stated that he has serious reservations about whether or not the statutory conditions should

We understand that this decision has been appealed. Unless it is overturned, it appears to signal the death knell for the one-year limitation provided for in the fire statutory conditions, as policies providing for fire coverage only are now rare if not non-existent. Although the decision on the applicability of the one-year limitation was a matter of first impression in Ontario, it has been the subject of judicial determination in several provinces.The question of the incorporation of the fire statutory conditions in other forms of property policies has also been considered in Ontario and other provinces. In terms of whether or not the oneyear limitation could apply to multiperil policies, the Insurance Bureau of Canada had previously weighed in with the view, expressed in a June 2005 Bulletin, that the Limitations Act, 2002 limitation applies. Ultimately, subject to the result on appeal, legislative action may be required to preserve a one-year limitation. By way of comparison, however, we note that in the recent amendments to the Insurance Acts in both B.C. and Alberta, all-risk policies are governed by the general provisions of those acts so that, for the most part, a two-year limitation would apply to all types of property and liability policies. Given that the language of provincial Insurance Acts, when dealing with these types of matters, are generally consistent, this may foretell what will occur in Ontario. Hughes Amys LLP is a member of the ARC Group. The author thanks student-at-law, Alexander Wilkinson, for his fine assistance in the preparation of this article.

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It appears clear a multi-peril policy, such as the one issued to the plaintiffs, cannot be considered fire insurance. The peril of fire is an “incidental peril” to the coverage provided and is excluded from the application of Part IV of the Insurance Act, which deals with fire insurance. In addition, Justice Quigley questioned the notion that an insurance contract can be considered a “business agreement” to begin with. He expressed the view that insurance contracts are not “business agreements” as contemplated by Ontario’s Limitations Act, 2002. Instead, he characterized insurance con-

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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 Risk & Insurance Management Society Inc. Dedicated to advancing the practice of effective risk management. www.rims.org

CLAIMS ADJUSTING FIRMS ClaimsPro Inc. Committed to providing leading-edge claims management services. www.scm.ca Crawford & Company (Canada) Inc. Enhancing the customer experience, every day. www.crawfordandcompany.com

PCA Adjusters Limited Adjusting to Meet your needs™ www.pca-adj.com

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CONSTRUCTION CONSULTANTS MKA Canada, Inc. Providing creative solutions to the Construction, Legal and Insurance Industries. www.mkainc.ca

DAMAGE COST CONSULTANTS SPECS Ltd. (Specialized Property Evaluation Control Services) Providing Innovative Solutions to Control Property Claim Costs www.specs.ca

EMPLOYMENT ONLINE I-HIRE.CA Canada's Insurance Career Destination. www.i-hire.ca

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Granite Claims Solutions Global Adjusters and Marine Surveyors www.graniteclaims.com

Canadian Underwriter March 2013

Informco Inc. Integrated Graphic Communications Specialists. www.informco.com

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CRU Adjusters Calm in the face of a storm. www.cruadjusters.com

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complex engineering incidents. www.waltersforensic.com

Giffin Koerth Forensic Engineering and Science Investigate Understand Communicate www.giffinkoerth.com Rochon Engineering Inc. Forensic Consulting Engineers & Code Consultants. www.rochons.com Walters Forensic Engineering Inc. Providing scientific answers to

Aviva Canada Inc. Home Auto and Business Assurance. www.avivacanada.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

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

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William J. Sutton & Co. Ltd. Insuring Special Risks since 1978 www.wjsutton.com

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tart S

Making Sense

Stuart Rose

Global Insurance Marketing Director, SAS

It is a brave new world and, as such, now time to start using analytics to make sense of telematics. By weeding out unimportant variables to identify important relationships, analytics can assist companies to quickly develop, test and use the best modelling techniques to create new auto insurance pricing models. If insurers could know with great accuracy which customers were likely to be involved in collisions and, thereby, increase their costs; better assess claims based on facts captured at the moment of the incident; or have the information necessary to create customized pricing tailored to the behaviours of individual customers, would they harness those opportunities? Telematics makes this, and more, possible, but the masses of data collected through this technology are useless if the insurer has no way of analyzing it. In an industry that is frequently slow to adopt cutting-edge technologies, telematics is starting to make waves, and for those driving the adoption, will result in a boon to their bottom lines.

