Canadian Underwriter November 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

NO V E M B E R 2 0 1 3 A Business Information Group Publication #40069240

A New Conversation 2014 REINSURANCE MARKET OUTLOOK

Floodgates Open BY MARY KELLY, ANNE KLEFFNER & NORMA NIELSON

No Limits? BY DANIEL STRIGBERGER

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VOL. 80, NO. 11, NOVEMBER 2013 CANADA’S INSURANCE AND RISK MAGAZINE. PUBLISHED BY BUSINESS INFORMATION GROUP

www.canadianunderwriter.ca COVER STORY

2014 Reinsurance Market Outlook Do recent months, featuring two of the most expensive natural catastrophe events in Canada’s history, provide a glimpse of a new, more perilous norm? Is it time for reinsurers, insurers and other stakeholders to have a new conversation about the perils, the frequency of events and the costs, both insured and otherwise, that the country is seeing? What do reinsurers expect 2014 will bring?

30 FEATURES

Flood Insurance

Educating Consumers

With the cost of water damage high and rising, the creation of a sustainable insurance coverage model demands the co-operation of a whole host of stakeholders.

Insurance professionals have likely found themselves in social situations where they have had to defend their choice of work. What response will best educate consumers?

BY MARY KELLY, ANNE KLEFFNER & NORMA NIELSON

BY THE CIP SOCIETY

16 CSIO Certification

42 Flood Survey

CSIO Certification is a national program designed to reduce data compatibility challenges by promoting the use of trusted and interoperable solutions in the broker channel.

Updated floodplain maps, weather-hardened infrastructure and homeowner engagement are needed to lower the risk to flood insurance coverage.

BY HANS GANTZKOW

20 Earthquake Preparedness

50 39th RIMS Canada Conference

Predicting when and where an earthquake will occur in Canada is a slippery proposition. As it stands, however, the insurance industry is not prepared to handle a major quake.

The RIMS Canada Conference offered attendees presentations on a full gamut of risks, including those associated with flood, earthquake and supply chains. BY ANGELA STELMAKOWICH

BY ANGELA STELMAKOWICH

56 93rd IBAO Convention

28 Nuclear Risk Underwriting Fraud

CAT Impairment

Amidst the efforts to combat fraud, underwriting fraud is not getting sufficient attention. As perpetrators become more sophisticated, this must change.

An Ontario ruling indicates a claimant who is denied a catastrophic impairment designation can dispute that finding more than two years following the determination.

BY WES GILL

BY DANIEL STRIGBERGER

BY JASON THISTLEWAITE & BLAIR FELTMATE

Ottawa plans to table changes to increase mandated liability coverage for nuclear operators from $75 million to $1 billion and, maybe, lengthen limitation periods for submitting claims. BY GREG MECKBACH

Issues ranging from the mandated auto premium cut to mitigating flood damage were among the items up for discussion during IBAO’s recent annual convention. BY ANGELA STELMAKOWICH & GREG MECKBACH

November 2013 Canadian Underwriter

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VOL. 80, NO. 11, NOVEMBER 2013

Editor Angela Stelmakowich astelmakowich@canadianunderwriter.ca (416) 510-6793

PROFILE

Photo: Patrick Thompson

Associate Editor Greg Meckbach gmeckbach@canadianunderwriter.ca Twitter: @CU_Greg (416) 510-6796

10 All Business Brooke Hunter, incoming president of the Toronto Insurance Conference (TIC), says that a key TIC objective is to ensure member brokerage firms are well-informed on issues affecting the industry. BY GREG MECKBACH

SPECIAL FOCUS

Editorial

Marketplace

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

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Circulation Manager Mary Garufi mgarufi@bizinfogroup.ca (416) 442-5600 ext. 3545 Print Production Manager Phyllis Wright President Bruce Creighton Vice President Alex Papanou

Account Manager Elliot Ford eford@canadianunderwriter.ca (416) 510-5117 Connect with Canadian Underwriter

58 Moves & Views

twitter.com/CdnUnderwriter

facebook.com/CanadianUnderwriter

60 Gallery

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EDITORIAL

Common Anomaly

“Sandy was an anomaly, and the nature of an anomaly is that it is not subject to a precise schedule or prediction.” Angela Stelmakowich, Editor astelmakowich@ canadianunderwriter.ca

Canadian Underwriter November 2013

It has been a year since Sandy — an angry lady that slowed a bustling powerhouse of a region to a crawl before inspiring some quick rethinking about how best to prepare for hurricanes and the damaging water they inevitably bring. “Sandy’s vast size, in combination with its slow offshore movement, low pressure and its timing of landfall during a full moon — one of the highest tides of the month — made tides 20% higher than normal,” Crawford & Company notes in a new situation paper. The primary mode of damage was widespread moderate to severe flooding of the first storey or below of both residential and commercial buildings, reports Guy Carpenter & Company, LLC, which released a damage assessment to mark Sandy’s one-year anniversary. Without changes, the future may hold much of the same. In mid-October, geologist Andrew Kemp, an assistant professor at Tufts University, pointed to the effect of rising sea levels. “It's like playing basketball and raising the level of the court so that shorter and shorter people can dunk. It makes low-lying property and infrastructure more vulnerable at a time when developers are pumping money into coastal cities and towns.” Notes Crawford & Company, “Sandy was an anomaly, and the nature of an anomaly is that it is not subject to a precise schedule or prediction.” Sandy was an anomaly, true, but perhaps there is a need to rethink the view of what

that means in light of the frequency of severe weather events, value of property and contents in close proximity to bodies of water (ocean or not) and locations of homes and businesses in areas at risk from rising water or flooding. Closer to home, one need look no further than the devastating flooding this year in southern Alberta and the jaw-dropping volume of rain the Toronto area witnessed in scant hours. Estimates of insured losses for these two events already are at about $2.5 billion... and rising. What happened in Calgary and other areas of southern Alberta may be considered an anomaly as well — by some, although certainly not all. On October 28, Alberta tabled legislative amendments to enshrine in law measures such as banning municipalities from approving new developments in floodways, and ensuring homebuyers are informed if a property in a flood hazard area is eligible for future disaster assistance. Recent media reports out of Alberta show less than 10% of the 250 eligible Albertans in a flood-prone zone who lost their homes have accepted a buy-out offer from government. Should homeowners opt to stay, they will not be eligible for disaster money in the event of another flood. Some established homes and businesses will not move; they will sit… and wait. Waiting will eventually make them witness to another flood event, to be sure. How costly

that will ultimately prove for stakeholders from insurers to reinsurers to governments will depend on the protective steps taken in the interim. Insurance will certainly need to be part of the mix. Someone will need to pay. How to bank the money needed to pay is contemplated in a recent bill introduced by Republican Dennis Ross (Florida) south of the border. The Disaster Savings Account Act of 2013 proposes allowing eligible individuals to establish tax-preferred disaster savings accounts of as much as $5,000 a year to be spent on mitigation expenses for future hazards. This would include earthquake, flood, hail, hurricane, lightning, power outage, tornado and wildfire. The act has gained the support of the Reinsurance Association of America (RAA). “The RAA has long supported proactive mitigation efforts to harden homes and businesses, thereby reducing the human and economic loss from disasters, particularly in geographic regions prone to repeated events,” says association president Frank Nutter. “As an ultimate risk-taker, the insurance industry has a vested interest in new infrastructure investments, upgrades to aging infrastructure and adaptation measures,” Swiss Re noted in releasing a report this fall that found “floods endanger more city residents than any other natural peril, followed by earthquakes and storms.”

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

Canadian Market FSCO PUBLISHES BULLETIN ON USAGE-BASED INSURANCE The Financial Services Commission of Ontario (FSCO) posted a bulletin in October outlining considerations for insurers planning to offer usage-based auto insurance programs, focusing on privacy issues and data collection. The bulletin notes information gathered by telematics technology, or other devices, for usage-based insurance pricing (UBIP), should be considered “personal information” as defined by Canada’s Personal Information Protection and Electronic Documents Act. Notes FSCO, “At this point in time, UBIP programs, including program-provided devices and applications, should collect and use UBIP data solely for discount-setting purposes, and not to decline, cancel or refuse to renew risks or to confirm rating criteria currently used.”

CSIO TELEMATICS DATA STANDARD EXPECTED SOON The Centre for Study of Insurance Operations (CSIO) plans to release its industry standard for delivering telematics data in January 2014. CSIO reported in October that it has been working for the past several months on delivering the standard for proving a secure way to transmit telematics information among multiple business partners and allowing for data

8 Canadian Underwriter November 2013

quality and consistency across the industry. “Telematics is rapidly becoming an important technology for the auto industry and in order to fully realize the potential of this technology, a data standard is necessary,” Catherine Smola, president and CEO of CSIO, says in a statement.

Risk NEED FOR FLOOD MAPS, CONSUMER EDUCATION Aging infrastructure and climate change are contributing to water-related residential losses in Canada, but educating consumers is one way to help mitigate losses, Glenn McGillivray, managing director of the Institute for Catastrophic Loss Reduction (ICLR), said in mid-October. In 2013, Canada experienced two of the most costly disasters in Canadian history within two weeks of one another, McGillivray said at a luncheon hosted by the Property Casualty Underwriters Club in downtown Toronto. Estimated insured losses from the floods in Alberta were last reported at $1.7 billion while losses from the Toronto-area rainstorm are expected to be at least $850 million. McGillivray noted that most losses are not from overland flooding. “The real problem is urban flooding,” he said, suggesting homeowners look at mitigation measures like using backwater valves, sump pumps and emergency back-up power sources for

those sump pumps. As for cities, McGillivray said that they can add flood mitigation measures. ICLR is also pushing for provinces to tighten building codes.

REPUTATION AT RISK WITH RISING USE OF SOCIAL MEDIA Young consumers are becoming more likely to complain about a product on social media, notes survey results from global insurer XL Group. XL reports that half of the surveyed 18- to 34-year-olds said they are more likely to complain via social media than they were a year ago, and almost a quarter said they had already used social media to make a complaint. A third of respondents in all age groups polled were more likely to complain using social media than they were a year ago. “As people integrate the use of social media into their everyday lives, they are more likely to use these channels to interact with companies and brands,” says Ed Mitchell, chief underwriting officer with XL’s product recall group. “Companies also need to develop response plans with their insurance company.”

Reinsurance SEPTEMBER NAT CATS COST US$15B GLOBALLY Economic losses from natural disasters globally in September are estimated at about US$15 billion, notes a recent report from Aon Benfield’s model development centre,

Impact Forecasting. Among other events, the report cites hurricanes Manuel and Ingrid, which made landfall on opposite sides of Mexico within 24 hours, generating estimated insured losses of $915 million; Super Typhoon Usagi, which made landfall in China, and is expected to carry economic losses estimated at $3.8 billion; and in the United States, record rainfall that caused historic flash flooding in Colorado. Those economic losses are expected to top $2 billion, with preliminary insured losses estimated at $150 million, not including pending losses through the National Flood Insurance Program.

LOWER RISK SEEN FOR LAC-MEGANTIC OPERATOR Montreal, Maine and Atlantic (MMA) Railway, the operator of the crude oil train involved in the deadly Lac-Mégantic, Quebec derailment, can continue operating until early next year because of measures taken to reduce risk exposure, the Canadian Transportation Agency (CTA) has ruled. MMA no longer carries crude oil and the distance over which it transports dangerous goods has dropped 90%, the CTA noted in a ruling extending the company’s licence to operate. In its decision, CTA stated MMA has “demonstrated that there is adequate third-party liability insurance coverage, including self-insurance, for the proposed railway operations until February 1, 2014.”

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Regulation CANADA’S HIGH COURT DENIES LEAVE TO APPEAL The Supreme Court of Canada has denied an application from a commercial property policyholder that operates a fashion boutique for leave to appeal an earlier ruling by the Court of Appeal for Ontario. The high court issued its decision to deny leave to appeal in mid-October. In February 2012, Thomas and Marilyn Boyce filed a statement of claim against The Co-operators General Insurance Company after the insurer denied a property claim made in connection with the Boyces’ store. On October 30, 2010, Marilyn Boyce arrived at her boutique and discovered a foul odour. The Boyces argued the boutique had been vandalized, but The Co-operators denied the claim, contending the odour had been caused by a skunk. The business had to be closed for a time, substantial clean-up costs were incurred and a great deal of inventory could not be salvaged. A claim was not filed until about 16 months after the incident. The case centred on if a clause in The Co-operators’ statutory conditions overrides those in Ontario’s Limitations Act. One section of the act cites a two-year limit; another provides an exception for business agreements made on or after October 19, 2006. In a November 2012 decision, a judge ruled the

Boyces could proceed with their statement of claim, finding that a one-year limit in the statutory conditions of a policy could only override the two-year limit in Ontario law if certain conditions were met. In May 2013, the Court of Appeal for Ontario overturned that decision. The Supreme Court of Canada dismissed the Boyces’ appeal with costs.

CAPITAL STANDARD ADDS UNCERTAINTY: FITCH Fitch Ratings cautioned in October that the International Association of Insurance Supervisors’ (IAIS) planned risk-based global insurance capital standard adds further uncertainty for the industry. The proposed standard would apply to approximately 50 internationally active insurance groups (IAIGs) and is expected to be fully implemented for 2019. “Any positive effects as a result of increased capital could be partly offset by negatives from the cost of higher capital and its impact on pricing and competitive position,” notes a statement from Fitch. IAIS reports that full implementation of the proposed standard will begin in 2019, with “testing and refinement with supervisors and internationally active insurance groups,” prior to that. “It is undeniable that the business of insurance is global, and global issues demand global responses,” says Peter Braumüller, chair of the IAIS executive committee.

Claims ANALYTICS, POOLED DATA TO BE USED TO FIGHT FRAUD The insurance industry has formed a not-for-profit organization that will focus on using analytical tools to identify suspicious claims in the industry’s pooled data in a bid to facilitate further investigation. CANATICS, or Canadian National Insurance Crime Services, will provide insurance companies with a new tool to fight auto insurance fraud. “By uncovering networks of connected claim activity across insurers, we will help ensure that investigators focus their investigations on the right claims,” says Ben Kosic, CEO of CANATICS, and a former partner at KPMG Canada. In a report for the Ontario Auto Insurance Anti-Fraud Task Force, KPMG estimated the insurance industry pays out as much as $1.6 billion annually responding to fraudulent or inflated claims.

WORKFORCE MANAGEMENT SEEN AS TOP CHALLENGE Workforce management tops the list of challenges for chief claims officers at leading property and casualty insurance firms, note findings from a new Towers Watson survey. In its survey of 41 chief claims officers, 76% of respondents cited workforce management as a top three business issue, 56% cited “achieving financial results” as a top three challenge,

and 54% cited “effectively integrating and leveraging technology innovations” as a main concern. Two-thirds of those polled said attracting and developing critical-skill workers was their top challenge, while 59% pointed to maintaining employee morale. “Insurers are responding to this dynamic in a number of different ways, most notably by revising claim processes, modifying job functions and leveraging technology innovations, where feasible,” says Brian Stoll, director of the P&C practice at Towers Watson.

Technology INSURERS EXPECTED TO ABANDON MANY APPS By the end of 2015, insurers will abandon 40% of their current customer-facing mobile applications because of inadequate return on investment, Gartner notes. Gartner’s forecast report includes the research firm’s top industry predictions for IT organizations and users for next year and beyond. While in 2012 many industry decision-makers focused on converging social, mobile and cloud technologies, today they are “significantly shifting their business models and processes,” says Kimberly Harris-Ferrante, vice president and analyst at Gartner. “Enterprises must respond immediately in order to build the right business and IT road map for future market demands.”

November 2013 Canadian Underwriter

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PROFILE

All Business Greg Meckbach Associate Editor

Brooke Hunter, incoming president of the Toronto Insurance Conference (TIC), advises commercial brokers not to limit themselves to just selling insurance. A key TIC objective is to ensure member brokerage firms are well-informed on issues affecting the industry. Although commercial brokers sell insurance, Brooke Hunter, next in line to take the helm of the Toronto Insurance Conference (TIC), places special emphasis on understanding her clients’ businesses and providing them with advice. “I believe we are business people first,” says Hunter. “We are insurance people second. I believe that the value that we add is business advice with a risk and insurance lens, and those brokers that choose to limit themselves to just selling insurance do so at their own peril.” Hunter, president and chief executive officer of Toronto-

10 Canadian Underwriter November 2013

based Hunters International Insurance, is scheduled to take over from Steve Hawkins as president of the TIC, an association of Ontario commercial brokerages, in March 2014. Before founding her company in 2005, Hunter worked at a variety of brokerages, including Hunter Keilty Muntz & Beatty (HKMB) — now known as Hub International HKMB — where she was managing partner from 1999 until 2004. Hunter has also worked at Sedgwick Group, acquired by Marsh & McLennan Companies Inc. in 1998, and Jardine Lloyd Thompson (JLT). Part of the fifth generation of a Toronto insurance family, she had a formative experience working for JLT in the early 1990s, when she had an opportunity to spend an entire week working at a fish farm. “I got to see, up close and personal, how the aquaculture business worked,” Hunter recalls. “I get to see all sorts of businesses from deep inside. I think that’s very exciting. I found it very exciting then. I still do,” she says. Today, Hunters International Insurance’s services include liability insurance audits for directors, officers and trustees. The firm also provides a wide range of individual and business coverage, such as property, business interruption, kidnap and ransom, marine

and boiler and machinery. “When I chose to start Hunters, I chose to start with management liability and directors’ and officers’ liability, because I was professionally very comfortable with it,” she says. “When I started in the business, I was actually doing construction, but I have been in the business a long time and your expertise evolves with time.” Hunter has been on TIC’s

“Our (TIC) members are the front line of commercial insurance and we want to make sure that they are as well-informed as possible, so that they can deal with the inquiries from (their) commercial clients,” Hunter says. board since 2009 and is currently first vice-president. Hunters International Insurance is one of 22 full members of TIC, whose high-profile events each year include a golf tournament in June and a black tie dinner in November. TIC also advocates on behalf of brokers and works with industry associations, such as Insurance Brokers Association of Canada, Insurance Brokers

Association of Ontario (IBAO), Registered Insurance Brokers of Ontario and Insurance Bureau of Canada (IBC).

