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
JA N U ARY 2 0 1 7 PM#40063170
Severe Burns BY GREG MECKBACH
D&O Risks BY CHRISTOPHER MUTCHESON
2016 Catastrophes BY TOM JOHANSMEYER & TED GREGORY
Bre aking news
giffin koerth has changed its name to -30-.
get the whole story at www.30fe.com
CANADIAN UNDERWRITER
VOL. 84, NO. 1, JANUARY 2017 CANADA’S INSURANCE AND RISK MAGAZINE. PUBLISHED BY NEWCOM BUSINESS MEDIA INC.
www.canadianunderwriter.ca
COVER STORY
Severe Burns
30
Recent disasters in California and Alberta serve as reminders that fire is still a commercial property hazard. While sprinkler systems can help reduce risk, some insurance professionals point out that the use of plastics in manufacturing and a lack of back-up systems for processes can exacerbate the severity of an industrial fire. BY GREG MECKBACH
FEATURES
16 46 Directors and Officers Landscape
Overland Coverage
Environmental clean-up costs and the proliferation of administrative monetary penalties remain key areas of risk for directors and officers.
Affordability of overland flood coverage is one principle espoused by the Insurance Brokers Association of Canada in its recently released flood principles document.
BY CHRISTOPHER MUTCHESON
BY GREG MECKBACH
26
55
12 Canadian Catastrophes Catastrophe frequency has been on the rise in Canada for several years and in 2016, Property Claim Services designated nine events — including the Fort McMurray wildfire — as catastrophes.
41 Privacy Breaches With draft federal regulations on breach notification expected this quarter, lawyers are warning of an increase in class-action lawsuits, especially with a court ruling that privacy breaches are common-law torts. BY GREG MECKBACH
BY TOM JOHANSMEYER & TED GREGORY
20 Marine Losses At the Canadian Board of Marine Underwriters Fall Conference, presenters spoke of the impact of recent events, including the Hanjin insolvency, the destruction of the AMOS-6 satellite and a Supreme Court of Canada ruling on dismissing workers.
50 Insurance Issues At KPMG’s 25th Annual Insurance Issues Conference, speakers discussed industry consolidation, government-mandated solvency assessments, privacy breaches and the impact of fintech. BY ANGELA STELMAKOWICH & JASON CONTANT
BY GREG MECKBACH
Home Buyers
Career Mapping
A survey of first-time home buyers reveals some pain points, such as the number of underwriting questions asked by home insurers.
Career advancement, or lack thereof, is one of the top five reasons insurance professionals consider quitting their jobs.
BY DANIEL SHUM
BY PETER HOHMAN
January 2017 Canadian Underwriter
3
Symposium Symposium CIP SOCIETY
CIP SOCIETY
2017 Symposium
The Change ursday, April 6, 2017 Imperative hursday, 6, 2017 onto BoardApril of Trade ronto Board of Trade
uring inspiring keynote speakers, a CEO lunch l and insightful seminar sessions, Symposium is the CIP SOCIETY turing inspiring keynote speakers, a CEO lunch ier industry event for GTA’s insurance professionals. el and insightful seminar sessions, Symposium is the annual event brings bright minds who mier industry event together for GTA’s insurance professionals. Thursday, April 6, 2017 oke engaging discussion about the future of annual event bringsBoard together Toronto ofbright Trademinds who ndustry. voke engaging discussion about the future of ons include: industry. Featuring inspiring keynote speakers, a CEO lunch volving Consumer Preferences: Changing Your panel and insightful seminar sessions, Symposium is the sions include: premier event for GTA’s insurance professionals. pproach to Stay industry Competitive Evolvingthe Consumer Preferences: Changing Yourwho ThisRules: annualDifferentiating event brings together minds reaking forbright Success discussion about the future of Approachprovoke to Stayengaging Competitive ocial/Sharing Economy: Implications for the Insurance our industry. Breaking Rules: Differentiating for Success dustry inthe Canada Sessions include: Social/Sharing Economy: Implications for Insurance anning for• aEvolving Catastrophe: theChanging Bar the Your ConsumerRaising Preferences: ndustry in Canada Approach to Stay Competitive more at www.insuranceinstitute.ca/symposium2017. • Breaking the Rules: Differentiating Success Planning for a Catastrophe: Raising thefor Bar
n more
BREAKFAST KEYNOTE SPEAKER
Tim Magwood
BREAKFAST KEYNOTE SPEAKER Master Storyteller & Culture Tim Magwood Catalyst—a “lightning rod inMaster drivingStoryteller positive change.” & Cultu
Catalyst—a “lightning rod in driving positive change
INDUSTRY CEO PANEL
Karen Barkley
BREAKFAST KEYNOTE SPEAKER
INDUSTRY CEO PANEL Tim Magwood President Karen Barkley Master Storyteller &Canada Culture Markel Limited Catalyst—a “lightning rod President in driving positive change.”