In the United States, Progressive Insurance was first out of the gate to implement the technology more than a decade ago and in 2012, the company reported that it wrote more than $1 billion in premium revenue for usage-based insurance policies. By 2020, it is forecast that more than a quarter of U.S. auto insurance premium revenue will be generated via telematics, representing more than $30 billion. At the heart of telematics is data, but this is also the biggest challenge to companiesâ&#x20AC;&#x2122; successful implementation of the technology. Advanced analytics can overcome challenges presented by telematics related to making sense of all the data and, thereby, enabling companies to handle huge data volumes and weed out unimportant variables in order to identify important relationships. By removing these barriers, analytics can assist companies to quickly develop, test and use the best modelling techniques to create new auto insurance pricing models.

DATA, DATA EVERYWHERE The value of data management to telematics Big Data has become a technology buzz-term, and telematics epitomizes this trend. Experts forecast that insurers will need to collect at least 10,000 customer-years of data to be able to correlate driving behaviour with claims data so they can compare this information with data from standard drivers.

March 2013 Canadian Underwriter

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Telematics devices create massive amounts of data — approximately 1 terabyte for 100,000 customers each year — as the devices create a data record per second of elements, including date, time, speed, location, whether the vehicle is accelerating or decelerating, cumulative mileage and fuel consumption. At the same time, bringing the varying data together into a single record is complex as it is usually comprised of many different formats. This can result in increases to cost, data quality issues from missing data, and complexity of bringing all the sources together for processing. So before it is possible to start analyzing this data to extract insights, it is necessary to ensure that it is well-managed. Surprisingly, in talking to Canadian companies in all sectors, this step of data management is often neglected at a corporate level. In fact, a recent Canadian study by analyst group IDC and commissioned by SAS, found that an enterprise data strategy is not a priority of the C-suite. As it turns out, mid-level IT managers for Canadian firms are close to six times more likely than their international counterparts to be primarily responsible for a company’s data management strategy. To make telematics work to the benefit of insurers, an enterprise-wide data management strategy should be adopted to ensure a unified environment of solutions, tools, methodologies and workflows for managing the telematics data as a core asset.To be successful, the strategy would incorporate data integration to improve the flow of accurate telematics information across the organization; data quality to ensure information integrity and excellence by managing the data quality lifecycle; manage the access and use of data across the enterprise; and master data management to create a single, accurate and unified view of all the telematics data. How the data is managed will also help overcome another barrier to the adoption of telematics — consumer concern about privacy. Consumers want assurance that data about them will be used for the purpose stated, not, for

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instance, sold to the highest bidder for marketing purposes. By having a reliable s policy in place, it is easier to ensure customer information does not fall into hands that it should not.

NEEDLE IN THE HAYSTACK From “unimportant” variables to important insights It would be great to have a crystal ball that predicts which customers are risky. Failing that, however, using telematics paired with analytics might be the next best thing. For instance, using both can provide fast, fact-based answers to questions such as whether a driver who racks up 20,000 kilometres a year on highways is more or less likely to get into an accident than an occasional motorist who drives just 5,000 kilometres annually on city roads. The combination of telematics and analytics can also help determine the most interesting variables to assess, thereby helping to solve the age-old dilemma, “I don’t know what I don’t know.” Using analytics and data explo-

To make telematics work to the benefit of insurers, an enterprise-wide data management strategy should be adopted to ensure a unified environment of solutions, tools, methodologies and workflows for managing the telematics data as a core asset. ration tools, insurance companies can sort through the masses of telematics data to determine which variables are important and which are not. For example, 20 years ago credit score was probably deemed an unimportant variable; now it is probably the most used variable in determining premium rates. To ensure the tools used are powerful enough to analyze the volume of data produced by telematics, companies should look for solutions that incorporate a distributed, in-memory or highperformance environment to display

results of data exploration and analysis in a way that is meaningful. This technology makes it possible to quickly prepare, explore and model multiple scenarios using data volumes, which could not be handled by older technologies, to deliver accurate and rapid insights.This makes it possible to quickly trial several “what if” scenarios involving variables that may have once been deemed unimportant and develop models that can be quickly adjusted and re-run. The ultimate promise of telematics is to provide auto insurers with increased competitiveness and profitability by making it possible to align individual risk and individual pricing using each customer’s specific driving behaviour. This would greatly reduce rate evasion resulting from customers misrepresenting information — either deliberately or not.This evasion is estimated to amount to 10% of premium revenue, according to numerous international studies.