KEEPING MEMBERS WELL-INFORMED One of TIC’s aims is to ensure its members are well-informed on key issues, including those relating to earthquake risk and municipal infrastructure. Hunter cites as an example the Municipal Risk Assessment Tool (MRAT), a web-based application under development by IBC. MRAT is intended to provide a visual representation of municipal risk zones, such as weak spots in infrastructure, by predicting the probability that a piece of infrastructure will fail and displaying it on a map. “Our (TIC) members are the front line of commercial insurance and we want to make sure that they are as well-informed as possible, so that they can deal with the inquiries from (their) commercial clients,” Hunter says. She made her comments shortly following the CEO Panel discussion at the recent IBAO Convention in Toronto. One issue up for discussion during the panel was property damage from severe weather. Panelists referred to statistics on long-term temperature increases in Canada and to property damage from disasters earlier this year in the Toronto

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PROFILE

and pricing,” she reports. TIC officials are watching the issue with interest. “As commercial brokers, we have got to watch the water question. The water question is not just flood, and it’s not just sewer back-up. It’s the broad water risk. I do think, ultimately, that we are going to have to see the government have a role to play in flood insurance, definitely in the residential space and possibly in the commercial space, depending on how hard that market gets and the effect of updated floodplain mapping,”Hunter says.

Photo: Patrick Thompson

PROTECTING CLIENTS

area and in southern Alberta. The latter is Canada’s costliest natural disaster to date, with insurable losses estimated at more than $1.7 billion. The fourth most expensive disaster in terms of insured losses occurred less than a month later when, on July 8, the Toronto area received about a month’s worth of rain in one day. The

latest estimate of insured losses is about $940 million. Events such as these are raising awareness among commercial clients, suggests Hunter. “We are already seeing, in the marketplace, some change in the terms and conditions for commercial flood insurance both in terms of capacity, retention

Beyond monitoring developments in flood coverage, TIC has also worked with carriers on an endorsement for commercial insurance policies that either extends the term of a policy — or suspends the notice period for a pending cancellation — in the event of a public emergency. That endorsement — which was approved by IBC and is used by many insurers — is intended to ensure clients are not left without coverage because their phone or Internet service was down, and that brokers do not face errors and omissions exposures in such cases. Not all insurers include that endorsement on every policy they issue, so TIC is now working on a Declaration of Emergency Agreement.

“We understand that some insurers may have trouble putting this endorsement on every single one of their policies,” Hunter acknowledges. The TIC is currently working with insurers in Canada to get the majority of them to sign the agreement.

ATTRACTING YOUTH Another TIC initiative is a university scholarship program introduced this year. TIC plans to offer three $5,000 scholarships annually to relatives of TIC brokers, partners and staff. In October, Hawkins presented the first set of scholarships at an industry breakfast in Toronto. “The broader purpose was to expose young people to career opportunities,” Hunter says of the scholarship program, which she calls an exciting TIC initiative. TIC selects the scholars based on several factors, such as academic excellence throughout high school and first year of post-secondary education, financial need, and contributions to school and community. “It is nice that the scholarship does help some merited individuals.” The program is intended for students entering second year of a full-time Canadian university undergraduate degree program with a concentration in business, finance or insurance.

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Water, Water Everywhere

Opinion/Analysis

Mary Kelly

Anne Kleffner

Associate Professor, Risk Management and Insurance, University of Calgary

Fundamentally, water damage is not a peril ideally suited to be insured. That said, with the cost of water damage high and rising, the creation of a sustainable insurance coverage model requires the co-operation of insurers, personal property owners, reinsurers, regulators and governments. The summer of 2013 is likely to be remembered for the devastating flooding in both southern Alberta and the Toronto area. Urban flooding in Toronto was the most costly natural disaster in Ontario (insured loss estimates in August were pegged at $850 million, while the city estimates it will spend $60.9 million on repairs). Indeed, the events of this summer, and those from past years, serve as a reminder that water damage has surpassed fire as the number one cause of personal property insurance claims.The cost associated with water damage is significant, both for insurers and for government.

COVERAGE FOR WATER DAMAGE

Norma Nielson

Professor, Chair in Insurance and Risk Management, University of Calgary

The extent to which water damage losses are covered ultimately depends on the type of property and the cause. Overland water that enters a building through doors, windows or cracks from either an overflowing body of water or from urban flooding is covered, but that is not the case for personal property. For residential property, a typical water damage endorsement covers damage caused by water or sewage that enters

12 Canadian Underwriter November 2013

the home through inside drains and sump pumps. In Toronto, most of the damage in July was insured as it was caused by sewer back-up. Many insurers also covered losses arising from seepage into basements, perhaps because of the small size of these claims or the fear of negative publicity. Overall, the settling of these claims was relatively straightforward. However, in southern Alberta, storm water and snowmelt led to swollen and overflowing rivers, resulting in damage caused by overland flooding, sewer back-up and sewer back-up caused by flood. The first is not covered by insurance, the second is covered if an endorsement is purchased, and the third is covered depending on the wording of the endorsement. As insurers in Alberta quickly learned, paying or denying claims depending on the source of sewer back-up and apportioning damage between sewer back-up and overland flood was fraught with difficulty. Covering some or no water damage might lead to lower loss payments, but at the expense of higher loss adjustment costs and significant loss in reputation.

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The expectation of claimants that water damage be insurable — combined with the increasing cost of water damage claims and the implications of climate change for increased frequency and severity of storm events — has resulted in the perfect storm for insurers. There is increased pressure for insurers to go beyond the status quo and offer better water damage coverage. Clearly, it is time to discuss how to mitigate water damage losses, increase policyholder and taxpayer satisfaction, and reduce the total cost to society.

PROTECTING AGAINST WATER DAMAGE Need to involve all parties Fundamentally, water damage is not a peril ideally suited to be insured: offering coverage always involves significant adverse selection both for riverine and urban flooding; the losses can be catastrophic; and climate change, out-of-date floodplain maps, aging infrastructure and urban growth make accurate pricing difficult. The concurrent nature of overland flood and sewer back-up losses will always lead to difficult claims settlement, an expensive adjustment process and the potential for reputational damage.

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These challenges must be overcome for the private insurance market to consider expanding coverage to include a more comprehensive form of water damage coverage. Furthermore, simply legislating insurers to expand coverage is not a solution. If offering more comprehensive protection against water damage were feasible today, the competitive industry would already be offering said product. The creation of a sustainable insurance coverage model for expanded water damage requires the co-operation of insurers, personal property owners, reinsurers, regulators and governments.

Determining viability The viability of insuring water damage depends on three critical issues: the role of property owners, urban planners and governments in mitigating water losses; the contract written between the homeowner and the insurer; and the role of insurers, reinsurers and governments in diversifying and sharing risk. First, insurance requires commitment and investment by government and policymakers. Provincial laws and policies regarding land use, as well as the implementation of those policies by municipalities, play an instrumental role in

mitigation. Infrastructure support and maintenance is critical in reducing urban flood losses. In addition, property owners have a key role to play in mitigating water damage losses. Below are some examples of activities that will reduce the impact and cost of flood risk. • Incentives for property owners to mitigate against water damage: Overland flood losses can be reduced by raising the elevation of homes in floodplains and not allowing development of living spaces in basements. Storm water damage is reduced when homeowners install backwater valves, correct the grading on their property, maintain eavestroughs and downspouts, install sump pumps and disconnect downspouts from municipal sewer systems. • Renewed support for provincial flood damage reduction programs: These programs build capacity for local governments to manage and mitigate flood risk. New floodplain maps should be created, future building in floodplain areas should not be allowed, and there should be funding available to mitigate against water loss for the inventory of buildings existing on floodplains. • Implementation of key mitigation activities for municipalities in reducing urban flood damage: Recommendations from the Institute for Catastrophic Loss Reduction include reducing infiltration and inflow in municipal sanitary sewer systems, increasing system capacity, separating storm water and sanitary waste sewer systems, and articulating overland flow routes.

Developing an appropriate contract The second important issue is the insurance contract itself. Policies that pay losses contingent on the underlying peril are not a practical solution when perils are concurrent. Similar challenges have arisen with flooding and wind losses from Hurricane Katrina and landslide and fire losses in California. A reasonable alternative is to bundle overland flooding with other perils —

such as hail, rain, ice and wind — which can occur concurrently and lead to damage. It is important that the multi-peril coverage be actuarially priced because this will reduce moral hazard, promote informed decision-making and allow for incentives for mitigation. To improve affordability for high-risk homeowners, the insurance contract may include provisions such as high deductibles or coverage limits. Additional coverage could potentially be offered through an endorsement to those who need higher limits. Pricing the new coverage presents some challenges because better data and analytics are needed to forecast water damage. Currently, no national data are available that track damage from urban flooding.

high-risk insureds (similar to the Facility Association that exists for high-risk drivers in the private auto insurance market). In the case of true catastrophic losses, as the norm in other countries that offer personal flood coverage, the government has a role as the insurer of last resort.

BEYOND THE STATUS QUO The feasibility of broader water damage

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These challenges must be overcome for the private insurance market to consider expanding coverage to include a more comprehensive form of water damage coverage. Furthermore, simply legislating insurers to expand coverage is not a solution. Accurate pricing also requires updated floodplain maps that reflect climate change, urban development and aging infrastructure. Lastly, even with mitigation activities and limits on coverage, insurers still face adverse selection and the possibility of catastrophic losses. One solution to the adverse selection problem is to broaden the base of policyholders — for example, mortgage standards that require the purchase of flood insurance. To protect against catastrophic losses, insurers must have opportunities to diversify and share the risk. Two options to help achieve this include traditional reinsurance (with the caveat that the price of reinsurance must be such that homeowners can afford the primary coverage) and risk-sharing pools for

coverage by private insurers is contingent upon the co-operation and commitment of all stakeholders. Unquestionably, the redesign of insurance contracts and the existence of risk-sharing mechanisms alone cannot manage or even finance flood risk. Insurance solutions must be paired with efforts to mitigate water damage at the individual, municipal, provincial and federal levels.

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Compatible and

Consistent

eDocs is the first business activity to be available for certification under the Centre for Study of Insurance Operations’ new national certification program. While the eDocs standard is meant to save time and money for brokers and insurers alike, certification is expected to enhance those efficiencies.

Hans Gantzkow Senior Architect and Analyst, Centre for Study of Insurance Operations

It is a reality in any industry — but especially in insurance — that data compatibility issues are inevitable when organizations attempt to integrate proprietary solutions that are not based on standards. CSIO Certification is a national program designed to reduce these compatibility challenges by promoting the use of trusted and interoperable solutions in the broker channel. Certification will ensure that standards-based solutions are uniformly applied across the country. eDocs is the first business activity available for certification. The CSIO eDocs standard offers many benefits to the broker channel, including increasing the efficiency of the channel by automating the sending and receiving of electronic documents. It is particularly important to certify eDocs because the standard saves time, money and paper for brokers and insurers. It is believed that consistent implementations of eDocs will help the broker channel save even more. “Before eDocs, we did the document-capture process manually with multiple companies, and we could see the significant amount of time that took,” says Karen Gale, IT manager at Allen

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Insurance Group, a brokerage with multiple locations in Ontario. “But once we implemented eDocs, that capture process became automatic and we saved a couple of hours a day per company by no longer collecting documents from their portals,” Gale says. “The availability of electronic copies of dec pages in your system gives you substantial time savings when speaking to clients because you have automatic access to those documents. I would say that eDocs is the best technology advancement there has been in the P&C (property and casualty) industry in 18 years — that’s as long as I’ve been working at Allen Insurance,” she continues. However, the true potential of standards like eDocs can only be achieved with consistent implementations between vendors and insurers. For example, an insurer sending eDocs in its own proprietary manner will face challenges when it decides to integrate with a new broker management system (BMS) vendor.That vendor will likely be set up to receive eDocs in another manner, so the integration work will have to start from scratch.

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Obtaining certification can improve the overall performance of an organization’s insurance information technology solution. In going through the certification process, it is possible that small errors or inconsistencies in a vendor’s or insurer’s method of transferring eDocs could be identified.

But if both parties have been CSIO Certified for eDocs, the integration will be simplified and they can start sending and receiving eDocs much more quickly. In October, Northbridge Insurance became the first insurance company to obtain CSIO Certification for eDocs. “Being part of the eDocs standard creates operational and cost efficiencies for our broker partners by allowing them to download all their Northbridge Insurance policy documents from one place, instantly,” says Dave De Kuyper, executive vice president, market management at Northbridge.

CERTIFICATION BENEFITS CSIO Certification allows users to communicate or market to customers, members, insurers, distributors and trading partners that their organization’s applications follow industry-recognized CSIO standards, which can help to minimize potential technical challenges and costly errors. By obtaining certification for eDocs, companies will be able to definitively state that their eDocs solutions will seamlessly integrate with all other trading partners who have also obtained certification. This provides a marketing opportunity for companies to promote their technology solution even more persuasively. Being able to associate CSIO Certification with an organization’s specific solution sends a strong message to the marketplace that that organization is committed to the most efficient implementation of eDocs.

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Obtaining certification can improve the overall performance of an organization’s insurance information technology solution. For example, in going through the certification process, it is possible that small errors or inconsistencies in a vendor’s or insurer’s method of transferring eDocs could be identified.These inconsistencies may have otherwise gone unnoticed, and by correcting them, the vendor or insurer will maximize the performance of its solution. Obtaining certification is designed to confer long-time benefits since it ensures that an organization’s certified solution will maintain alignment with future iterations of the eDocs standard. By reviewing the certification criteria with the standards experts at CSIO, an organization will gain awareness of alternate eDocs implementation methods that could have otherwise been overlooked.These alternate methods could, if implemented, result in a better user experience and more stable version of the organization’s eDocs solution. It should also be acknowledged that obtaining an industry-recognized certification provides buyers of an insurance information technology solution with additional peace of mind. Brokers who purchase a vendor’s BMS product will receive a solution that is guaranteed to effectively transmit eDocs. The broker will then be able to quickly and efficiently do business with multiple insurers, providing customers with the highest level of service.

APPLYING FOR CERTIFICATION The CSIO Certification process is thorough and accurate, but it is not onerous or taxing. For the program, CSIO analyzed what other countries and industries have done in the certification space and developed a model where rigor meets accessibility. “We’re proud to be the first insurer in Canada to be certified for eDocs as we introduce the solution to select broker partners. The certification process was thorough, straightforward and well worth the investment. We are sure our broker partners will see the value of this innovative solution,” comments De Kuyper. CSIO offers full support from its standards experts throughout the certification process and test cases are provided to applicants up front. The CSIO Certification section on CSIO.com offers a description of the certification process, a certification FAQ page, a listing of who has already achieved certification and details on how to apply. After obtaining certification, insurers and vendors will receive access to the branding materials that have been created specifically for the program, including the CSIO Certification Mark and its associated styling guide. The mark can then be used in various communications materials, such as articles, brochures, videos and website pages to visually inform all industry stakeholders that an organization’s eDocs solution has successfully met CSIO’s certification criteria.