Markel Canada Limited
INDUSTRY CEO PANEL
•
Social/Sharing Economy: Implications for the Insurance Industry in Canada at www.insuranceinstitute.ca/symposium2017. • Planning for a Catastrophe: Raising the Bar
posium is a must–attend annual nt for savvy insurance people.” Learn more at www.insuranceinstitute.ca/symposium2017. mposium is a must–attend annual mposium 2016 Attendees ent for “Symposium savvy insurance people.” is a must–attend annual
event savvy insurance people.” ymposium 2016for Attendees
Heather Masterso
Karen Barkley
President and CEO
Heather Masters
President Travelers Canada Markel Canada Limited
President and CEO Travelers Canada
Heather Masterson
Rowan Saunders
President and CEO Travelers Canada
President and CEO RowanInsurance Saunders Economical President and CEO
Rowan Economical Saunders Insurance President and CEO Economical Insurance
—Symposium 2016 Attendees THANKS TO OUR GENEROUS SPONSORS: THANKS TOTO OUR SPONSORS: THANKS OURGENEROUS GENEROUS SPONSORS:
Book now! Visit www.insuranceinstitute.ca/symposium2017 Book now! Visit www.insuranceinstitute.ca/symposium201
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INSURANCE eford@canadianunderwriter.ca (416) 442-5600 ext. 3545 Production Manager Print Production Manager Account Manager (416) 614-5831 -5122 Michael Wells Phyllis Wright Harmeet Singh (416) 510-6788 Mary Garufi Elliot Ford Bruce Creighton canadianunderwriter.ca Vice President DIRECTORY Print Production Manager Twitter: @InsuranceCanuk (416) 510-5122 Michael Wells Gary White Circulation Manager Phyllis Wright Print Production Manager (416) 510-5117 NCE michael@canadianunderwriter.ca hsingh@canadianunderwriter.ca the insurance industry’s Print social network Production Manager mgarufi@bizinfogroup.ca mike@canadianunderwriter.ca National -5122 Manager Phyllis Wright (416) 510-6788 President eford@canadianunderwriter.ca Account Manager (416) 510-6760 INSURANCE Mary Garufi the insurance industry’s social network Phyllis Wrightindustry’s the insurance social network Alex Papanou (416) 510-5122 Twitter: @CU_Harmeet Account Manager TORY (416) 510-5122 Phyllis Wright Claims (416) 442-5600 ext. 3545 President Insurance Blogs hosted by Canadian Underwriter rd Vice President Bruce Creighton Michael Wells mgarufi@bizinfogroup.ca insBlogs DIRECTORY Manager Manual (416) 510-5117 (416) 442-5600 ext. 3652 President Account Manager Elliot Ford Subscriptions/Customer Service Bruce Creighton Account Manager insBlogs Insurance Blogs hosted by Canadian Underwriter INSURANCE nadianunderwriter.ca Property & Casualty Insurance Newswire InsuranceMarketer.com Account Manager michael@canadianunderwriter.ca (416) 442-5600 ext. 3545 President Print