STREAM IT, SCORE IT, STORE IT Achieving this ideal is no simple task. As discussed, the mountain of data that is produced by telematics can be overwhelming. At the same time, the speed (or velocity) at which this data arrives is challenging. To overcome this challenge, insurers can turn to high-performance analytics, which enable them to access and process varying velocities of data quickly. Insurance companies should consider a “stream it, score it, store it” approach. This enables analytics to be applied on the front end to identify the meaningful telematics data from the unimportant data or “the noise.” Telematics has the power to transform the insurance industry and deliver significant competitive advantages to companies early to adopt the technology, but with this great potential also comes complexity. Advanced high-performance analytics and data management tools can assist companies in overcoming the complexities, thereby enabling them to reach the full potential of telematics as it grows from a trend in its infancy in Canada to one that is a musthave for all insurers.

March 2013 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

Marsh is creating a single global risk management (RM) practice group by bringing together G5, the company’s largest account platform, its multinational practice and its existing RM operations. The move is meant to enhance focus on meeting the evolving needs of the company’s largest clients worldwide. Tim Gardner [1], previously global sales leader for Marsh’s large corporate business, will lead the group. Based in New York, Gardner will report to Joe McSweeny, global sales leader and president of Marsh’s United States & Canada division. Marsh has also created chief client officer (CCO) roles to help drive the enhanced offering across its RM practice group. Tim Mahoney, formerly global risk manager leader for the U.S., has been named CCO in Marsh’s U.S. & Canada division, Gilbert Van den Eynde, formerly the global G5 leader, will be CCO for the international division and Alban Laloum will continue to lead the multinational team.

RSA has recently named Paul Lucarelli [2] as vice president of its large commercial and specialty business for the Ontario region. In this new role, Lucarelli will also lead RSA’s large commercial and specialty upper mid-market

60 Canadian Underwriter March 2013

business in the province. He has held various commercial underwriting leadership roles, including heading the underwriting integration of GCAN and RSA, forming the current large commercial and specialty division after RSA acquired GCAN in 2011. Most recently, he served as vice president of the technical resource group.

Marilyn Horrick [3] is The Guarantee Company of North America’s new national vice president for the Guarantee Gold product, which caters to high-net worth individuals. Over the past 20 years, Horrick has held positions of increasing seniority within the property and casualty insurance industry, most recently as assistant vice president of strategic initiatives and communications manager for Chubb Insurance’s Canadian operations. She has also worked at Zurich Insurance, notes her LinkedIn profile. Horrick is a director on the Ontario board of WICC (Women in Insurance Cancer Crusade).

Intact Financial has taken a new step in its analytics capabilities and its implementation of the FellowDSS Accelerator business intelligence tool. Intact has acquired the FellowDSS Framework version, which will provide access to intellectual property functionalities, notes InEdge, the business analytics

company behind the product. “By leveraging and customizing the FellowDSS platform, we will improve our ability to manage an ever-increasing volume of complex data and accelerate the deployment of our analytical solutions,” says Denis Pouliot [4], vice president of applications development for Intact. FellowDSS Accelerator is a business intelligence package for insurance companies that integrates technical elements and industry-specific business content. Its integrated data warehouse stores transactional data from a company’s operational support systems and consolidates and integrates data from across a company’s various systems, making the data easy to analyze through pre-defined or ad hoc reports.