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k n g i ha SFoundations Angela Stelmakowich Editor

There may be no way to predict when and where a major earthquake will hit in Canada — although British Columbia and the Ottawa to Quebec City corridor are as likely targets as any. But as it stands, the insurance industry (and maybe the country) is ill-prepared for such an event. The Insurance Bureau of Canada (IBC) has released a study conducted by AIR Worldwide that has painted an unsettling picture of the insurance industry’s preparedness for “the next big one.” Findings of modelled scenarios of a 9.0magnitude earthquake off the west coast of Vancouver Island and a 7.1-magnitude quake about 100 kilometres northeast of Quebec City are clear: Canada is not prepared to handle a major earthquake, the resulting economic and insured costs of which would be significant. By significant, catastrophe modelling firm AIR Worldwide notes in its report, commissioned by IBC, that for the western scenario, economic

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losses would be approximately $74.7 billion and insured losses about $20.4 billion. For the eastern scenario, those losses are estimated at $60.6 billion and $12.2 billion, respectively. The report notes that both scenarios are attributable to established seismic sources and similar to quakes known to have taken place in the past. “Although these two seismic source zones cover only a small fraction of Canada by area, they impact about 40% of the national population,” states the peer-reviewed analysis, released October 29. IBC notes that the scenarios — described as a hypothetical exercise rather than a prediction of future events — demonstrate the pressing need for a national strategy on earthquake response.

LONG REACH OF A MAJOR QUAKE “Earthquakes of the magnitude modelled are lowfrequency events in these locations, considered to have a 0.2% probability of occurring in any one year, but sufficiently threatening and devastating to warrant prudent planning and preparation now,” the report notes. A study published this spring in the Canadian Journal of Earth Sciences dated the disturbances in sedimentary layers off the B.C. southern coast over the last 11,000 years, identifying 22 earthquake shaking events. “Even though it could be

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tomorrow or perhaps even centuries before it occurs, paleoseismic studies such as this one can help us understand the nature and frequency of rupture along the Cascadia subduction zone, and help Canadian coastal communities to improve their hazard assessments and emergency preparedness plans,” Audrey Dallimore, an associate professor at Royal Roads University and one of the authors of the study, said at the time. “The risk of a major earthquake affects us all, not just those living in high-risk areas,” IBC president and CEO Don Forgeron says in a statement. “Events of this magnitude have a domino effect on the Canadian economy triggered by property damage, supply chain interruption, loss of services, infrastructure failure and business interruption.” The AIR Worldwide report provides estimates of insured losses by peril: • western scenario — shake, approximately $17.1 billion; tsunami, about $1.1 billion; fire following the event, $337 million; and liquefaction and landslide, about $1.9 billion. • eastern scenario — shake, about $11.5 billion; fire following event, approximately $628 million; and liquefaction and landslide, $56 million. With regard to economic losses, for the western scenario, the perils of shake, tsunami, fire following event and liquefaction and landslide would produce direct loss of about $58.6 billion for property, about $1.9 billion for infrastructure and about $1.5 billion for public assets.The total direct loss would be around $62.0 billion, while indirect loss is pegged at about $12.7 billion. For the eastern scenario, the perils of shake, fire following event and liquefaction and landslide would produce direct loss of about $45.9 billion for property, almost $2.0 billion for infrastructure and about $1.4 billion for public assets.The total direct loss would be approximately $49.3 billion, while indirect loss is estimated at about $11.3 billion. Speaking in advance of the report’s official release, Gregor Robinson, IBC’s chief economist and senior vice president of policy, said during the National Insurance Conference of Canada in Gatineau,

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Quebec that shaking would account for 82% of total direct losses from the event in the western scenario, and for 98% of direct losses in the eastern scenario. Overall, Robinson said, such an event would also have an extreme impact on supply chains and the overall Canadian economy, as roads, pipelines and airports would all be affected. Canada’s Office of the Superintendent of Financial Institutions (OSFI) released the final revised version of its Earthquake Exposure Sound Practices Guideline (Guideline B-9) in late February. The guideline, which takes effect in January 2014, is meant to, among other things, strengthen the principles-based approach to manag-

“Recent experience has shown that risk such as tsunami, liquefaction and business interruption may not have been fully understood or taken into consideration when assessing earthquake risk in the past,” the report states. ing earthquake exposure; update the description of best practices in earthquake exposure management; and spell out the Minimum Capital Test Guideline. “The revised guideline will help Canadian insurance companies continue to be well-prepared for the financial consequences if a major earthquake were to occur in Canada,” Mark Zelmer, assistant superintendent of OSFI’s regulation sector, noted in a letter at the time.

CALL FOR COLLABORATION Things have changed — as has understanding of the potential impact of a major earthquake — since Munich Re released the last study on the economic impact of an earthquake in Canada more than 20 years ago, notes AIR Worldwide. Among these changes, the report cites urban and infrastructure development, economic and population growth, advances in earthquake research and building codes, as well as legislative changes. “Furthermore, recent experience has

shown that risk such as tsunami, liquefaction and business interruption may not have been fully understood or taken into consideration when assessing earthquake risk in the past,” the report states. “Insurers, governments and all Canadians have a responsibility to prepare,” Forgeron says. “If a mega-earthquake should strike in a densely populated area, insurance alone will not pay for all the damage,” he emphasizes. On a more positive note, study findings indicate that mitigation — such as more resilient buildings and infrastructure — “can further reduce economic losses by a third or more.That’s why we are calling for an integrated preparatory approach to the earthquake threat,” says Forgeron. Figures in the report related to indirect losses to infrastructure for the eastern scenario, for example, show that airports disruption would result in indirect loss (without resilience) of $32 million, $163 million for sea ports disruption, $61 million for roads disruption and $97 million for railroads disruption. However, it adds that indirect loss (with resilience) would change those figures to $16 million, $82 million, $11 million and $36 million, respectively. Jayanta Guin, senior vice president of AIR Worldwide, notes that as a result of its collaboration with IBC, its “updated Canadian earthquake model provides the most complete view of seismic risk to residential, commercial and industrial properties and infrastructure.” The model, set for release in 2014, will include fire spread risk, updated models for tsunami and liquefaction, and an earthquake-triggered landslide model. AIR Worldwide notes that study findings are “intended to raise awareness and to serve as a valuable tool for the insurance industry, government agencies, regulators, disaster preparedness organizations and the public in planning for, and mitigating, the risk from future earthquakes in Canada.” In that vein, Forgeron says that the research “will be shared with governments, regulators, disaster preparedness organizations, the banking community, the insurance industry and the public.”

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The Wawanesa Mutual Insurance Company announces the following recent appointments:

Tracy Riley, CIP, NPDP as Vice President, Insurance Products

Andrea Sherry, FCIA, FCAS, CMA, FCIP, CRM, as Vice President, Actuarial Pricing

Mark Struck, FCAS, FCIA, MAAA as Vice President, Enterprise Risk Management

Tracy Riley, CIP, NPDP as Vice President, Insurance Products is responsible for developing and maintaining products and underwriting policies for all regions of the Company. Ms. Riley joined Wawanesa in 2001 bringing with her a number of years of brokerage experience. Over the years, she has held several roles of increasing responsibility including Underwriter, Business Analyst and Operational Auditor. In 2005, Ms. Riley joined the Property Underwriting Department as an Underwriting Specialist, in 2010 she was appointed Manager, Property Products and in 2012 she was appointed Director, Property Products, a role she has held until the present time.

Andrea Sherry, FCIA, FCAS, CMA, FCIP, CRM, as Vice President, Actuarial Pricing is responsible for overseeing the actuarial pricing process for the organization while working with our internal and external stakeholders. Ms. Sherry brings over 20 years of experience in the industry where she has held several senior management positions in the corporate actuarial and pricing functions.

Mark Struck, FCAS, FCIA, MAAA as Vice President, Enterprise Risk Management is responsible for the development and management of an enterprise wide program designed to address insurance, ϐ ǡ risks within the organization.

Ms. Riley holds a Diploma in Business Administration from Red River College with an Accounting major. She has earned her Chartered Insurance Professional (CIP) and New Product Development Professional (NPDP) designations.

Ms. Sherry holds a Bachelor of Commerce degree (Honours) from the University of Manitoba, and has achieved her fellowship designation in both the Casualty Actuarial Society and the Canadian Institute of Actuaries. As well, she has earned her ϐ (CMA), Fellow Chartered Insurance Professional (FCIP) and Chartered Risk Manager (CRM) designations. In January 2011, Ms. Sherry joined the organization as Manager, Actuarial Pricing - Automobile and in 2012 was appointed Director, Actuarial Pricing.

Mr. Struck holds a Bachelor of Commerce (Honours) degree from the University of Manitoba and joined Wawanesa in 1999 after a period with a major life company in New York. Over the years Mr. Struck has assumed roles of increasing responsibility in the organization and was appointed Manager Actuarial Services in 2004. The following year Mr. Struck achieved his fellowship designation in the Casualty Actuarial Society and currently also holds fellowship in the Canadian Institute of Actuaries and membership in the American Academy of Actuaries. In 2010 Mr. Struck was appointed Director, Enterprise Risk Management.

The Wawanesa, established in 1896, is a Canadian-owned leader in the insurance industry. The Company conducts business throughout Canada, California and Oregon and has combined assets of over $7 billion and annual premiums exceeding $2 billion.

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Spotlighting Underwriting Fraud

Executive Lead, Enterprise Risk Manager, SAS Canada

Fraud is a major issue for all insurance companies. Although measuring fraud precisely continues to be difficult, the Insurance Bureau of Canada estimates the cost of insurance fraud to the Canadian economy to be more than a billion dollars a year.What’s more, the insurance industry estimates that 15% of what consumers pay for insurance ends up covering fraudulent insurance claims alone. To combat this issue, the current focus of most insurance companies has been on detecting and preventing claims fraud, yet a significant amount of insurance fraud is associated with underwriting fraud.

24 Canadian Underwriter November 2013

Underwriting fraud occurs when someone intentionally conceals or misrepresents information at any stage of the policy life cycle when obtaining insurance coverage. It affects most lines of business, especially commercial auto insurance, workers’ compensation, property and even life insurance. As perpetrators of fraud are becoming more sophisticated, the need to be proactive and identify fraud before the policy is issued as part of the underwriting process has never been more critical.Yet the call for a greater focus on underwriting fraud still lags when compared to other types of fraud.

A CLOSER LOOK AT UNDERWRITING FRAUD Application fraud Insurance carriers are competing for business like never before, with consumers demanding more options, such as the ability to get quotes, buy and manage policies directly, including via mobile devices. Competition and mobility have resulted in insurance companies implementing “straight-through underwriting processing” projects that limit the amount of due diligence undertaken before a policy is written. Savvy fraudsters are sitting on the sidelines, ready to take advantage of this vulnerability,

Illustration by Tomio Nitto/reactorart.com

Wes Gill

Efforts to combat underwriting fraud continue to lag measures focused on other types of fraud. But as perpetrators become more sophisticated, it is increasingly critical to identify fraud before a policy is issued as part of the underwriting process.

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clearly aware that insurance companies are under pressure to increase premium revenue and, as such, do not always check all the application details for accuracy or inconsistencies. Application fraud runs the gamut — applicants can withhold personal information such as social insurance numbers, maiden names or prior addresses to prevent effective searching for previous claims or credit histories. Additionally, everyday consumers are becoming much savvier in their understanding of how to successfully cheat when applying for insurance, as more and more applicants misrepresent details to reduce rates. Many people think that insurance fraud is a victimless crime, but the reality is that consumers are victims. Insurance fraud has a direct impact on the amount everyone pays for health, auto, homeowner’s and life insurance. Typical rate falsification techniques include the following: • fronting — where a parent states that he or she is the primary driver of a vehicle, instead of the child, to reduce the premium; • garage flipping — changing the address where the vehicle is most used, such as someone with two homes using a rural address instead of a city address, where the car is actually stored and used; and • manipulation — changing rating factors such as miles driven, the age of the primary driver and even education levels to reduce the premium.

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To address the problems with application fraud, insurance carriers are using application pre-fill tools and analytics to model fraudulent behaviour. Through application pre-fill technology, with as little information as a telephone number, policy-level data can be populated. This includes location, coverage limits and deductibles, current in-force details and payment and lapse information. By integrating these pre-fill technologies with real-time, anti-fraud analytics tools, insurers can track changes in online application data. If certain rules or combinations of rules are triggered, then the carriers are alerted and can intervene immediately to potentially deny the policy.

A little white lie: rate evasion Rate evasion or data misrepresentation is the most widespread form of underwriting fraud. It is also the most undetected. Whether it is an undisclosed driver on a car insurance application or not reporting a history of smoking for life insurance, data misrepresentation is defined as deliberate hiding or falsification of a material fact. To deter rate evasion, it is critical to address the issue in real time throughout the quotation process. Insurers must ensure that information is correct at the point of sale and continue to update information through the life of the policy. Accurate information and data is key, as it is the basis for finding transactions that indicate rate evasion.

To combat rate evasion, insurance companies are using advanced analytics to create a premium leakage predictive model that instantly scores applications for relative risk to predict the likelihood of fraud. Many have implemented an enterprise data warehouse across all lines of business in order to aggregate data and potentially find interrelated information and transactions.

TRUTH IN TELEMATICS As the popularity and use of telematics grows, it is expected that the industry should see a fall in instances of rate evasion in auto insurance. Customer data provided through these devices are turning car insurance bills from a static monthly figure into something variable — the less safe the customer’s driving habits, the higher the cost. Data from these wireless devices will provide a strong platform to help eliminate misrepresentation — providing insurers with real data on annual mileage, vehicle location, etc.

BEWARE OF THE GHOST BROKER Another emerging trend, known as ghost brokering, is also gaining in popularity. A ghost broker will offer significantly cheaper insurance rates than a legitimate insurance broker by changing key details of the policy to ensure the insured pays lower premiums. More often, the ghost broker applies for genuine insurance and alters specific details, changing anything that might have a

negative impact on the quote, including residency status or claims history. This leaves the customer with an invalid policy. In some cases, the broker takes out a policy and then cancels it once the insurance certificate has been issued, leaving the customer uninsured and holding a policy that is not worth the paper on which it is written. These ghost brokers operate through small ads or websites and offer cheap insurance.They often target people who may think it is hard to get insurance, such as those on tight budgets, like students, or those whose native language is not English or French. Data analytics is used to look at triggers or characteristics of an application that suggest ghost brokering is taking place. It can be done by deploying statistical analysis and cross referencing information, such as date of birth, driver’s licence information and past histories of activities with industry databases to look for misrepresentation.

SPOTTING RED FLAGS Traditional underwriting operates using rules-based models that produce various “red flags” during the underwriting process to indicate the need for additional research or follow-up.This model,

Integrating pre-fill technologies with real-time analytics tools helps insurers track changes in online application data. If certain rules or combinations of rules are triggered, carriers are alerted and can intervene immediately to potentially deny the policy. for the most part, relies on the judgment and expertise of the underwriters alone. Couple this with the fact that insurers are being forced to cut expenses, perhaps leaving little time to check application

details for completeness and accuracy, and that it is a fiercely competitive market where a consumer’s main criteria for choosing an insurer is often based on price. The net result is an environment ripe for underwriting fraud. To ensure rating integrity and to prevent premium leakage, insurers need to implement analytics technologies and conduct sophisticated data analysis in real time. Precise detection can only be realized through the creation of an overall picture of the probability of fraud so that action can be taken during the underwriting process. As today’s insurers look to develop new strategies for employing advanced technology to detect and prevent the various types of underwriting fraud, capturing customer data in real time, using predictive modelling, creating special investigative units and integrating insurance data warehouses need to be among the techniques deployed.

BROKERS – looking for markets for your specialty, niche and non-standard risks? Find them in the Insurance Marketer! www.insurancemarketer.com We’ve got you covered in the… Published annually in July by Canadian Underwriter magazine, the extremely popular Insurance Marketer is used daily by brokers across Canada. Both in-print and online at InsuranceMarketer.com, the Insurance Marketer is The Source to assist you in finding a market for even the most unique risk!