Production Manager Papanou rd Property & Gail Casualty InsuranceAlex Newswire Bruce Creighton Michael Wells INSURANCE eford@canadianunderwriter.ca Christine Hirst Page Vice President DIRECTORY -5117 Associate Publisher Elliot Ford (416) 510-5122 Bruce Creighton Phyllis Wright Vice President DIRECTORY christine@canadianunderwriter.ca nadianunderwriter.ca (416) michael@canadianunderwriter.ca 510-5117 gpage@bizinfogroup.ca Alex Papanou Print 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Canadian Underwriter iswww.CanadianUnderwriter.ca/MediaGroup published thirteen timesthirteen yearly (monthly + the Annual(monthly Statistical Issue) NEWCOM BUSINESS MEDIA INC. Canadian Underwriter iswww.CanadianUnderwriter.ca/MediaGroup published times yearly + thebyAnnual NEWCOM BUSINESS MEDIA INC. eford@canadianunderwriter.ca .caStatistical Issue) by linkd.in/CanadianUnderwriter instouch.com/group/CanadianUnderwriter NEWCOM MEDIAM3B INC. 2S9 InsuranceMediaGroup.com erwriter at thirteen 80 Valleybrook Drive,BUSINESS Toronto, Ontario, BY GREG MECKBACH erwriter is is located published times yearly (monthly + the Annual Statistical Issue) by NEWCOM BUSINESS MEDIA INC. Vice President 451 Dr., Toronto, ONatM9W 5C4 (416)Attwell 510-5117 442-5600. Canadian 80 Valleybrook Drive,(monthly Toronto, + Ontario, M3B Statistical 2S9 SINESS MEDIA INC. Canadian Underwriter Underwriter is is located published thirteen times yearly the Annual Issue) by InsuranceMediaGroup.com Alex Papanou linkd.in/CanadianUnderwriter instouch.com/group/CanadianUnderwriter (416) 614-2200 • (416) 614-8861 (fax) Phone: (416) 442-5600. NEWCOM BUSINESS MEDIA Canadian is at thirteen 80 Valleybrook Drive,(monthly Toronto, + Ontario, M3B Statistical 2S9 Published by Underwriter Canadian Underwriter is located published times yearly the Annual Issue) by rved. Printed in Canada. The contents of this publication may INC. not be reproduced or transmitted
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SPECIAL FOCUS
7 Editorial 8 Marketplace 58 Moves & Views 60 Gallery
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January 2017 Canadian Underwriter
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The ARC Legal Re Winter Issue – Arti A National Network of Independent Law Firms
When is a medical examination considered a second examin under Rule 36 of the New Brunswick Rules of Court?
The ARC Legal Reporter Blyth v. Crowther and Kelly Reported Case: 2009 NBCA 80 Citation: Winter IssueAt–Issue: Article #1When both the plaintiff’s physical and mental condition are in issue in
the plaintiff undergoes a physical examination, will a subsequent a psychiatric examination be considered an application for a s examination?