Brokers would do well to be prepared to deal with the influence of telematics — something that George Cooke [5] suggests will ultimately revolutionize the way personal insurance is sold — or risk being left behind. “The reality is that this is coming,” Cooke, executive vice president of E-L Financial and former CEO of The Dominion of Canada General Insurance Co., said during a recent industry event in Toronto. “It will change the way we all do business. We can’t stop it, even if we want to, so we better figure out how to get on board that train because it’s leaving very quickly,” he said. “If you ignore it, I think brokers will lose very badly. If you pay

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8 attention to it, I think brokers would likely win, very quickly, very well,” he said of the influence of telematics. That makes it critically important for brokers to prepare now, not later, to ensure they have an opportunity to take part.

Toronto’s Granite Claims Solutions recently announced it has acquired Subrogation Group Ltd. in Burlington, Ontario. Subrogation Group will continue to operate under its current name as a division of Granite Claims Solutions. Beyond subrogation services, Subrogation Group specializes in deductible recovery, uninsured motorists, judgment recovery, premium compliance, small claims representation

4 and restitution enforcements. “As a great resource on the recovery side of claims adjusting, their focus on providing the highest quality service for their client fits right in line and is a perfect complement with our product offering,” says Michael Holden, president and CEO of Granite Claims Solutions. Chris Smith, founder of Subrogation Group, adds the acquisition will allow “us to spread our services, both geographically and by line of business.”

The McLennan Group Insurance Inc. has launched a mobile app for its insurance programs for members of CARP, formerly the Canadian Association for Retired Persons. CARPMembers is available to current and future CARP members, notes a statement from CARP and McLennan Group Insurance, a personal lines brokerage owned by Northbridge Insurance Company. The app is available for iPhone 3GS-5 (iOS 4.01-6.0) and works on iPad, Android Smartphones (OS 2.3.3-OS 4.0) and

BlackBerry Bold 9900 and Torch 9850/9860 (with OS 7.0). Users can browse for product information, rates and applications and get simplified auto, pet and travel insurance quotations. The app is an “example of how The McLennan Group Insurance Inc. is helping to make insurance easier to understand for CARP members,” says Jason Bednarz [7], director of direct personal lines for Northbridge Insurance.

ISB Canada, an information services firm in Milton, Ontario, has welcomed Fawn Mah [8] as customer relationship manager for Alberta and Western Canada. Mah has been a business development specialist at Aviva Canada, a personal lines field underwriter with The Dominion and an independent broker. In her new role, she will help train claims adjusters and branch managers to identify fraudulent claims and to improve efficiency by searching source documents.

Western Financial Group announced that as of February, Melfort Agencies Ltd. will be part of its network of insurance brokerages, marking the company’s 23rd location in Saskatchewan. “Joining Western Financial Group was the logical choice for me as I looked for ways to allow the office to grow and improve

service to our customers and to Melfort,” says Wes Moneta, owner of Melfort Agencies. “We can now offer a much better selection of products and services and our office is part of an extensive network that stretches across western Canada,” says Moneta, who will manage the integrated office. Melfort staff will be maintained.

Cunningham Lindsey Canada has rejoined the Canadian Independent Adjusters’ Association (CIAA). “We believe there are some positive initiatives under way and have come to an agreement to rejoin the CIAA,” says Rob Seal, Cunningham Lindsey’s president. “We want to take an active role in pushing these initiatives and look forward to participating,” Seal says. “We are very excited to welcome Cunningham Lindsey back into the fold,” notes John Seyler, national president of the CIAA. “Although competitors, CIAA’s volunteers set competition aside and are dedicated to working together for the advancement and preservation of the independent adjusting profession. This significant increase in resources and expertise will be of considerable benefit for all members,” Seyler adds. Follow @CdnUnderwriter on

http://twitter.com/CdnUnderwriter

March 2013 Canadian Underwriter 61

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To mark the 125th Anniversary of Ecclesiastical Insurance Group and 40 years in Canada, a reception and dinner for staff and business partners was held on October 22, 2012 at The Gardiner Museum – Ecclesiastical’s first Arts and Culture risk. The evening was hosted by Jacinta Whyte, General Manager and Chief Agent for Canada, along with visiting Group executives. As a Canadiancentric event - "Protecting the Heritage and Cultures of Canada" - the dinner tables were named for arts and culture risks insured from coast to coast. Dinner was catered by Jamie Kennedy, using locally grown produce and Ontario wines and the music was provided by the Métis Fiddler Quartet, a family of musicians studying at The Royal Conservatory of Music.