Published by:

November 2013 Canadian Underwriter

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Eyeing Nuclear Liability Greg Meckbach Associate Editor

The federal government plans to introduce legislation that will increase the mandated liability coverage for nuclear operators from $75 million to $1 billion. These new requirements may also include a limitation period of as long as 30 years. A proposal announced by Joe Oliver, federal minister of natural resources, to increase the liability insurance coverage mandated for nuclear reactor operators from $75 million to $1 billion should not affect the availability of coverage for the nuclear industry, insurance experts suggest. Oliver promised June 10 to table legislation to increase — from 10 years to 30 — the limitation period for submitting compensation claims for bodily injury under the Nuclear Liability Act (NLA). But that longer limitation period has not been carved in stone, with some predicting the existing 10-year timeframe may remain in place. If passed into law, the requirements being con-

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templated would make several changes to the NLA, which currently stipulates that nuclear operators are “without proof of fault or negligence, absolutely liable” for breaches of duties imposed by the NLA. As it stands, one of those duties is to ensure “that no injury to any other person or damage to any property of any other person is occasioned as a result of the fissionable or radioactive properties, or a combination of any of those properties with toxic, explosive or other hazardous properties, of nuclear material,” which is in their installations. Operators subject to the NLA include nuclear power plants, nuclear research reactors, fuel processing plants and facilities for managing used nuclear fuel.They are currently required to have basic liability insurance of at least $75 million for each nuclear installation, an amount that has not changed since 1976. Although the federal government has not committed to tabling a bill by a specific date, Oliver has provided a fair amount of detail on what the new legislation is expected to contain. “The legislation would maintain the key principle of ‘absolute liability,’” a backgrounder from Natural Resources Canada states. “Another important principle of the legislation is ‘exclusive liability of the operator,’ which means that the operator alone is liable, to the exclusion of others such as suppliers and contractors.” The strict liability provision does not apply to “a direct result of an act of armed conflict” during a war, invasion or insurrection. A full coverage limit of $1 billion would be available throughout the world pooling system for nuclear liability insurance in Canada, says Colleen DeMerchant, general manager of the

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Nuclear Insurance Association of Canada (NIAC), a non-profit association of insurers. Through NIAC, nuclear reactor operators purchase both liability and first-party property insurance. Asked whether or not some operators subject to NLA would have to seek coverage outside of Canada, DeMerchant replied, “No, they would not.They would be able to access their capacity through Canada through the Nuclear Insurance Association of Canada, as is done now.” Coverage would still be available for Canadian operators, but an increase to $1 billion could affect premiums, suggests Gary Hirst, national director at Burns & Wilcox Canada, a Farmington Hills, Michigan-based brokerage that uses the Lloyd’s market to provide coverage for nuclear risk. “I think there would be availability of market,” Hirst comments. “I do believe that is mainly driven by price, so the larger the liability limit, the higher the premium.” Worldwide, much of the nuclear insurance coverage is provided by pools such as NIAC, which were created in the 1950s to cover nuclear property and liability risks. Insurers usually protect their solvency by excluding nuclear peril, suggests a handbook on nuclear accident compensation published by the London-based Nuclear Pools’ Secretariat. In countries that use commercial nuclear power production, generally the insurers of that country voluntarily provide capacity to the pools of which they are members, and those pools generally underwrite the nuclear operators’ coverage. In Canada, says DeMerchant, NIAC’s insurers put forth their net line. “They cannot cede it away, but if it’s in a family of insurers, if they can have a primary company and a reinsurance company and the primary company has the reinsurer back them up — that is permitted, because that is still on the net line basis.” That way, “We know exactly how much money is in this pool.” NIAC, comprised of 16 companies, currently provides 92% of the Canadian market for the $75-million liability coverage required by the NLA, she says. Other countries mandate much higher

Page 29

limits. For example, as of 2012, operator insurance requirements in Japan were $1.5 billion, notes the Fall 2012 report of Canada’s Commissioner of the Environment and Sustainable Development, an assistant Auditor General of Canada who issues reports to Parliament. In the United States, there is almost $12 billion available from two tiers of liability coverage, adds information from the U.S. Nuclear Regulatory Commission.

LONGER TIMEFRAME Beyond increasing the required liability coverage, the Canadian government also indicated in June that the proposed legislation would increase from 10 to 30

“How does the government think that they are going to go about collecting the evidence, preserving that evidence, so that it’s still meaningful in 30 years time, if and when there is a court case?” years the limitation period for submitting compensation claims for bodily injury. The intent, information from Natural Resources Canada states, is “to address latent illnesses — such as certain forms of cancer detected more than 10 years after an incident.” It is not clear what effect this longer timeframe would have on the insurance industry. “The insurers are currently limited to a 10-year prescription period and we feel that this is unlikely to change,” DeMerchant says. When asked if nuclear operators — and not the government — would be liable for bodily injury claims submitted more than 10 years following an incident, if the new legislation is passed into law, a spokesperson for Natural Resources Canada replied in an e-mail: “The operator would be liable for bodily injury claims after 10 years (up to 30 years). The minister’s June 10, 2013 announcement indicated that the government would still provide cover for

certain risks for which there is no liability insurance. The details and extent of this coverage will be considered once the bill is introduced into Parliament.” Hirst suggests that the bill should include provisions on collecting and preserving evidence, such as video footage and maintenance records. “How does the government think that they are going to go about collecting the evidence, preserving that evidence, so that it’s still meaningful in 30 years time, if and when there is a court case?” he asks. One example of a nuclear incident south of the border indicates how claims cost could arise. On March 28, 1979, a failure at the Three Mile Island nuclear power plant led to a partial meltdown, notes information from the U.S. Nuclear Regulatory Commission. Pennsylvania’s governor at that time advised that pregnant women and preschool-age children within a five-mile radius of the plant should leave the area. Compensation claims included living expenses, lost wages, economic losses and court fees. As of 2012, the pools had paid about US$71 million in claims and litigation costs, the commission reports. A more recent example was the nuclear incident following the March 11, 2011 earthquake off the coast of Japan, which caused an 11-metre-high tsunami to hit the Fukushima Daiichi nuclear power plant, leading to a contamination leak. “There are all sorts of different ways that contamination can manifest itself and, unfortunately, that contamination does appear to last a number of years,” says Hirst. “There’s still debris being washed up on beaches from Japan.” That said, he emphasizes that nuclear facilities tend to be built to withstand natural hazards and the risks are very low. “The severity of the claim, when it happens, is huge because you do have quite a large amount of value there,” Hirst says. “The power station costs billions to build and, of course, the size of claim that occurs, if it involves the nuclear reactor... can be huge even if the original loss was fairly innocuous.”

November 2013 Canadian Underwriter

A New Conversation It was a relatively quiet 2012 for reinsurers; the same cannot be said for 2013. Two flooding events have taken their place among the most expensive natural catastrophes ever in Canada, prompting insured loss estimates well in excess of $2.5 billion. Is the country on the verge of something new? Do these seemingly more frequent â&#x20AC;&#x201D; certainly most expensive â&#x20AC;&#x201D; events demand a whole new conversation when it comes to perils in Canada?

30 Canadian Underwriter November 2013

he world returned to its catastrophic ways in 2013, featuring everything from hurricanes, earthquakes, windstorms and, of course, flooding — regular flooding, overland flooding, flash flooding. But unlike most years, except perhaps a distinct few, talk of Canada was much more on the lips of reinsurers, insurers and everyday folk beyond the country’s borders. Canada played unwelcome host to the extreme flooding in southern Alberta — its associated insured costs already expected to eclipse those related to the previously most expensive natural catastrophe in the country’s history, the ice storm in 1998 — followed by flash flooding in and around Toronto, an event garnering its own dubious distinction, producing the highest insured losses of any nat cat ever in Ontario. The peril then changed from water to fire, but was no less upsetting or concerning, with the rail tragedy in Lac-Mégantic, Quebec. These events have been among those to fuel new conversations, conversations that invariably involve talk of rethinking current thinking and positing whether or not Canada is now facing a new norm of more and more expensive events. Couple these considerations with emerging and persistent conditions elsewhere — including low interest rates, pressure on reinsurers to improve results and alternative capital entering the market — and 2013 made for a much more active year for reinsurers than 2012. In light of the changes, both existing and emerging, Canadian Underwriter asked senior executives of reinsurance companies in Canada what they see ahead for 2014. What considerations need to be part of the conversation?

November 2013 Canadian Underwriter 31

COVER STORY

A New Conversation

Pierre Dionne Senior Vice President & Chief Agent

Caisse Centrale de Réassurance - Canada

There may be some truth in the old superstition that 13 is an unlucky number. The year 2013 was certainly not kind to the insurance industry in Canada. Not only did the industry witness the largest-ever insured catastrophe with the Southern Alberta flooding, there was a second $1-billion event with the Toronto storm, followed by the tragedy of Lac-Mégantic, and multiple other storm events throughout Canada. The final tally will be over $4 billion in claims paid. The current trend of more frequent and severe events — brought on not only by climate change, but aging infrastructure, increasing population density and increasing wealth — seems to be here to stay. As an industry, if we want property insurance to remain affordable, we need to engage politicians and consumers on prevention, in order to reduce future losses. Some changes to the insurance product, such as limiting Guaranteed Replacement Cost and Actual Cash Value on roofs in the case of hail or wind damage, would also go a long way in controlling costs. In the meantime, reinsurers will again adjust their pricing on catastrophe-exposed business. Loss-impacted treaties can expect some increases. Although alternative capital has impacted the pricing of catastrophe business in the United States, the same impact is not foreseen in Canada. Given the ever-increasing medical costs, judicial inflation and low interest rates, there should also be some pressure on automobile and general liability pricing. However, most treaties are expected to renew with flat pricing. The story may be different next year if the Ontario government follows through with the mandated 15% reduction in Ontario automobile rate. This may turn out to be the next politician-made catastrophe. Stay tuned! 32 Canadian Underwriter November 2013

The current trend of more frequent and severe events — brought on not only by climate change, but aging infrastructure, increasing population density and increasing wealth — seems to be here to stay. As an industry, we need to engage politicians and consumers on prevention, in order to reduce future losses.

Tim Fisher Senior Vice President &

Canadian Branch Manager XL Group’s Reinsurance Operations

When considering what the Canadian reinsurance market can expect during 2014, context is important. Analysis of filed results for 2009 to 2012 show that local reinsurers generated an average combined ratio of 94.5%; removal of the contribution from Caribbean and other non-Canadian busi-

ness written locally would worsen this already weak result. The significant and often tragic events this year appear likely to generate a much higher market combined ratio for 2013. Additionally, the cost of transacting business locally will increase due to the application of GST/HST to reinsurance premiums paid to nonresident affiliates and 2014 increases in capital requirements will further weaken margins. So what can the Canadian market expect? First, there is likely to be greater scrutiny of local reinsurers by their head offices, resulting in increased pressure to improve results. The available levers to achieve this are limited: reinsurers can cut costs, reduce cover or increase product price. Following a year of record catastrophe losses, there can no longer be any doubt that frequency and severity of natural catastrophes has increased. Reinsurers will likely seek to address changes in the product cost during the 2014 renewal process. Second, reinsurers are expected to work with their customers to better understand how they address unmodelled earthquake risk as part of their risk management discipline following the completion by all federally regulated insurers and reinsurers of the B9 Gap Analysis for the Office of the Superintendent of Financial Institutions of Canada at the end of September. Additionally, there is likely to be pressure from reinsurers to reduce occurrence limits provided under property per risk contracts as the summer events demonstrate catastrophe risk is better managed and controlled in the Cat product. Finally, with yields on “new money” remaining weak, claims inflation running between 3% to 5% annually and a number of mid-sized losses having impacted the casualty market this year, we are likely to see increased rates for casualty reinsurance during 2014. The views expressed are the author’s alone and do not necessarily represent the views of XL Group plc companies.

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COVER STORY

A New Conversation

Kenneth Irvin President & Chief Executive Officer

Munich Reinsurance Company of Canada

Weather-induced catastrophic events are certainly top-of-mind for reinsurers and insurers alike. Climate change induced by the evolution of man, the cyclicality of the ecosystem or the yetto-arrive meteorite, produces human hardship and suffering and a pot-full of insured losses. The floods in Alberta, rainstorm in Toronto and hailstorm in Regina certainly demonstrate the need for catastrophe reinsurance programs to protect against the uneven climatic conditions of our time. Catastrophe program rates in Canada will increase for 2014 — most notably in low layers revealed to be the most vulnerable. This is not unexpected as primary carriers adjust their own rates to respond to this new reality of greater and more frequent exposure. Loss mitigation efforts in advance of the calamities will certainly have beneficial effects on both the human capital and economic outcomes of events, but these will be counter-weighted to some degree by the seemingly exponential increase of insured values in our urban centres. Reinsurance rates, ex-catastrophe, will reflect individual experience. Primary commercial rates are finally beginning to rise from the floor created by satisfactory company and industry results in recent times — this will, if continued, solidify the financial base insurers and reinsurers need to serve their constituents and themselves well.

Caroline Kane Senior Vice President &

Chief Agent in Canada Toa Reinsurance Company of America

The year 2013 has been a challenging one for the Canadian insurance/reinsurance industry. The Calgary floods in June, estimated at $1.7 billion insured loss, followed by the Toronto rainstorm in July, estimated at $850 million, will largely be borne by reinsurers. 34 Canadian Underwriter November 2013

Loss mitigation efforts in advance of the calamities will certainly have beneficial effects on both the human capital and economic outcomes of events, but these will be counter-weighted to some degree by the seemingly exponential increase of insured values in our urban centres. There is a general understanding that mitigating future catastrophic losses will require industry collaboration with federal and provincial governments, as well as investing in infrastructure on an ongoing basis. For the upcoming January 1, 2014 treaty renewals, reinsurers and cedants can expect rate increases on catastrophe

excess and risk excess treaties that were impacted by one or both of the Calgary or Toronto rainstorms. But it is not just a question of raising rates. Reinsurers will no doubt be in discussions with their clients (cedants) to learn and to better understand each of their changes in underwriting — for example, deductible levels, sub-limits for certain exposures, use of models and predictive analytics, etc. — in order to control exposures and mitigate future losses. Capacity is plentiful in the Canadian reinsurance market and this will put pressure on pricing. It is too early to gauge whether capital markets will play any sort of a role in the Canadian reinsurance market in 2014. For some, the choice may boil down to accepting cheap capital or preserving value-added relationships with reinsurance partners. It is worth mentioning that a number of reinsurers also provide capacity for casualty programs. And while most cedants have healthy retentions, this means that reinsurers are primarily exposed to the volatility of medium to long tail automobile and liability shock losses. Low interest rates remain on the horizon for the foreseeable future, and so it is imperative that reinsurers exercise underwriting discipline and obtain adequate rate for the risk return. Reinsurers need to take a measured approach in deploying our capital, managing risk and selecting business partners where there is an appropriate strategic fit.

Sharon Ludlow President & Chief Executive Officer Swiss Re Canada

The re/insurance industry is one in which you have to learn from past experience and continually evolve if you are to effectively serve clients. This is why in 2014 it is vital that the insurance industry takes heed of events that occurred in Canada this year. Canadians saw significant water damage in Alberta and in Toronto, which demonstrated how vulnerable we are

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COVER STORY

A New Conversation to this particular peril. For a long time now, the industry has talked about ways to better protect people financially from the impact of flood, but these events showed that it is time to back up those words with action. Canada is the only G8 nation that does not have a flood program. Without this, and with the inconsistencies in definition and application of sewer back-up coverage, there is confusion in the marketplace. As an industry, it is necessary to better explain what is covered and what is not under sewer back-up. But the industry must go further and look for ways to provide protection for this peril. There are questions that still need to be answered, of course. But the industry has the advantage of evaluating programs in a variety of other countries; and determining what fits best for Canada. And this does not have to be done alone; meaningful discussion and action needs to take place with the industry and with government. The industry needs to have a simple, transparent policy that states what is covered and what is not. While insurers cannot prevent flood events, they can help consumers prepare for them by helping them better understand their risks and offering them financial protection should an event strike.

Cam MacDonald Senior Vice President & Chief Agent Transatlantic Re

Another tumultuous year for the Canadian reinsurance market, dealing with insured losses from two major catastrophic events totalling approximately $3 billion, and these latest losses are on the heels of the Calgary hailstorm and Hurricane Sandy in 2012. This unprecedented series of major losses will quite likely have a profound impact on the Canadian reinsurance market as reinsurers come to grips with the extent of their losses. Changes to reinsurance terms and conditions appear inevitable. 36 Canadian Underwriter November 2013

As far as the outlook for investments, the expected return on fixed income portfolios remains extremely volatile, if not absolutely dismal. This anticipated volatility will place continued emphasis on reinsurance underwriting results reflected by a firm market and firm pricing. Those property catastrophe and property per risk treaties that experienced several losses over the past two years will almost certainly see some form of rate adjustment, although the larger question may be: Are these recent Cat losses truly market-changing events and will there be a change in underwriting attitude throughout the entire marketplace and across all lines of business? One major factor that may mitigate any positive shift in underwriting policy is the overabundance of avail-

able capacity not only from traditional reinsurance sources, but from capital markets that appear to have a renewed interest in property and casualty products. While capital market capacity in the form of Cat bonds, sidecars and pension plans is typically dependent on yield and may be fleeting, in the interim it could pose a serious problem to a market that is in dire need of correction. Our operating environment is changing rapidly and reinsurers will be faced with many challenges in 2014. However, along with uncertainty comes opportunity and as long as our market continues to exercise sound underwriting principles and practices, we will endure.

Frank Rueckert Senior Vice President

Canadian Treaty Department Hannover Re

Whether a market-changing event or not, if one looks at the specific experience of the respective clients, the flood losses in southern Alberta and Toronto will likely be a driver for renewal pricing. The losses combined are expected to be close to the $3-billion mark. Already at recent renewals, there were a few quite significant upward price adjustments for loss-affected accounts. The losses in the Canadian market space will have an impact especially on reinsurers who have been hit, perhaps eliciting some effort to try to recoup some money. Overall, it is anticipated that the property per risk and the property Cat prices, especially for those affected layers, will have an upward movement. There must be a rethinking of how flood losses are dealt with, in general, and what industry as a whole is willing to bear. Is it still viable to hold the distinction between a sewer back-up loss and a normal flood loss? Without the distinction, is general flood/water coverage affordable at all, and what is the role of the government in this regard? If the distinction is held up,

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COVER STORY

A New Conversation will sewer back-up coverage only be included via endorsements or become mandatory? And what about sub-limits and deductibles? On a global basis, one threat is that Canada has been overall a profitable market and a good market with regard to the long-term relationships between primary companies and reinsurers. The recent major losses could result in some new capacity, for example, from London or from other markets. Those new markets, or potentially new markets, have not experienced claims. As such, they may be willing to provide capacity that is cheaper than reinsurers who have been here for a long time and have suffered those losses, are willing to provide. However, reinsurers who suffered losses cannot go wild and expect a payback over a very short period — say, two years. On the other hand, there is a need for some price adjustment upwards. Finding the right balance is essential, or reinsurer clients might be pushed to other alternatives.