ood
EDITORIAL
Breaching the Topic Insurance professionals who
er & Culture are concerned about expohtning rod sure to cyber claims might ve change.” lie awake at night wondering
kley
Limited
about their insureds’ weakest links, such as the front-line workers who actually handle sensitive data. Underwriters might consider asking commercial insurance applicants how much they pay their front-line workers, compared to the directors and officers who could actually be held accountable by regulators or plaintiffs for cyber breaches. Cyber underwriters might also do well to ask prospective clients for an exhaustive list of all types of sensitive personal information in the possession of the organization, and for a list of all types of sensitive personal information over which it is anticipated the organization will have control. Is it fair to ask for such an exhaustive list, or for details on the compensation package of the lowest-paid worker with access to potentially sensitive data? It is kind of like asking an entity applying for fire insurance for details on the building construction and the local fire department. The answers may not be readily available and, therefore, the questions may be frustrating to the buyer. However, the answers are important for pricing risk and assessing whether or not the risk is actually insurable. To put it another way, is the risk of a breach of data — that the organization’s insurance buyer was unaware the orga-
Masterson
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nization even had in its possession — really unforeseen? A commercial insurance buyer who is unable to answer basic questions on what sensitive data the organization controls and who within the organization has access, could hardly be said to have a good understanding of the organization’s cyber risk exposure. After all, directors and officers of employers make decisions on how much to pay themselves and their employees, and what responsibilities their employees should have. Paying a person minimum wage does not by itself make that employee irresponsible. But if a minimum wage earner’s mistake — or lack of training — could give rise to a multi-million-dollar class-action lawsuit, it raises questions on the overall management of an organization. Questions of this nature could give rise to some risk assessment on the part of an applicant. What if the organization — and its directors and officers — are named in a lawsuit after an employee sends a snail-mail letter or email to the wrong recipient? What if it turns out that a breach was attributable to a person making $30,000 a year, but the application for cyber insurance indicated that the lowest-paid worker with access to sensitive data was actually making $45,000 a year? Would the claim be denied due to incorrect information being provided with the
insurance application? What if an employee leaves sensitive information on his or her desk in an area where physical access is not controlled — where customers, suppliers or even the general public has access? Blaming a breach on a front-line worker will probably not get a lawsuit against an organization dismissed. When considering the type of information that people expect to be kept private — such as social insurance numbers, credit card numbers, banking information and health data — it would be difficult to come up with an example of an organization that is not in the market for cyber insurance. Asking cyber insurance applicants to determine the remuneration of the lowest-paid employee with access to sensitive data could help senior managers learn more about their exposures. It could also raise questions on the selection and training of the people who are responsible for preventing data breaches. Having care and control of sensitive personal information is not a responsibility to be taken lightly. Managing an organization that handles sensitive personal information is not an easy job and it is not for everyone. Cyber coverage may be new for some, but like any other line of property and casualty insurance, it only makes commercial sense if it covers sudden and unforeseen risk.
A commercial insurance buyer who is unable to answer basic questions on what sensitive data the organization controls and who within the organization has access, could hardly be said to have a good understanding of the organization’s cyber risk exposure. Greg Meckbach Associate Editor Canadian Underwriter greg@newcom.ca
January 2017 Canadian Underwriter
7
MARKETPLACE
Claims ICBC SOFTWARE IDENTIFIES POSSIBLE FRAUD ALERTS A new analytics tool has helped the Insurance Corporation of British Columbia (ICBC) identify 3,300 possible fraud alerts on open claims in the last three years. ICBC reports it has signed a five-year agreement with BAE Systems to use the fraud analytics software and case management solution to help target fraudulent claims early in the claims process. The tool is able to quickly sift through information such as claims history, addresses, driver licensing and vehicle registration data to flag possible issues, ICBC notes. The insurer’s review of the first 102 alerts has launched 48 suspected fraud investigations. The newly identified possible frauds are in addition to the 5,000-plus claims and driver licensing investigations completed by ICBC up until the announcement in early December.
REBATES OFFERED FOR HURRICANE STRAPS Developers and property owners in Ontario’s Dufferin County are eligible for rebates if they install hurricane straps in their buildings, reports Mike Giles, the county’s chief building official and director of facilities and property. The Institute for Catastrophic Loss Reduction (ICLR), affiliated with 8
Canadian Underwriter January 2017
Western University, has partnered with the county to offer the $4.50 rebate. ICLR is kicking in $1.50 per hurricane clip; the county is contributing the other $3 per clip, Giles reports. The bands that wrap around trusses and connect to walls “can largely eliminate” risk of roof failure from an EF2 (Enhanced Fujita scale) tornado, Western engineering professor Greg Kopp has previously said.