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$332,170(17

GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery

McCauge Borlack LLP hosted its seventh annual ski day event on Feb. 21 at the beautiful Alpine Ski Club in Collingwood, Ontario. Raffle proceeds were donated to Darearts, a charity devoted to empowering “at risk” children through access to the arts.

9LFWRULD 6WLUOLQJ Patrick Lundy, President and CEO of Zurich Canada, is pleased to announce the appointment of Victoria Stirling to the position of Director for Zurich Commercial Transportation. Ms. Stirling is well-known in Canada’s commercial insurance industry, having held a number of transportation related roles at some of Canada’s most respected insurers. As head of Transportation, Victoria will spearhead the execution of Zurich’s thriving Transportation business which offers vast depth and breadth of coverage, cross border solutions and the financial strength to deliver on claims over the long term. Victoria’s understanding and knowledge of the business will strengthen the already deep commitment Zurich has to meet and surpass the expectations of transportation focused brokers and customers. Prior to joining Zurich, Victoria managed the Ontario and Atlantic Commercial Automobile and Transportation business for Intact Insurance. Zurich Canada is a part of Zurich Insurance Group, an insurance-based financial services provider with a global network of subsidiaries and offices in North America and Europe as well as in Asia Pacific, Latin America and other markets. Founded in 1872, the Zurich Insurance Group is headquartered in Zurich, Switzerland and employs approximately 60,000 people serving customers in more than 170 countries, including more than 9,500 employees in North America. Zurich Canada is focused on developing solutions for large Canadian corporations; Canadian-based multinationals; customers in the transportation, public sector, real estate, construction, manufacturing and management solutions.

March 2013 Canadian Underwriter

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GALLERY

The CICMA/CIAA Ontario Chapter’s 46th Annual Joint Conference was held on Feb. 5, 2013 at the Metro Toronto Convention Centre. The theme of the conference was ‘Can We Talk? Customer Service: the Good, the Bad and the Ugly’. Guest speakers were Brian Maltman, executive director, General Insurance OmbudService; Stephen Scullion, director professional development, Crawford & Company (Canada) Inc.; and keynote speakers Carl Van, president and CEO, International Insurance Institute, Inc.

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Aviva Canada Inc.

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Blouin, Dunn LLP

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Burns & Wilcox Canadian Litigation Counsel

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CARSTAR Automotive Canada

CNA Canada

Crawford & Company (Canada) Inc.

Cunningham Lindsey Canada

EFI Global

Elliot Special Risks

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Liberty International Underwriters

Quarter Century Club

RSA – Royal & Sun Alliance Insurance Company of Canada

Travelers

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WINMAR Zurich Canada

64 Canadian Underwriter March 2013

27 35, 63

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Hundreds of insurance claims industry guests attended the 7th Annual Post CICMA/CIAA Joint Conference Cocktail on Feb. 5, 2013. Entitled The Big Mingle, the event featured a Big-Top theme. Giffin Koerth Forensic Engineering and Blouin Dunn LLP hosted the event, held at the Maison Mercer in Toronto.

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GALLERY Watch OIAA 2013 Video at: http://bit.ly/oiaavid13

More than 150 exhibitors from across Canada showcased their works at the Ontario Insurance Adjustersâ&#x20AC;&#x2122; Association (OIAA)â&#x20AC;&#x2122;s Professional Development & Claims Conference in Toronto on Feb. 6, 2013. The event featured a trade show and seminars covering a wide variety of timely claims topics.

68 Canadian Underwriter March 2013

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To Read the Full Story for Each Press Release visit insPRESS.ca Itech Environmental Maintains Commitment to Training First Responders by STRONE-Itech – Mar. 7 A.M. Best First Monday: Review & Preview 2013 – US Property/Casualty: Reserve Adequacy, ERM Remain Critical [Video] by A.M. Best Co. – Mar. 6 STRONE Named Winner of Canada’s 50 Best Managed Companies Award for 2012 by STRONE-Itech – Feb. 26 ClaimsPro Welcomes Shelley Glover as New Branch Manager in Ottawa by SCM Insurance Services – Feb. 25 Marilyn Horrick Appointed National VP, Guarantee GOLD® - The Guarantee Company of North America by Guarantee Company of North America – Feb. 22 Cunningham Lindsey Canada Rejoins the Canadian Independent Adjusters’ Association (CIAA) by Canadian Independent Adjusters’ Association (CIAA) – Feb. 22 Disaster Kleenup Canada Appoints Chris Schmidt as new VP by Disaster Kleenup Canada Ltd. (DKC) – Feb. 20 Granite Claims Solutions Acquires Subrogation Group Ltd. by Granite Claims Solutions – Feb. 14