Steve Smith President & Chief Executive Officer Farm Mutual Reinsurance Plan

From the reinsurers’ perspective, the story for 2013 is two-fold. Obviously, the Calgary and Toronto floods top everyone’s agenda with respect to market impact events. The second is the misguided mandate to reduce Ontario auto insurance premiums by an arbitrary 15% without any proper analysis or industry input. The severity of weather events continues to be a clear trend, particularly in the urban areas that are at the mercy of aging and inadequate infrastructures. With regard to the regional mutuals, their rural focus and spread of risk enabled them to, by and large, escape the wrath of the two aforementioned storms. While overland flood is “not covered,” the insurance industry, in the face of great reputational risk, has in fact responded to a large portion of the 38 Canadian Underwriter November 2013

If we focus solely on the “flooding events” of 2013, the cost of these losses alone will far outstrip “all” catastrophe premium for “all” perils collected by reinsurers for Canada, not just for 2013, but for a few years. losses through either realizing ambiguous and conflicted wordings or ex-gratia responses. Recognizing that Canada is the only G8 country that does not currently provide some form of flood insurance response, it would appear that the Canadian insurance industry is on the cusp of developing and providing an overland flood cover. If the industry is going to pay the claims anyway, let’s

develop a workable flood model, clean up the wordings, provide the cover and charge for it. With respect to Ontario auto, the reduction in auto rates will result in pressure on reinsurance rates as the reforms that are theoretically driving the primary rate reduction will not reduce reinsurers losses. Reinsurers’ exposure remains the same; serious injuries driving excess claims have not changed. As a result, excess of loss casualty rates relative to primary rates will be likely seen to increase. As far as the outlook for investments, the expected return on fixed income portfolios remains extremely volatile, if not absolutely dismal. This anticipated volatility will place continued emphasis on reinsurance underwriting results reflected by a firm market and firm pricing.

Matt Spensieri Vice President, Reinsurance Catlin Canada Inc.

Last year at this time, catastrophe loss(es), or the absence thereof, were seen as the main driver in the reinsurance market. Hurricane Sandy had just impacted the U.S. East Coast, leaving thousands homeless and billions of dollars of losses. While a few companies in Canada suffered losses from Sandy, 2012 was essentially a non-event with respect to Cat losses. While there was a little upward movement, for the most part it was a very stable renewal market. Fast forward 12 months, and a lot has changed. June brought unprecedented flooding in Alberta. A few weeks later, July arrived with a month’s worth of rain falling in the Greater Toronto Area in a matter of hours. Both of these events caused billions of dollars in losses, with a significant portion falling upon reinsurers to pay. The train derailment and subsequent explosions brought a huge tragedy to the town of Lac-Mégantic, Quebec. There was a tremendous loss of lives, destruction of property and pollution

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COVER STORY

A New Conversation

Reinsurers will need to partner with non-traditional capacity as opposed to competing with it, they will need to innovate and create new products which meet the changing needs of their clients, and they will need to form strategic alliances where their value proposition goes beyond capacity.

of land and water. The ultimate cost of this loss will not be known for many, many years — and no doubt some portion will be paid by reinsurers. While many exposures are considered when pricing a catastrophe cover, it would be fair to say the main driver is the peril of earthquake. The Office of the Superintendent of Financial Institutions of Canada (OSFI) requirements provide guidance to insurers as to minimum limits required. Most insurers in Canada have earthquake exposures in their portfolios, thereby significantly influencing their catastrophe purchasing decisions/ requirements. If we focus solely on the “flooding events” of 2013, the cost of these losses alone will far outstrip “all” catastrophe premium for “all” perils collected by reinsurers for Canada, not just for 2013, but for a few years. To put this another way, we may be pricing for earthquake, but we seem to be missing the cost of other perils, one of which is flood. The main influence of the supply/ demand marketplace continues to be price. For 2014, there is expectation that adjustments will be made to programs that have suffered losses in 2013... but perhaps much more is required. 40 Canadian Underwriter November 2013

MATT WOLFE Senior Vice President & Managing Director Canada Beach and Associates Ltd.

“It is not necessary to change. Survival is not mandatory.” — W. Edwards Deming We could speak at length about the recent Canadian catastrophe losses (which will cost Canadian reinsurers approximately $1.5 billion against a total Canadian reinsurance market premium base of about $2 billion). However, two trends that are occurring now in the global reinsurance marketplace may have a larger long-term impact. Throughout the world, reinsurers are seeing their clients materially reduce their non-property catastrophe reinsurance cessions while simultaneously having to compete with non-traditional capacity on property catastrophe programs. 2013 has seen a number of very large insurers sharply reduce their reinsurance spend, the latest of which was Allianz Group announcing it will reduce its non-property catastrophe reinsurance spend by over $700 million. In addition to facing a sharp reduction in this much-needed diversifying (non-property catastrophe) premium, reinsurers are facing significant pric-

ing pressure from non-traditional capacity in the property catastrophe space, as clearly evidenced by the double-digit rate reductions seen at July 1 in the United States property catastrophe market. In Canada, reinsurers have experienced a material contraction in noncatastrophe premium ceded to them in recent years, but thus far they have not experienced downwards pricing pressure from non-traditional capital. However, it is inevitable that this capital will look to participate in Canada. They will seek to offset their peak exposures (such as California quake and Florida wind) by adding diversifying exposures such as British Columbia quake. What do these two issues mean for reinsurers? Vincent Van Gogh said, “The fishermen know that the sea is dangerous and the storm terrible, but they have never found these dangers sufficient reason for remaining ashore.” And neither should reinsurers! Reinsurers will need to partner with non-traditional capacity as opposed to competing with it, they will need to innovate and create new products which meet the changing needs of their clients, and they will need to form strategic alliances where their value proposition goes beyond capacity.

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Weather Hardening Flood Insurance

Opinion/Analysis

New floodplain maps, weather-hardened infrastructure and homeowner engagement are needed to lower the risk to conventional flood insurance coverage. But the base of stakeholders involved also needs to be broadened to include all three levels of government, banks, builders, industry associations and homeowners. Jason Thistlethwaite, Ph.D

Director, Climate Change Adaptation Project (Canada), University of Waterloo

Blair Feltmate, Ph.D

Associate Professor, Faculty of Environment, Chair, Climate Change Adaptation Project (Canada), University of Waterloo

The viability of private insurance for overland flood damage — hereafter referred to as flood insurance — became the focus of substantial national media attention following the 2013 summer floods in Calgary and Toronto. Indeed, many Canadians who suffered flooding damage started asking why Canada is the only G8 country that does not offer insurance for overland flood damage, and under what circumstances such coverage might become available. Canadians who have applied to the federally administered Disaster Financial Assistance Arrangements (DFAA) program have also questioned why a privately administered flood insurance system is not available. Although Canadians may appreciate compensation through the DFAA, they often comment that the process is lengthy relative to their liquidity requirements immediately following a major flood. By good fortune or good luck, in the months immediately preceding the 2013 floods, senior executives from many of Canada’s largest property and casualty insurers (who wrote 57% of all property premiums in Canada as of 2011) were interviewed to determine their collective views on the viability of privately administered flood

42 Canadian Underwriter November 2013

insurance.These interviews, initiated at the behest of The Co-operators Group Limited, were agnostic as to whether flood insurance is a “prudent or imprudent” choice, and interviewees were free to express any opinions they wished. Key findings borne of these interviews are presented herein.

EXTREME RAIN EVENTS HERE TO STAY From a historical perspective, the need for the p&c insurance sector to address flooding cannot be overstated — indeed, for over a century floods have been the dominant natural disaster in Canada, exceeding all three of the next most prominent disaster events combined (see Figure 1). Looking forward, p&c leaders were of the opinion that climate change and flooding will continue to get worse and none of those surveyed thought flooding would ameliorate over time. P&C leaders are probably correct in their perception that climate change and resulting extreme weather will continue to get worse, based on the fact that fossil fuels currently contribute to about 75% of the world’s energy supply (with coal, oil and natural gas adding about a third each to the global generation mix). By 2035, the

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percentage of fossil fuel contribution to global energy use will remain at 75%, but the total volume of atmospheric greenhouse gas loadings will be in excess of the present due to the net addition of 1.5 billion people to the planet over the next 20 years.

Figure 1: Number of Hydrological and Meteorological Disaster Events in Canada (1900-2013) Flood Hail/Thunderstorm Wildfire Winter storm Drought Tornado Hurricane/Typhoon Avalanche Storm surge Cold wave Heat wave

FLOOD INSURANCE PREREQUISITES

0 0

100

150

200

250

300

Source: Canadian Disaster Database

F Figure 2: Climate change will cause a material future change in the freguency and magnitude of overland flooding in my company’s insurance market (response of 16 Canadian P&C executives). 8

7 6

6 4 2 2 0

1 O

Strongly Disagree

Disagree

N Neutral

Agree

Strongly Agree

Don’t Know

Figure 3: F Is floodplain mapping sufficiently understood in the regions identified that underwriting (risk exposure) due to flooding can be adequately calculated? 14 12 10 8 6 4 2 0 Eastern Canada E

Central Canada Yes

Western Canada

Don’t Know

Northern Canada

No Response

Three key factors that emerged from the survey of p&c executives as “must haves” for flood insurance to even be contemplated as an offering, were as follows: floodplain maps for all Canadian geographic regions would need updating; governments would have to invest in “flood-hardening” of infrastructure in urban and surrounding rural regions; and homeowners would have to be more engaged in flood-proofing in and around their properties. Even if these three prerequisite conditions (described below) were to be met, it is important to stress this constitutes no guarantee that flood coverage will be offered in the near future, as complexities regarding risk, pricing and premium affordability would have to be resolved. On the upside, by addressing these three points, insurers would realize concomitant benefits to currently available sewer back-up coverage. New floodplain maps, weather-hardened infrastructure and homeowner engagement would lower the risk to conventional coverage.Thus, independent of developing overland flood insurance, the p&c sector would serve itself well by addressing these three initiatives.

UP-TO-DATE FLOODPLAIN MAPS When p&c executives were asked if floodplain maps across Canada were sufficiently robust to calculate risk and develop flood insurance product, their response was a resounding “no” in reference to Eastern, Central,Western and Northern Canadian regions (see Figure 3). In the absence of rigorous mapping, they recognized that flood risk, projected losses and product pricing could not be determined. Accordingly, a first course of action to address flood insurance is the need to develop up-to-date floodplain maps for major Canadian geographies.

November 2013 Canadian Underwriter

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Figure 4: For flood insurance to be profitable for your company, infrastructure under the direction of government control would have to be substantially “flood-hardened” relative to its current condition. 6 5

3 2

Don’t Know

No Response

2 1 0

0 0

Strongly Disagree Neutral Agree Disagree

Strongly Agree

Figure 5: If provided with overland flood insurance, the average homeowner will initiate and maintain action(s) to limit the probability of flooding around his/her home. 4.5

4 3.5

3 2.5

2 1.5 1 1 0.5 0 Strongly Disagree

Disagree

Neutral

FLOOD-HARDENING INFRASTRUCTURE The majority of respondents identified the “flood-hardening” of infrastructure, executed under the direction of government, as critical to the profitability of any future flood insurance product (see Figure 4). Investments in flood defences, such as dams and dikes, largerdiameter storm sewer lines, permeable surface parking lots, cisterns and retention ponds, were identified as potentially useful strategies. Insurance executives were also in general agreement that flood-hardening infrastructure, at the point of new build or scheduled

44 Canadian Underwriter November 2013

Agree

Strongly Agree

Don’t Know

retrofits, would only add an incremental, largely immaterial, up-front cost (e.g., laying a 20-centimetre-diameter sewer pipe costs nearly the same as laying a 30-cm pipe — yet, the larger pipe has over twice the discharge capacity). Conversely, the cost of rebuilding underbuilt infrastructure — i.e., that which did not account for extreme weather — would be substantial and imprudent.

HOMEOWNER RESPONSIBILITY P&C executives were divided as to whether flood insurance would incentivize policyholders to invest effort in household

flood-protection measures (see Figure 5). This analysis suggests that homeowners need more information on strategies they could use to reduce their exposure to flood losses, which as a consequence could reduce their insurance premiums. Much like governments have offered national home energy audits, insurers discussed a form of “adaptation audit” that could be offered to incentivize voluntary flood protection. Insurers who doubted the inclination of homeowners to embrace mitigation based their view, in part, on the National Flood Insurance Program in the United States. Under this system, the insurance coverage is mandatory for homeowners

Even if these prerequisite conditions were to be met, it 3 is important to stress this constitutes no guarantee that flood coverage will be offered in the near future, as complexities regarding risk, pricing and premium affordability would have to be resolved. who live in high-risk flood zones, which reduces the incentive for actions that help mitigate flood damage. Conversely, voluntary flood mitigation tends to be practised more so under private systems where insurers can set riskadjusted rates.

GOING FORWARD Developing up-to-date floodplain maps, flood-hardening infrastructure and engagement by homeowners to mitigate risk collectively offer actionable starting points to address flood insurance going forward. Discussion on these ideas, however, is not one to be addressed solely by the insurance sector — this challenge should be owned by a broad base of stakeholders, which at a minimum would include all three levels of government, banks, builders, industry associations and homeowners.

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The CIP Society Ethics Series

The CIP Society Insurance Institute of Canada

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Unsocial Function How does an insurance professional, who is attending a social function, deal with someone who voices vigorous disenchantment with the industry? One course of action may be for the industry and its professionals to do their best to educate and clearly communicate with the consumer — regardless of the setting.

The CIP Society represents more than 17,000 graduates of the Insurance Institute of Canada’s Fellow Chartered Insurance Professional (FCIP) and Chartered Insurance Professional (CIP) Programs.The CIP Society, through articles such as this, is working to bring ethical issues to the forefront and provide learning opportunities that enhance the professional ethics of all insurance So, what do you do? professionals. A bunch of old university friends, accompanied by their spouses and partners, gathered together for a dinner reunion.While catching up and exchanging stories about their careers, an insurance professional found herself cornered by a pair of individuals who were quite expressive about their disenchantment with the insurance industry. One member of the unhappy pair went on at

46 Canadian Underwriter November 2013

length about what he felt was unfair treatment after putting in a claim, and suggested that insurance companies all conspire to take money from people with the intent of never paying claims. The other person indicated she has never made a claim in almost 20 years, yet her premiums keep going up. The insurance professional felt somewhat attacked, this not being the first time that she had encountered negative attitudes about her profession. Unlike her colleagues in accounting, law and finance, she realized she had had to defend her choice of industry on a number of occasions similar to this. As the unhappy pair continued with a barrage of complaints, the remainder of the dinner attendees took a collective interest in the conversation. The professional began formulating a response in her mind, but paused before speaking to consider a few things, including the following: 1.Is there a general comment she could make? 2.Where is the onus for the consumer’s negative experience: on the industry, the industry professional and/or the consumer? 3.What can the industry and industry professionals do to improve the public’s perception of the industry?

Illustration by Tomio Nitto/reactorart.com

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Pat Van Bakel, BA, CIP President and CEO Crawford & Company (Canada) Inc. I think it is incumbent on all of us, as professionals in the insurance industry, to be prepared to speak openly about the strengths and values our industry provides to communities and industries across Canada. We are very fortunate to live in a very stable economy and our industry can be proud of being a fundamental contributor in this regard. Having said that, I think the conversation has to begin much sooner than when it is raised in a social setting. It is critical that we truly understand not only what we do, but more important, why we do it. One of our former CEOs, Glenn Gibson, made a very emphatic point as he travelled across Canada, addressing graduates of the Insurance Institute at convocation celebrations. Gibson said, “We help people,” a simple message that has stuck with me over the years. There is still much more that can be done to improve the image of our industry with the general consumer. Much of it comes down to communication. As claims professionals, it is remarkable how often we come across scenarios where the policyholder has no idea what coverage was purchased until it comes time to make a claim, or the number of times a restrictive clause was added to the policy on renewal that the policyholder claims to have been completely unaware of, including things like increased deductibles and new or reduced sublimits. Another area we can be better at is continuing to look for ways to simplify the process through the entire life cycle of an insurance policy. I think this comes back to truly understanding why we do the things we do — and understanding that from a policyholder perspective. As a company, we spent a considerable amount of time over the past couple of years in an exercise called “day in the life of the customer.” It is a paradigm shift in both truly understanding and reacting to the unmet needs of our cus-

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tomers, and value creation. I think we need to continually challenge ourselves to shift our focus from inside-out to outside-in when considering the public image of our industry.