EMISSIONS SCANDAL COULD SETTLE FOR $2.1 BILLION Canada’s Competition Bureau has reported that a settlement agreement, if approved, would provide buy-back and restitution payments to consumers in relation to emissions scandals involving Volkswagen Canada and Audi Canada. If approved by the courts, the settlement would be one of the largest consumer settlements in Canadian history at as much as $2.1 billion, the bureau notes. Its investigation found Volkswagen Canada and Audi Canada misled consumers by promoting vehicles sold or leased in Canada as having clean diesel engines with reduced emissions cleaner than an equivalent gasoline engine sold in Canada. The vehicles passed applicable emissions tests because software was installed that altered the operation of the vehicle during testing, which appeared to have the effect of reducing emissions, notes the bureau.
HIGH COURT RULES ON LITIGATION PRIVILEGE An insurer in Quebec can assert litigation privilege when the province’s self-regulating body for agents, brokers and claims adjusters demands a copy of an entire file on a claim, notes a new ruling by the Supreme Court of Canada. The court ruled against Chambre de l’assurance de dommages (ChAD), which oversees damage insurance agents and brokers, as well as claims adjusters. Essentially, ChAD wanted to force Aviva Canada to hand over a complete copy of a residential fire claim. In its November 25, 2016 ruling, the Supreme Court of Canada upheld a lower court ruling to the effect that Aviva Canada could asset “litigation privilege” against ChAD, a self-regulatory organization. There is no clear, explicit or unequivocal language “providing for the abrogation” of this litigation privilege, the high court found. “Litigation privilege can be asserted against anyone, including administrative or criminal investigators, not just against the other party to the litigation,” it added.
Reinsurance 2016 DISASTER LOSSES AT LEAST US$158 BILLION Total economic losses from natural and man-made disasters in 2016 were at least US$158 billion, 68% higher
than the US$94 billion in losses in 2015, notes Swiss Re’s latest sigma report. Insured losses were higher in 2016 at US$49 billion compared to US$37 billion in 2015, while losses from man-made disasters fell to US$7 billion from US$9 billion in 2015. The report estimates show nat-cats accounted for US$150 billion of the total economic losses in 2016, with related insured losses of US$42 billion, up from US$28 billion in 2015, but slightly below the annual average of the previous 10 years (US$46 billion).
Canadian Market FAIRFAX, ALLIED WORLD AGREE TO MERGE A merger agreement has been reached between Toronto-based Fairfax Financial Holdings Ltd. and Allied World Assurance Company Holdings AG. Valued at approximately US$4.9 billion, the merger agreement has been unanimously approved by each firm’s Board of Directors. It is subject to shareholder and regulatory approval. Allied World’s Canadian operation writes various commercial coverages, including privacy breach, directors and officers, representations and warranty and energy risks. Fairfax Financial’s operations include Northbridge Insurance and OdysseyRe.
MARKETPLACE
CANADIAN P&C OUTLOOK STABLE: MOODY’S The outlook for the Canadian property and casualty industry is stable, driven by good demand, strong underwriting discipline and solid balance sheets, notes a recent report released by Moody’s Investors Service. Despite the stable outlook, though, these trends will be offset by persistently low investment yields and potential volatility from catastrophes, the credit ratings firm notes. “Moody’s outlook could change to negative should there be a significant jump in catastrophe exposures, a 10% decline in industry capital or a drop in our GDP (gross domestic product) growth forecast to below 1%,” it states. “Factors that could drive a positive outlook include p&c pricing exceeding loss cost trends, interest rates gradually rising 2% to 3% from current levels, and/or materially stronger economic growth.”
Regulation FUNDING FOR CLEAN-UP ON ONTARIO AG’S RADAR Organizations undertaking activities with high risk of pollution in Ontario are often not required to provide financial security to ensure funds are available later for clean-up costs, notes a new report from Ontario’s Office of the Auditor General (AG). Some emitters, including privately owned landfills
accepting municipal waste, must provide financial security in the form of cash, letter of credit, securities and/or bonds. But the provincial environment ministry is not requiring that of many emitters involved in high-risk activities, the AG reports. “Our review of a sample of emitters has indicated the ministry has collected approximately $10 million less than what it estimated would be required for future clean-up,” the report states, but adds the ministry “is considering expanding the financial security requirements to activities that pose potentially significant risks.”