…continued on Page 70 Canadian Underwriter March 2013

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$QGUHZ 3DSDGLPLWURSRXORV Claude Blouin and Jamie Dunn, Partners at Blouin Dunn LLP, are extremely pleased to announce that Andrew Papadimitropoulos has joined the firm as an associate lawyer. Andrew received his Bachelor of Science degree from the University of Toronto in 2004, after which he attended the University of Manchester, where he obtained his law degree in 2007. He obtained his Certification of Qualification from the National Committee on Accreditation in 2008 and subsequently articled at a mid-sized Toronto full service firm with an emphasis on insurance defence work. After Andrew was called to the bar in 2010, he worked as in-house counsel for a major insurance company and a boutique insurance defence firm. Andrew’s practice focuses on insurance defence litigation, including first and third party claims, occupiers liability claims and property damage disputes. Andrew is a member in good standing of the Law Society of Upper Canada, the Canadian and Ontario Bar Association and The Advocates’ Society. Outside of work, Andrew’s interests include golf, mountain biking and skiing. Andrew’s contact information is: apapadimitropoulos@blouindunn.com (416) 365-7888 ext. 123 Blouin Dunn is one of Ontario’s leading insurance defence firms whose members have been providing quality legal support to the insurance community for over 30 years. We offer services in Ontario to property and casualty insurers throughout North America, at all levels of experience, at appropriate and competitive rates.

www.blouindunn.com

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The Toronto Insurance Women's Association (TIWA) Wine and Cheese Reception was held at The Hyatt Regency in Toronto on Feb. 21. More than 1,200 guests attended the association's annual signature event.

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'HERUDK %URFNZD\ Claude Blouin and Jamie Dunn, Partners at Blouin Dunn LLP, are extremely pleased to announce that Deborah Brockway has joined the firm as Director, Marketing & Communications. Deborah comes to Blouin Dunn with over 10 years of combined experience in Business Development, Marketing, Client Services Coordination, Recruitment and Healthcare and will be responsible for leading all aspects of Blouin Dunn’s marketing and communication efforts including advertising,client relationship management, sponsorships and events Outside of work, Deborah’s interests include fitness, beach volleyball, music and travel. Deborah’s contact information is: dbrockway@blouindunn.com (416) 365-7888 ext. 147 (416) 737-3668 Blouin Dunn is one of Ontario’s leading insurance defence firms whose members have been providing quality legal support to the insurance community for over 30 years. We offer services in Ontario to property and casualty insurers throughout North America, at all levels of experience, at appropriate and competitive rates.

www.blouindunn.com

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The CIP Society Ontario Councilâ&#x20AC;&#x2122;s annual Fellowsâ&#x20AC;&#x2122; Reception was held at The National Club in downtown Toronto on February 12. The newest FCIP graduates were greeted and recognized as part of a reception featuring good food and good company. James Cameron, FCIP, CRM, C. Arb, president of Cameron & Associates Insurance Consultants, was honoured with the 2012 GTA Fellow of Distinction Award. This award, created to recognize outstanding achievement in the insurance industry in Toronto, is presented annually to Fellow Chartered Insurance Professionals nominated by industry peers and colleagues.

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at 25.42°N 90.15°W, ACE insures progress

Property & Casualty | Accident & Health | Life

It takes the right people, a strong balance sheet, worldwide capabilities and a flexible approach to address the complexities of marine insurance. These are the strengths of ACE. We take on the responsibility of your risks so that you can take on the responsibility of making things happen. We call this insuring progress. Visit us at www.ace-ina-canada.com.