Marcus B. Snowden & Bradley J. Wells Partners Snowden LLP, Coverage Counsel No matter on which side of the industry a professional works (broker, agent, underwriter, independent adjuster, claims examiner, etc.), all can be painted with

The professional could suggest her companions speak to their respective insurance brokers or agents, as only they can properly address their concerns and propose a solution. She can also remind them that the insurance industry has a variety of complaint resolution processes available. the same brush by consumers who have had a “bad experience.” As tempting as it is to address her dinner companions’ specific complaints, the insurance professional in our scenario should refrain from doing so. Even if she feels the complaints are justified, it does not enhance the insurance in-

dustry’s image for one insurance professional to criticize another, especially without first hearing both sides. The professional could suggest her companions speak to their respective insurance brokers or agents, as only they can properly address their concerns and propose a solution. She can also remind them that the insurance industry has a variety of complaint resolution processes, including ombudsmen and professional organizations. The majority of consumers will only make one or two claims during their lifetimes, and many do not understand the claims process. The important role for the broker/agent and claims adjuster is to properly explain the process from the outset, so as to ensure the consumer’s expectations are set at an appropriate level. As well, the broker or agent must be involved throughout the claim to ensure that the consumer does not feel lost or forgotten in the process. To improve its public perception, the insurance industry and insurance professionals should recall that the vast majority of consumers need to have their coverages, deductibles, premiums and claims processes carefully explained to them. Although insurance policies often use “plain language,” there are situations that have insurance professionals, lawyers and the courts scratching their heads on what exactly is covered. Expecting the average consumer to understand the issues they face is unfair and leads to frustration. To improve its image, the insurance industry and its professionals should do their best to educate and clearly communicate with the consumer. A knowledgeable consumer is more likely to be a happy consumer.

Donna Ince, CPA, CA, CIP Senior Vice President Personal & Commercial Insurance RSA Insurance Everything we do in life is inherently risky. Insurance is a financial product that transfers risk from your balance sheet to that of someone else (an insurer) who, for a fee (a premium), assumes

November 2013 Canadian Underwriter

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some of the risk you take on by driving a car, owning a home or operating a business. Consider the implications of assuming these risks on your own. What would it cost a family to support a teenage driver left disabled by a car accident, for the rest of his life? What would it cost a

business owner and her employees if their entire establishment, with saleable goods and expensive equipment, burned to the ground? If you have not transferred any of your risk to an insurer, you could be facing a lifetime of debt and the possibility of never again regaining the financial position — or the life — you had prior to a major loss. One of the key principles of insurance is to get you back to the position you were in prior to the loss. By assuming a portion of the risks faced every day by individuals and companies, insurance forms the building blocks of our economy. It allows us to create a sustainable society — from the infrastructure of our cities to our residences, our places of work, and every life event you can think of. Without having experienced a significant loss, it can be difficult for consumers to understand the real impact and the process to get that loss adjudicated. Natural disasters such as floods, hurricanes and other major catastrophes can very quickly bring the reality of loss into sharp focus. It is important to view these types of catastrophic events as op-

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portunities for consumer education. As independent experts, individual brokers play a key role in this process. By building relationships as trusted advisors with customers’ best interests in mind, brokers are in a unique position to guide clients in preventing risk and choosing insurance products that will meet their needs. Brokers also play a unique role in the claims process as an advocate for their customers. Insurance is a complex model and easily misunderstood. My key message is this: Insurance underpins our economy and our lives. As an industry, we need to help people understand why that is important.

J.R. (Bob) Tisdale, MBA, FCIP, CRM President and COO Pembridge Insurance Company In this situation, a tactful and diplomatic approach would be to explain to the group what insurance is and what it is not. Insurance is not a bank account where you bank your premiums in case you might have a loss some day. Insurance is simply a pooling of funds

Without having experienced a significant loss, it can be difficult for consumers to understand the real impact and the process to get that loss adjudicated. It is important to view natural disasters, such as floods and hurricanes, as opportunities for consumer education. where the premiums of many pay for the losses of few. The more losses that occur or the higher the potential for losses, the more funds that are required to ensure that adequate funding is available. Insurance companies then charge an administration cost to provide the necessary services, such as premium collection and claims payouts. Taking an educational approach may

help ease the tension and negativity that arises during these types of conversations about insurance. The onus of the consumer’s negative experience lies with our industry. We have much room for improvement when it comes to educating the consumer about insurance. We should generate more positive press about the many things we do to help people, such as helping restore someone’s quality of life after a bad accident, or rebuilding someone’s home after a fire. We need to find better ways of educating consumers about what they are actually purchasing when they buy insurance. Many times, I hear industry professionals say that they would rather not tell others what they do for a living. I disagree with this approach and think it is unfortunate that they feel that way. Insurance is the lifeblood of the economy. Without insurance there would be fewer houses, fewer businesses, fewer

cars, fewer vacations, fewer everything. The fact that insurance exists allows people to take risks that they could not afford to take on their own. We need to be proud of what we do. I have found from personal experience that by taking the time to explain what we do, and why we do it, we can change perceptions of even the biggest critics of our industry. We do a lot of good things for many people and we should be proud to share these stories.

Recent Insurance Press Releases featured on insPRESS.ca CRU Adjusters on standby in the wake of Typhoon Haiyan by CRU - Catastrophe Response Unit – Nov 13

Burns & Wilcox Canada Underscores the Importance of Kidnap & Ransom Insurance by Burns & Wilcox Canada – Nov 12

Burns & Wilcox Canada Offers Product Specific to Skilled Trades and Artisan Contractors by Burns & Wilcox Canada – Nov 7

Roofers Plus Final Residential Haag Certification Course for 2013 to be Held in Toronto November 19th – 21st by Roofers Plus – Nov 5

Bryson & Associates Insurance Brokers Ltd. Appoints Tammy McCarthy as Director of Transportation by Bryson & Associates Insurance Brokers Ltd. – Nov 1

DKI Canada is excited to bring to you Canada’s BEST NHL Hockey Pool! by Disaster Kleenup Canada Ltd. (DKC) – Oct 16

Canadian Employers to Benefit from Cira Medical Services’ by SCM Insurance Services – Oct 16

Audatex Canada Adds Chrysler North America Data to AudaVIN by Audatex Canada – Oct 15

Granite Claims Solutions Welcomes Blair McGregor as Vice President Operations for Western Canada by Granite Claims Solutions – Oct 9

Burns & Wilcox Canada Offers Comprehensive Personal Umbrella Coverage by Burns & Wilcox Canada – Oct 7

Management Buyout at GROUPASSUR by GroupAssur – Oct 31

SGI CANADA and Policy Works Launch Real-Time Wording Lookup by Policy Works Inc. – Oct 28

A.R.S. Opens New Office Locations: Edmonton, AB and Halifax, NS by A.R.S. Assessment Rehabilitation Services Inc. – Oct 21

The Guarantee partners with Brovada to launch new broker connectivity tool GLink by The Guarantee – Oct 22

STRONE and Itech Exhibiting at IBAO Annual Convention by STRONE-Itech – Oct 22

Lorri Frederick Joins ClaimsPro as Executive Vice President, Operations - by SCM Insurance Services – Oct 21

Burns & Wilcox Canada Announces Specialized HVAC Coverage by Burns & Wilcox Canada – Oct 3

Mark Ram Joins The Guarantee Company of North America’s Board of Directors by The Guarantee Company of North America – Oct 3

Granite Claims Solutions welcomes Grace Dattomo as Business Development Manager by Granite Claims Solutions – Oct 3

PAUL DAVIS SYSTEMS CANADA, Ltd. Announces New Franchisee for Paul Davis Systems of Montreal by Paul Davis Systems Canada – Oct 3

Opta Answers Industry Lament with Launch of Peril Score, Canada’s First Commercially Available Peril-Based Scoring Tool by SCM Insurance Services – Oct 2

RMS Welcomes Dianna Fioravanti as Senior Vice-President of National Sales and Business Development by SCM Insurance Services – Oct 21

PAUL DAVIS SYSTEMS CANADA, Ltd. Recruits a Documentation & Communications Specialist by Paul Davis Systems – Oct 2

DKI Canada Welcomes HI-TECH Restorations & Contracting in Hanover, ON by Disaster Kleenup Canada Ltd. (DKC) – Oct 17

Itech Dangerous Goods Personnel Train for CHLOREP Level II Chlorine Response

Ontario Brokers Association Donates Sixty Sets of Goalie Equipment to Ontario and Northern Ontario Minor Hockey Associations by Insurance Brokers Association of Ontario (IBAO) – Oct 2

by STRONE-Itech – Oct 17

To Read the Full Story for Each Press Release visit insPRESS.ca

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39th Annual Risk and Insurance Management Society (RIMS) Canada Conference, Victoria

Angela Stelmakowich Editor

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State of The face of risk around the world and here at home is changing quickly. Being prepared is critically important — not only to answer specific perils, but to also match the evolving nature of risk management. Victoria played host to the 39th RIMS Canada Conference, held from October 6 to 9. Discussions revolved around everything from risks associated with disaster preparedness, flood, business continuity and reliance on supply chains.The world of risk is quickly changing, the speed of which is perhaps only matched by the evolving continuum of risk management itself.

BREADTH OF RISK DEMANDS RISK PROFESSIONALS BE AT THE FOREFRONT The speed at which risk is coming at organizations today clearly illustrates the need for risk professionals to be at the forefront of their organizations, RIMS president John Phelps said during the opening ceremonies of the 39th RIMS Canada Conference in Victoria, British Columbia. “We have risk coming at us faster and bigger than we’ve ever had before,” Phelps noted. “We have risks that hit our companies not in terms of months or years, but in nanoseconds. We have reputation risk that can happen within the blink of an eye, whereas in the past, it required the

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publication of a newspaper or magazine,” he said. “If there was ever a time when risk professionals should be at the forefront of their organizations, it’s now. At the same time, the profession is experiencing very significant change,” he added. Risk today is not solely about speed; it is about breadth. “Risk management” is evolving and a continuum has been created that runs from traditional risk management to enterprise risk management and strategic risk management, Phelps said. “Never before has there been such opportunity for risk managers to be part of strategic decisionmaking in their organization,” he suggested. “We have risk that is increasing at a rate and depth that we’ve never seen before coming together with this evolution within the profession for risk managers to become more strategic,” Phelps noted. “We are in a state of change in this profession, but the change isn’t bad,” he emphasized. “What the future can hold for us in risk management is engaging an entire organization,” Phelps said. “It’s a profession that will not be computerized out of existence. It is something that is needed in all organizations and embraced,” he added.

FOCUS ON SAVINGS ALONE WILL NOT BUILD ROBUST SUPPLY CHAIN Current supply chains may offer lower costs and higher efficiencies, but may not be as robust and able to smoothly respond to failures or stoppages, Darren Meyler, property branch manager for Central Canada at AIG, said during RIMS Canada. “A supply chain that’s purpose-built for your needs in terms of cost savings may not be the most robust supply chain,” Meyler said.

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While supply chains used to be based on simple sourcing logistics and delivery, usually relying on local rather than global suppliers, that has evolved “to the current state where it’s a recognized driver of company margins,” Meyler said. “Companies that are very good at supply chain management actually use it as a competitive advantage against their competitors,” he pointed out. “Thirty years ago, if you had a manufacturing plant and went into a warehouse, you’d see a warehouse full of spares and full of extra materials to make the product. Nowadays, companies pride themselves on not needing that because of the cost saving. The challenge is that once you have a bump in the road or a stoppage in the supply of your product, you’ve got nowhere to turn to, you’ve got no spares, no redundancy,” Meyler said. Leszek Bialy, vice president and head of customer and distribution management for Zurich Canada, said that from 2008 to 2012, the top 10 countries Canada imported from saw imports rise 6%. For countries like China, Mexico and Japan, collectively the increase was about 20%. “As your organizations, as well as Canadian multinational organizations, expand globally, they expand their footprint, they’re going to source to those suppliers within the natural catastrophe areas,” Bialy explained. Citing catastrophe events in Japan and Thailand over the past few years, these have produced more scrutiny by insurers and brokers and demand that companies have desired information at hand. “Understanding the components of a supply chain risk and how it’s approached and underwritten within your organization will depend on how responsible you are and how connected you are to that process,” Bialy said. “It’s no longer that you’re being given supplements from unnamed locations as you were before those events,” he said. “Definitely, there’s more scrutiny from the standpoint of insurers and reinsurers, there’s more responsibility on your parts in terms of capturing that information,” he told the room full of risk professionals. “If you’re not capturing

that information, if you haven’t already seen, you may see that you’re going to struggle in terms of securing the same limits and supplements you were for contingent business interruption as you were before those events took place.”

FLOODS NOT GOING AWAY, COSTS IN FLOOD ZONES MORE THAN FIRE Flood is here to stay and stakeholders must get prepared, David Thompson, vice president and operations manager, Toronto Operations for FM Global, noted during the RIMS Canada Conference. “Fundamentally, the scientists at FM are pretty much convinced that flood is

“Companies that are very good at supply chain management actually use it as a competitive advantage against their competitors.” here to stay. It’s not an issue that’s going to get less; it’s an issue that’s going to get more as we move into the future,” Thompson told session attendees. “When you look at the frequency of natural hazards around the globe, nothing is really changing: earthquakes are still happening at the same frequency, hurricanes are still happening at the same frequency,” he noted. That said, “urbanization is changing everything,” with events now affecting more people. Gino Brunetti, vice president and division engineering manager at FM Global, suggested flood should receive at least as much, if not more, attention than fire. “In a flood zone, the likelihood of a flood loss is five to seven times that of a fire loss, so priorities should change maybe — if you’re tagged as being in a flood zone — because that’s what’s going to hit you,” Brunetti said. “Moreover, the severity for the average flood loss is 150% that of fire,” he reported. “If you take a 35-year facility, in a 100-year zone, there’s a 30% chance in that time period of the site being hit at least once,” Brunetti said. Flood risk characteristics that impact the type and severity of an event include

proximity to water source, susceptibility to flood, basements and flood emergency response plans. “Our losses show that even a plan that’s in the early stages of formulation — clients who have plans that are not even complete — have shown to be effective to mitigate flood losses.” However, an ongoing challenge is that people still rationalize big flood events. “The reality is that every year, on average, on a global basis, businesses lose about $2.5 billion to flood,” Brunetti said. The region of Alberta recently hit hard by flooding has had 16 discreet flood events since 1896 that were significant. “We continue to be surprised by these events when we should not,” he added.

GOAL IS RESILIENCE, NOT JUST LIFE SAFETY IN QUAKE EVENTS Expectations of new buildings, should an earthquake occur, are changing, Mark Pierepiekarz of MRP Engineering, LLC suggested during the RIMS conference. “We’re expecting life safety. But what we really want is resilience or limited disruption to our life,” said Pierepiekarz. The goal now is “about resilience, getting back our regions, our lives and operations of businesses to pre-earthquake condition quickly,” he told attendees. Resilience, though, “may mean a different thing to different organizations. It may be a week or a day of downtime for one organization; it may be a month for another. But it’s achievable if that dialogue happens early on,” he added. “Damaged contents can really drive the business interruption losses and it’s actually quite preventable,” Pierepiekarz said, pointing to the effectiveness of such things as having piping, sprinklers and gas-fired equipment. “It’s going to take dialogue between the design team and the building owner,” he suggested. “The sea change is going to happen only if the owners start asking for certain performance of their design.” Said Pierepiekarz, “Mega-events do happen. It is our opinion that megadisasters, however, are definitely preventable.” He cited measures such as retrofits and early warning systems as two simple ways to help avoid damage.

November 2013 Canadian Underwriter

CU Seminar ad November 2013_Layout 1 13-10-18 2:18 PM Page 1

Putting the pieces together.

Events and Seminars Calendar You work hard to protect your clients’ property. Now, it’s time to ensure that you apply the same kind of energy and commitment to your own success. CIP Society Events and Seminars give you the opportunity to learn, to network, to catch up on industry developments and to think about your career.

CIP Society Events

PROedge Seminars

Winnipeg – Curling Fun Spiel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . November 22

Thornhill – Advanced Business Interruption . . . . . . . . . . . . . . . . . . November 20

Calgary – Stage West – Love Train – The Soul of Motown . . . . . November 27

Hamilton – Auto Update: Panel Discussion . . . . . . . . . . . . . . . . . . November 27

Kelowna – Convocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . November 29

Calgary – Organized Crime and Insurance Fraud . . . . . . . . . . . . . . November 29

Quebec City – Convocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . January 11

Regina – Condo Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . December 10

Toronto – Annual Fellows’ Reception . . . . . . . . . . . . . . . . . . . . . . . . . February 13

Saskatoon – Ethics and the Insurance Professional . . . . . . . . . . . . December 10

Ottawa – CIP Society Pool Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . February 27

Ottawa – Cyber Liability: Exposures and Insurance Coverage . . . . . . January 29

Toronto – Symposium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . April 10

Ottawa – Leading Insurance Cases of 2012 – 2013 . . . . . . . . . . . . February 27

Keeping you at the forefront of the P&C industry. The CIP Society. MEMBERS BENEFIT. www.insuranceinstitute.ca/cipsociety

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Creeping CAT A recent Ontario ruling indicates a claimant who is denied a catastrophic impairment designation can dispute that finding more than two years following the determination, meaning insurers who deny related applications will not benefit from the “finality” that limitation periods afford to defendants/respondents.

Partner, Kitchener-Waterloo, Miller Thomson

THE STATUTORY FRAMEWORK Sections 279 to 283 of Ontario’s Insurance Act govern disputes over an insured’s entitlement to, or quantum of, statutory accident benefits. Section 281.1(1) of the provincial act contains a two-year limitation period for these disputes, as noted below: 281.1(1) A mediation proceeding or evaluation under section 280 or 280.1 or a court proceeding or arbitration under section 281 shall be commenced within two years after the insurer’s refusal to pay the benefit claimed. (emphasis added) Section 56 of the Statutory Accident Benefits Schedule (SABS), which came into force on September 1, 2010, also contains a two-year limitation period: 56.(1) A mediation proceeding or evaluation under section 280 or 280.1 of the Act or a court proceeding or arbitration under clause 281(1)(a) or (b) of the Act in respect of a benefit shall be commenced within two years after the insurer’s refusal to pay the amount claimed. (emphasis added)

November 2013 Canadian Underwriter

Illustration by Tomio Nitto/reactorart.com

Daniel Strigberger

The Financial Services Commission of Ontario (FSCO) Appeals Unit has upheld the arbitrator’s 2013 decision in Do v. Guarantee, finding that an insurer’s denial of a catastrophic impairment application does not trigger a limitation period to dispute that determination. The claimant, Dong Do, was injured in a motor vehicle accident on October 9, 2005. In December 2006, Do submitted an application to The Guarantee Company of North America for a determination that he sustained a CAT impairment. On May 2, 2007, the insurer determined that the claimant did not sustain a catastrophic impairment and sent him an Explanation of Benefits form (OCF-9), along with information about his right to obtain a rebuttal report. After receiving a rebuttal report and a further addendum from the independent medical examination (IME) doctor, The Guarantee sent the claimant an OCF-9 on April 10, 2008.The form reiterated its position that the claimant had not sustained a catastrophic impairment. Accordingly, the claimant applied for mediation, and subsequently arbitration at FSCO.

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THE ARBITRATION DECISION The Guarantee raised a preliminary limitation issue. The arbitrator was asked to decide whether the May 2007 or April 2008 OCF-9 forms triggered the limitation period. If the limitation period was triggered in May 2007, as The Guarantee alleged, the claimant’s applications for mediation and arbitration were time-barred. If it was triggered on the later date of April 2008, as the claimant alleged, both applications were timely. Arbitrator Suesan Alves concluded that neither the May 2007 nor the April 2008 OCF-9 forms triggered the commencement of the limitation period. The basis for the arbitrator’s conclusion was as follows: Section 281.1 of the Insurance Act prescribes a two-year limitation period for commencing a mediation or arbitration application from the refusal of a benefit. That period is extended by a further 90 days from the date of the Report of Mediator, if the mediation is commenced within the two-year period. The arbitrator noted the insurer’s determination that the insured person did not sustain a catastrophic impairment was not a “refusal of a benefit.” In any event, the arbitrator held that the insurer failed to communicate clearly that the two-year limitation period ran from the date the CAT designation was refused. Alternatively, she found that if the limitation period had been triggered, it

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was triggered by the April 10, 2008 Explanation of Benefits that followed the claimant’s rebuttal report.

THE APPEAL DECISION: DOLLARS AND CENTS On appeal, The Guarantee argued, among other things, that a denial of a CAT designation is a refusal of a benefit.To find otherwise would mean there would not be a limitation period for CAT denials, which would be contrary to the importance of limitation periods, as stated in the jurisprudence. The Guarantee also argued in the alter-

Of note, Blackman agreed with the arbitrator that the insurer’s communications to Do were not sufficient to start a limitation period in any event. He held the communications failed to advise the claimant that claims for housekeeping or attendant care benefits were being denied. native the Limitations Act, 2002 provided a “catch-all” limitation period of two years, starting from the date the claimant discovered that his claim (denial of catastrophic impairment) was denied. Director’s Delegate Lawrence Blackman dismissed the appeal and held that the arbitrator was correct.

Blackman agreed that, at first glance, the insurer’s refusal of a catastrophic determination should trigger a limitation period. However, he held that the language in section 281.1(1) of Ontario’s Insurance Act is clear; the specific limitation period does not begin to start until the insurer refuses to pay a benefit claimed. Blackman found that although a CAT determination entitles an insured to claim a greater level of benefits, the determination itself does not bestow any monetary award on a claimant. With respect to the pith and substance of the dispute resolution system, Blackman stated: The substance of this system, as stated in subsection 279(1) of the the Insurance Act, is the resolution of disputes in respect of entitlement to, and the quantum of, statutory accident benefits to which an insured is entitled. It is about dollars and cents. It is about defined benefits sought by accident victims as a result of injuries sustained in a motor vehicle accident. That is the legislative context. It is hardly “onerous,” to cite Boussali1, or requiring a “standard of perfection,” to cite Turner2, to require an insurer, in order to trigger the limitation period regarding a specific benefit, to specify the benefit or amount claimed it is refusing to pay. Blackman also rejected the insurer’s argument that the Limitations Act, 2002 applied to disputes under sections 279

to 283 of Ontario’s Insurance Act. He held that the insurer could not defeat the legislative intent of the SABS and the Insurance Act, including consumer protection, highlighted in the Supreme Court of Canada’s decision, Smith v. Cooperators General Insurance Co., by carving out a new limitation period under section 4 of the Limitations Act, 2002. Of note, Blackman agreed with the arbitrator that the insurer’s communications to Do were not sufficient to start a limitation period in any event. He held that the communications failed to advise the claimant that claims for housekeeping or attendant care benefits were being denied. He also disagreed with the arbitrator that the limitation period would have started once the insurer responded to the rebuttal report.

THE AFTERMATH OF DO A claimant who is denied a catastrophic impairment designation can dispute that determination more than two years

after the determination.This could have serious implications for insurers who deny catastrophic determination applications, as they will not benefit from the “finality” that limitation periods afford to defendants/respondents. It is clear from the appeal decision that the two-year limitation period does not start until the insurer refuses to pay a benefit. What is unclear is whether an insurer can use the opportunity to refuse a CAT determination to also refuse to pay the claimant’s entitlement to catastrophic-level benefits, such as caregiver, housekeeping or post-104 week attendant care benefits. For example, if the insurer denies a catastrophic determination after the 104-week mark, can it advise in the same letter that no further housekeeping/attendant care benefits will be considered or payable? Would that be considered a “refusal to pay a benefit claimed” in cases where the claimant has yet to claim those benefits?

In Do, the insurer sent the claimant a letter on September 4, 2007, advising that housekeeping expenses, attendant care benefits and expenses for visitors would cease at the 104-week mark as the claimant’s injuries did not meet the CAT definition. However, Director’s Delegate Blackman held that the letter did not mention the two-year limitation period or the dispute resolution process, as required by Smith v. Co-operators. This might suggest that had The Guarantee’s letter complied with Smith, the insurer might have been able to establish that it denied the benefits claimed in this letter. That said, Blackman also states in Do that “it would seem to be an absurd consequence that the limitation period begins to run prior to a benefit even being claimed, as the Appellant concedes regarding housekeeping expenses.” Is there anything more we can Do? 1 Boussali and Zurich Insurance 2 Turner and State Farm Mutual Automobile Insurance Company

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Keeping 93rd Annual Convention of the Insurance Brokers Association of Ontario, Toronto

Angela Stelmakowich Editor

Greg Meckbach Associate Editor

Pace

New challenges, new technology and new and old partnerships have charted a course that could end at better positioning for Ontario’s independent broker channel. Attendees of the Insurance Brokers Association of Ontario’s 93rd Annual Convention, held in Toronto October 23 to 25, had a chance to meet, learn and network. There were seminars, the annual general meeting (which received a visit from Premier Kathleen Wynne), luncheon speakers and the always-popular CEO Panel.

PREMIER CALLS IT “HEALTHY” TO HAVE COMPETITION IN AUTO INSURANCE Ontario’s ruling Liberals are committed to maintaining competition in private passenger auto while reducing fraud, Premier Kathleen Wynne suggested in her remarks during IBAO’s annual general meeting (AGM), held at the convention. “Competition in this industry is healthy for both drivers and for brokers,” Wynne told a room full of assembled brokers and guests. “We’re going to make it possible for you to do what you do best, to support your industry in the valuable services that you provide. We’re going to be very careful not to do anything that would threaten the viability of the marketplace

56 Canadian Underwriter November 2013

and not threaten the competition that is in place.” Wynne also assured attendees she understands more needs to be done to reduce fraud. “In order to address a 15% target, we know that more needs to be done and we are considering other actions that could help reduce costs,” she told attendees. “We are working on developing a province-wide licensing system for the towing industry, which will see us consult with our municipal partners, with the Association of Municipalities of Ontario and the City of Toronto. We are looking at storage liens and collision repair practices,” the premier added. Measures to combat fraud, like the anti-fraud hotline and adding information about fraud to The Driver’s Handbook, also have been taken. “We are requiring companies to offer lower rates to consumers with safe driving records and we will explore options, in co-operation with brokers, that could allow for the responsible use of telematics,” Wynne added.

ONTARIO TO EXAMINE ISSUE OF CREDIT UNIONS SELLING INSURANCE ONLINE The Ontario government plans to look at the issue of credit unions selling insurance products online, Premier Kathleen Wynne said at IBAO’s AGM. “We’re going to look at the issue of online selling of insurance products in the credit union industry before the end of this year,”Wynne said. During a Q&A session following her remarks, IBAO CEO Randy Carroll noted that “we work

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hard as an association from a federal perspective to make sure that we have a level playing field with banks and we appreciate your efforts to make sure we have that same level playing field with credit unions in the province.” The issue has been on IBAO’s radar for some time. In a September 2012 letter to the finance minister, Carroll noted that Regulation 237/09 of the Credit Unions and Caisses Populaires Act prohibits credit unions from selling, marketing or promoting unauthorized types of insurance. As such, IBAO called on government to enact regulatory amendments to clarify that unauthorized products which are prohibited in the “bricks and mortar” world also apply to the online world. The letter followed another in February 2012 to Philip Howell, superintendent and CEO of the Financial Services Commission of Ontario (FSCO). “Currently, Ontario credit unions are advertising insurance products and companies on their websites and providing direct links to facilitate consumer access,” it stated. “The overriding policy purpose behind the clear distinction between banking and credit union functions and insurance operations and distribution is that the former are, primarily, wealth management services, while the latter is a risk management product.The competencies required to responsibly service these very different products are not at all similar.”

BROKER ADVICE KEY TO ADDRESSING SEVERE WEATHER Insurance brokers will have an even greater opportunity to provide advice to residential customers about coverage for water damage as Canada experiences more extreme weather events, those attending IBAO’s CEO Panel heard. On the issue of water damage, “you have a real opportunity to provide great advice, advice they are not going to get in other channels,” said Maurice Tulloch, past president and CEO of Aviva Canada. Jean-Francois Blais, president of Intact Insurance, reported that the average temperature in Canada “has risen twice as much as in other countries” over the past 100 years. Blais added the insurance in-

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dustry has witnessed four consecutive years of cat losses in Canada exceeding $1 billion. Already this year, flooding in southern Alberta and in and around Toronto has produced expected insurable losses of more than $2.5 billion. “It’s about working with your markets, ensuring that you absolutely understand their coverage, ensuring that their coverage is appropriate,” Tulloch advised brokers with regard to the challenge of dealing with severe water events. Water “is certainly the major peril that we have to underwrite and, historically, we had underwritten by risk, but today we have to underwrite the weather, and that is very difficult,” said Blais.

Water “is certainly the major peril that we have to underwrite and, historically, we had underwritten by risk, but today we have to underwrite the weather, and that is very difficult.” Alister Campbell, CEO of The Guarantee Company of North America, said that the “curve ball” for the insurance industry will be water damage occurring in places where it did not normally occur in the past. Campbell suggested a lack of coverage — or higher premiums — could become a political issue. Tulloch applauded steps being taken by the Alberta government to combat the potential for flood losses, including requiring municipalities to stop approving future development in floodways.

CONCERNS VOICED OVER POSSIBLE LACK OF CAPACITY Convention attendees heard concerns voiced about the possibility that the Ontario government directive to reduce auto insurance rates an average of 15% by August 2015 could lead to capacity issues. IBAO officials had previously expressed concerns that the reduction could result in future availability and affordability issues for Ontario private auto owners.

Concern that some carriers could retract from offering auto insurance in certain areas was voiced in a question from a Brampton, Ontario broker to Premier Kathleen Wynne at IBAO’s AGM. “My understanding is that, in a limited way, that is starting to happen in some very restricted areas,”Wynne responded. “I want to be careful not to trigger that.” The possible effect on capacity was also a topic during the CEO Panel. “Some companies have more scope to reduce rates than others, but I think it’s going to cause a tightening of underwriting standards,” said Karen Gavan, president and CEO of The Economical. “I hope it doesn’t cause more foreign players to exit the market or other players who have not done well in Ontario auto to rethink why they’re selling the product here, because that would cause further destabilization across the industry.” Should there be unwise regulatory intervention on rates, Alister Campbell, CEO of The Guarantee Company of North America, said capacity withdrawal could follow.

SIX MEASURES TO HELP REACH AUTO RATE REDUCTION: TULLOCH Implementing six measures will help the insurance industry reach the Ontario government’s mandated target of cutting private auto insurance rates an average of 15% over two years, Maurice Tulloch, former president and CEO of Aviva Canada, said during the CEO Panel. “Setting targets in life is a great thing, but setting them responsibly is also critically important,” said Tulloch, who was recently named CEO of Aviva U.K. & Ireland General Insurance. He cited the need to do the following things: • revise the CAT definition; • adjust interest rates on the Statutory Accident Benefits Schedule; • stabilize minor injury guideline reform; • reduce treatment costs; • replace the bodily injury verbal threshold; and • reform the arbitration process. “Government’s got to step up and have the courage to force these things through. Otherwise, we’re not going to get there,” Tulloch cautioned.

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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

Greg Somerville (1) has been named Aviva Canada’s new president and CEO. Most recently executive vice president of broker distribution, Somerville has also served as executive vice president of claims and reinsurance, responsible for the technical and strategic direction of Aviva Canada’s national claims and reinsurance operations. Prior to joining Aviva Canada in 1992, he worked for State Farm and Liberty Mutual, notes Aviva Canada. In September, Aviva Canada announced Maurice Tulloch, then president and CEO, would lead Aviva U.K. & Ireland General Insurance. Tulloch’s appointment is subject to regulatory approval.

SCM Risk Management Services Canada (RMS) announced in October that Dianna Fioravanti (2), formerly with Economical Insurance, is the company’s new senior vice president of national sales and business development. Fioravanti will be based in Markham, Ontario. Until last May, she was Economical Insurance’s vice president of sales, distribution and underwriting operations, and had earlier served as vice president of commercial insurance. Services provided by RMS, owned by Edmonton-based

58 Canadian Underwriter November 2013

SCM Insurance Services, include residential and commercial inspections, as well as post-loss appraisals.

Property and casualty insurance brokerage BrokerLink recently added three new full-service, Ottawa-area brokerages — Baizana Insurance Brokers, Pentagon Insurance Brokers and Lalonde Insurance Brokers — to its network of offices in Ontario. Terms of the deal were not disclosed. John Baizana (3a), current president of Baizana Insurance Brokers, will be joining BrokerLink as regional branch manager for Ottawa-area operations. “The addition of these three insurance brokerages is a natural extension of our strategy to expand our offering to Ottawa-region consumers,” says Paul Meyer (3b), head of the Ontario Region at BrokerLink. The brokerages will be integrated into BrokerLink, bringing the network of offices in Ontario and Alberta to 66. BrokerLink companies, including Canada Brokerlink Inc., Canada Brokerlink (Ontario) Inc. and Canada Brokerlink Financial Inc., are subsidiaries of Intact Financial Corporation.

The Centre for Study of Insurance Operations (CSIO) has announced it has certified Northbridge

Insurance for eDocs. Several brokers and carriers have already implemented CSIO’s Extensible Markup Language (XML) eDocs, but the centre reported in early October that Northbridge is the first carrier to obtain CSIO Certification for eDocs. The eDocs standard saves brokers time, CSIO reports, because it allows them to download policy documents directly from a carrier’s computer system to a broker management system (BMS), and to store those documents in their BMS without manual intervention. XML eDocs has been available to CSIO members since March 2012. CSIO has announced eDocs will be the first business activity available for certification as part of its standards certification program.

Claims adjusting firm Cunningham Lindsey has named Terry O’Reilly (5) as its new assistant vice president, Central Region for Canada. Previously manager of the branch office in Hamilton, Ontario, O’Reilly’s appointment “finalizes the company’s restructuring to three operational regions — West Central, and Quebec & Atlantic,” the company notes. The firm’s services in Canada include commercial property and liability, personal lines, transportation fleet and environmental.

Opta Information Intelligence, owned by Edmonton-based SCM Insurance Services, has

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MOVES & VIEWS

a release from the company. ClaimsPro has more than 90 branches across the country.

10 launched a new peril-based scoring tool, aimed at determining the relative likelihood and severity of claims at a property location. Peril Score, designed to help insurers identify properties that are more at risk for specific loss perils, makes predictions for specific perils and translates that information into a combined total loss-cost estimate and normalized score. The tool uses location-specific data assets, also employing advanced predictive analytics.

Frank Cowan Company, which offers specialized insurance programs, is providing clients a web-based weather monitoring and operations management platform. Called Snowman, the platform

3b is being offered as part of a partnership between Frank Cowan and Baseline Telematics, a supplier of telematicsbased solutions for the insurance industry. Snowman seeks to help municipalities, specifically in Ontario, meet legal requirements under the Minimum Maintenance Standards legislation. Municipalities are required to “monitor the weather, both current and forecast to occur in the next 24 hours, once every shift or three times per calendar day, whichever is more frequent.” Municipalities can be held accountable in award costs should they be found 1% negligent and other named defendants cannot fund the judgment, Frank Cowan notes.

Claims adjusting firm ClaimsPro Inc. has recently named Lorri Frederick (8) as the company’s executive vice president of operations. Frederick, previously with Cunningham Lindsey Canada, will work out of Toronto, notes

The Guarantee Company of North America has launched a new business segment offering coverage for the transportation market, dubbed Guarantee Transportation Solution (GTS). The service includes a microsite and a mobile app called the Go-To Solution for brokers and customers to leverage expertise from several strategic partnerships in the transportation industry the insurer has formed for GTS. Among those partners is CargoNet, an offering for early cargo theft response; Carriers Edge, a driver training service; and some legal expense coverage through DAS. The program also includes a partnership with Crawford and Company (Canada). GTS is now available to customers in Ontario, Alberta and the Maritimes.

Jon Arnett (10) recently joined vehicle history report provider Carfax Inc. as general manager/managing director for Carfax Canada. Arnett’s previous positions have included director of product management/ development for CarProof out of London, Ontario. “Arnett brings over a decade of auto-

motive experience in Canada to Carfax, including time in the vehicle history industry,” notes Carfax. Its reports include title information, flood damage history, number of owners and accident indicators, like airbag deployments. Carfax’s data sources include provincial transportation departments, collision repair facilities, salvage auctions and insurance carriers.

The Insurance Institute of British Columbia (IIBC) has announced its 2013-2014 governing council. The new president is Jan Brownridge of Munich Reinsurance Company, who replaces Pierre Chavigny of Claimspro. The executive also includes Mark Francis, 1st vice president, academic division; Jennifer Perry, 2nd vice president, professional division; and Kerry McLaughlin, secretary/ treasurer. Other IIBC council members are: Wayne Coates, Vancouver Island chapter president; Debra Copeland, chair of marketing and communications; Sharon Knotts, chair of future directions; Lianne Crawford, chair of seminars; Manjit Biring, chair of education; Lynne Vetter, chair of events; and Janna Smart, chair of Okanagan. Follow @CdnUnderwriter on

http://twitter.com/CdnUnderwriter

November 2013 Canadian Underwriter

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AGRAQ / QRIMA (RIMS Quebec Chapter) held its 2013 Season opening cocktail on September 13. The event was held at the Montreal museum of fine arts. Guest from across Canada present at the event where offered a private guided tour of the world-renowned Chihuly glass exhibit.

60 Canadian Underwriter November 2013

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The Property Loss Restoration Expo (PLR) help Canadaâ&#x20AC;&#x2122;s largest restoration conference in Toronto, Ontario at the International Plaza Hotel from September 23-25. The event featured a tradeshow and seminars covering a wide variety of timely restoration industry topics. Over 50 exhibitors filled the exhibit hall and the tradeshow floor bustled with delegates from across Canada. The booths offered opportunities for learning, networking and sharing.

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The Association of Certified Fraud Examiners (Toronto Chapter) and the Canadian Association of Special Investigations Unit (Trillium Chapter) held the Annual Fraud Forum on September 25. The event held at Le Parc Conference Centre in Thornhill, Ontario featured a mix of both general and insurance fraud seminars, in addition to a tradeshow.

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The Harmonie Groupâ&#x20AC;&#x2122;s 2013 Fall Conference was held in Toronto at the Ritz-Carleton Hotel, September 26-28. During the Conference, The Harmonie Group and Canadian Litigation Counsel hosted a reception at the Ritz-Carleton on September 26 attended by conference delegates and industry guests. Earlier that day the two firms co-hosted a golf day at The Club at Bond Head in Beeton, Ontario.

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The seventh annual National Insurance Conference of Canada (NICC), held in Gatineau, Quebec from September 22-24, featured speakers such as Amanda Lang, Senior Business Consultant, CBC News, emcee of 2013 NICC; Dr. Kurt Karl, Chief Economist,

Head of Swiss Re Economic Research and Consulting, Swiss Re; Julie Dickson, Superintendent of Financial Institutions, OSFI, and The Honourable Jean Charest, 29th Premier of Quebec & Former Deputy Prime Minister of Canada, to name a few. In addition, there were numerous speakers on a variety of

panels as part of concurrent sessions taking place at the conference. The conference raised $19,000 through donations made in lieu of speaker gifts and a silent auction and raffle for WICC, the 2013 NICC charity of choice. Over $100,000 has been raised for WICC at NICC since 2008. [Photos courtesy of NICC].

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Professional leadership starts at the top.

At the 60th Annual General Meeting, held October 19, 2013, in Toronto, Ontario, Silvy Wright, BA (Hons), CA was elected Chair of the Board of Governors of The Insurance Institute of Canada. Ms. Wright is President and Chief Executive Officer, Northbridge Financial Corporation, based in Toronto, Ontario. T. Neil Morrison, BA (Hons), President and CEO of Hub International HKMB/Ontario Limited, was elected Deputy Chair, and J.R. (Bob) Tisdale, MBA, FCIP, CRM, President & COO, Pembridge and Pafco Insurance Companies was elected Vice Chair, Governor-at-Large. Karen Barkley, MBA, CIP, CRM, Deputy President and CUO of Elliott Special Risks, will continue in the role of Past Chair. The Insurance Institute expresses appreciation for the work of Maurice Tulloch, MBA, CMA, previously President and CEO of Aviva Canada Inc. and now CEO of Aviva UK & Ireland General Insurance, who stepped down from the Institute Board to assume his new responsibilities. Regional Vice Chairs are: Glenda Ouellette, MBA, FCIP – Western provinces; Donna Ince, CA, CIP – Ontario; François Coté, FPAA, CRM – Québec; and Darrel Coates, CIP, CRM, CFI – Atlantic provinces Divisional Vice Chairs are: Michael Wills, FCIP – Academic Julie Pingree, BA, CIP – Professionals The Insurance Institute is the premier professional education body for the property & casualty insurance industry. Its membership of over 39,000 includes 20,000 active students in its formal programs. The Institute is also the parent organization of the Chartered Insurance Professionals’ Society, which serves the needs of more than 17,000 graduate Chartered Insurance Professionals (CIP) and Fellow Chartered Insurance Professionals (FCIP). For more information, please visit our website at www.insuranceinstitute.ca

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Granite Claims Solutions, CKR Global, Rochon Engineering and Sibley & Associates (Granite Global Solutions companies) held their annual RIMS Canada Conference, Victoria, ‘Kick-Off’ reception on October 5 at The Clubhouse at the Strathcona Hotel in downtown Victoria, British Columbia.

Cunningham Lindsey held its annual RIMS Canada Conference dinner on October 5 at Café Brio Restaurant in Victoria.

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Crawford & Company (Canada) Inc. held its annual RIMS Canada Conference dinner on October 5 at Belmiroâ&#x20AC;&#x2122;s Restaurant and Lounge in Victoria, British Columbia.

SCM Insurance Services hosted a cocktail party on October 5 to help kick off the RIMS Canada Conference, Victoria at the Union Club of B.C.

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CLAIMS ADJUSTING FIRMS Crawford & Company (Canada) Inc. Enhancing the customer experience, every day. www.crawfordandcompany.com Cunningham Lindsey International independent claims services. www.cunninghamlindsey.com DSB Claims Solutions High Performance Adjusting Satisfaction Guaranteed! www.dsbclaims.com

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Delegates of the Risk and Insurance Management Society (RIMS) Canada Conference, Victoria, British Columbia laced up their running shoes for the William H. McGannon Foundationâ&#x20AC;&#x2122;s annual Fun Run-Walk early on October 6 at Beacon Hill Park. Sponsored by FM Global and Suncorp Valuations, the event raised funds for the foundation and being a RIMS Canada initiative, it was established to provide resources in the form of grants to advance risk management by way of education, research, mentorship programs and work experience programs.

About two dozen risk managers from throughout British Columbia gathered at Milestones in Victoria on October 6 for the BCRIMA Brunch, held during the 2013 RIMS Canada Conference in Victoria, B.C. this year. On the menu was good food, excellent conversation and plenty of risk talk. For more than 50 years, BCRIMA has been an integral part of promoting risk management in both the private and public sectors by providing education and networking opportunities for its members.

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The RIMS Canada Conference Victoria: â&#x20AC;&#x2DC;Discovery: 2013â&#x20AC;&#x2122;, October 6-9, kicked off the event with a welcome reception on October 6 at the Victoria Conference Centre. Delegates sampled signature martini drinks, indulged in a variety of cocktail fare and mingled with the exhibitors within the tradeshow area.

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The opening ceremonies of the 2013 RIMS Canada Conference Victoria: ‘Discovery’, held October 6-9, started with an address from John Phelps, President of RIMS. Nowell Seaman, from the University of Saskatchewan, honoured the life of Glen Frederick with a heartfelt oration. Other speakers at the opening ceremonies included: Victoria conference co-chairs Dan Heaman, Central 1 Credit Union, and Steve Matterson, BC Ferries; Betty Clarke, Chair, RIMS

Canada Council, City of St. John’s; Mary Roth, executive director of RIMS; and Joe Restoule, William H. McGannon Foundation. Plenary session, keynote and guest speakers included: Dr. Joe MacInnis speaking on ‘Deep Leadership: 5 Ways to Become a Better Risk Manager’; Colonel Chris Hadfield, astronaut and former Commander of the International Space Station, and Seth Mattison on ‘Work Force Trends and the Millennials. [with photos courtesy of RIMS Canada Council]

14 Janet G.M. Stein, director of risk management and insurance for the University of Calgary, was recognized with the country’s highest honour in risk management at the RIMS Canada Conference in Victoria, B.C.

“Throughout her career, Janet’s professionalism, superior risk management knowledge and unmatched experience has enabled her to help guide her institution and work with the Province of Alberta through some of the most complex and devastating challenges in recent history,” ORIMS president Suzanne Barrett says in a statement. During the record-breakThe RIMS Ontario Chap- ing flooding in Calgary this ter (ORIMS) presented past June, Stein worked in Stein with the Donald M. the university’s Emergency Stuart Award, bestowed an- Operations Centre. nually since 1979 to celeAmong her other many brate Canadians who have accomplishments, Stein made outstanding contrihas analyzed and implebutions in the risk manmented a variety of risk agement profession. management programs for

Canadian Underwriter November 2013

the institution, including the university’s first Master Emergency Response Plan and one of the first university risk management web sites in Canada; she has participated on a provincial committee during the 2009 H1N1 pandemic to create specific guidelines for students working in healthcare facilities; she was a co-recipient of the Les B. Strickler Innovation in Instruction Award from the American Risk and Insurance Association in 2011; and she has held numerous leadership positions on RIMS local, national and international committees. Stein is currently chair of

the new RIMS Canada Council Centralized Conference Programming Committee that works with Local Organizing Committees on the educational components of RIMS Canada Conferences. “Today’s risks continue to gain in complexity and come at us with speeds that risk professionals have never experienced before. This tends to prevent us from taking time to step back and reflect on our careers,” Stein says, extending her sincere thanks to ORIMS for the honour and for “acknowledging my passion for this truly exciting and rewarding profession.”

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1 RIMS Canada Conference Victoria: ‘Discovery: 2013’ Co-Chairs: [1a] Dan Heaman and [1b] Steve Matterson 2 RIMS Canada Council 3 Nowell Seaman honours life of Glen Frederick with tribute 4 Dr. Joe MacInnis

5 Colonel Chris Hadfield 6 Joe Restoule at 2013 RIMS Canada Conference, Victoria with McGannon Foundation ‘Student Involvement Program (SIP)’ attendees 7 Mary Roth, executive director of RIMS and John Phelps, President of RIMS

8 At the 2013 RIMS Canada Conference, Victoria, Dr. Philip Samuel Mouser, assistant vice president of Marsh Canada Limited, was presented with the 2013 Fred H. Bossons Award in recognition of the risk management professional who earns the highest marks on the three courses required to receive the CRM designation. 9 RIMS Canada Conference Victoria: ‘Discovery: 2013’ Local Organizing Committee 10 RIMS Canada Manitoba Chapter Delegation

11 RIMS Canada Conference Winnipeg: ‘Crossroads: 2014’ Co-Chairs Val Barber, Government of Manitoba and Bev Duthoit, MTS Allstream 12 Seth Mattison 13 Full House 14 ORIMS Past-President David Beal presents Janet Stein with the Donald M. Stuart Award].

13 November 2013 Canadian Underwriter

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More than 60 companies and organizations providing products and services filled the Exhibit Hall at the 2013 RIMS Canada Conference in Victoria, October 6-9.

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Continued on Page 78â&#x20AC;Ś November 2013 Canadian Underwriter

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Umbrellas were integrated into every aspect of the Travelers Canada's RIMS Canada dinner dĂŠcor, helping transform the Victoria Public Market into a truly unique space. On October 6, over 80 guests enjoyed cocktails and live swing music before moving into a distinctive dinner layout under a canopy of umbrellas.

AIG hosted its annual RIMS Canada cocktail reception on October 7 in the main Ballroom in the Fairmont Empress Hotel, Victoria, British Columbia. Guests were able to mix and connect at the reception before venturing out to other conference-related functions throughout the city.

November 2013 Canadian Underwriter

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Catlin Canada hosted a hospitality suite on October 6 at the 2013 RIMS Canada Conference at the Laurel Point Inn in Victoria, British Columbia. Invited to the event were Catlin Canada’s broker partners, risk managers and other members of the risk management community, including members of the McGannon Foundation. Catlin Canada has been a strong supporter of the

McGannon Foundation and its initiatives since 2009. The Mission of the McGannon Foundation is “to provide funding for the advancement of risk management and insurance to students, organizers and stakeholders”. In addition to providing scholarships and research grants to risk management and insurance students, the McGannon Foundation maintains a Student

Involvement Program (SIP). This program allows students that are enrolled in post-secondary study programs in risk management, insurance or related programs to attend the annual RIMS Canada Conference. This year, six students were granted SIP awards, allowing them to attend the RIMS Canada Conference. The students, along with Joseph Restoule, President of the McGannon Foundation, attended the Catlin hospitality suite whereby Greg Joyce, Catlin Canada’s Chief Underwriting Officer presented a donation for $15,000 to the foundation.

ARC Group Canada hosted a reception at the RIMS Canada Conference in Victoria at 10 Acres Bistro & Bar Market on October 7. The event included mingling and delightful appetizers and beverages.

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A.R.S. Assessment Rehabilitation Services and ProFormance Group held its RIMS Canada Conference cocktail reception on October 7 at the Bard & Banker Scottish Pub in downtown Victoria.

FirstOnSite Restoration hosted a Meet & Greet reception at the RIMS Canada Conference on October 8 at Spinakers Gastro Pub Brewpub in Victoria.

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The 6th Annual Wish Upon a Star Charity Golf Tournament was held in support of the Starlight Childrenâ&#x20AC;&#x2122;s Foundation on October 2 at Deer Creek Golf and Country Club. Generous golfers at the sold-out event teed up to help make a difference in the life of children. Tournament organizers presented more than $45,000 to the Starlight Childrenâ&#x20AC;&#x2122;s Foundation. For more than 20 years, the foundation has committed itself to improving the quality of life for children with chronic and lifethreatening illnesses and life-altering injuries. The foundation provides entertainment, education and family activities to help cope with any pain, fear and isolation associated with prolonged illness.

Canadian Underwriter November 2013

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