MANITOBA BOARD OKAYS 3.7% AUTO RATE INCREASE The Manitoba Public Utilities Board (PUB) has approved a 3.7% overall general rate increase for basic compulsory motor vehicle premiums in the province, effective March 1, 2017. The approved increase is lower than the 4.3% hike requested by Manitoba Public Insurance (MPI). PUB determined that 2.3% of the increase “is directly attributable to changes in interest rate forecasting with the balance of 2% being attributable to the volatility of the investment portfolio.”
Risk FIRE HAZARD FROM LARGE-FORMAT BATTERIES Large-format lithium-ion batteries, such as those
used in electric cars, tend to ignite more quickly in a warehouse fire and generally present a higher hazard than small-format batteries used in smartphones and laptops, notes new research from FM Global. “While the corrugated board cartons were shown to dominate the initial fire growth, the plastic content within the cartons was shown to be a driving factor in the overall commodity hazard,” adds the research, conducted in partnership with Property Insurance Research Group and in collaboration with the National Fire Protection Association’s Fire Protection Research Foundation.
Technology AUTOMATED VEHICLE PILOT LAUNCHED IN ONTARIO Ontario’s Ministry of Transportation plans to launch “the first automated vehicle (AV) pilot program in Canada,” led by the University of Waterloo, the Erwin Hymer Group and BlackBerry QNX. The pilot seeks to “advance innovation and capability in Ontario’s AV sector.” Participants in the program include the WATCar Project at the university’s Centre for Automotive Research, which will monitor a vehicle for performance and test it on-road at different levels of automation; auto manufacturer Erwin Hymer Group, which will test and monitor a van at different
levels of automation; and software development company BlackBerry QNX, which will test a 2017 vehicle with automated features.
BENEFIT IN SHARING PERSONAL INFO FOR SMART CITY PROGRAMS: GARTNER Half of the citizens in million-people cities will benefit from smart city programs by voluntarily sharing their personal data by 2019, suggests new research from information technology research firm Gartner Inc. Government chief information officers have a new sense of urgency and a willingness to experiment with smart city and open data initiatives, Gartner maintains in the research. “If managed effectively, this shift will position governments at the core of technological innovation in society,” the company notes. Gartner predicts the volume and diversity of the personal data generated by citizens will continue to grow in line with the proliferation of consumer devices and the Internet of Things (IoT). As hyperconnectivity picks up pace, citizens will be willing to proactively exchange “life data” for “in-the-moment” value, the company expects. “The city becomes ‘smart’ when the data is collected and governed in a way that can produce valuable realtime streams, rather than just backward-looking statistics or reports,” says Bettina Tratz-Ryan, research vice president at Gartner. January 2017 Canadian Underwriter
9
PROFILE
New Found Claim Greg Meckbach Associate Editor
As president of the Canadian Insurance Claims Managers Association, claims specialist Alex Lethbridge wants to raise awareness of the inter-company arbitration agreement. After almost 40 years of involvement with the Canadian Insurance Claims Managers Association (CICMA), Alex Lethbridge’s goals include raising its profile and encouraging companies to use its inter-company arbitration agreement. With the Canadian Inter-Company Arbitration Agreement, “we could curtail the legal costs considerably for our member companies,” explains Lethbridge, who was elected CICMA national president, for a one year term, at the association’s annual general meeting this past September. CICMA has chapters across Canada. CICMA’s Ontario chapter — in conjunction 10 Canadian Underwriter January 2017
with the Ontario chapter of the Canadian Independent Adjusters’ Association — is scheduled to host January 30 the 50th annual joint conference in Toronto. Scheduled to speak at this year’s joint conference is Giselle Kovary, co-author of Loyalty Unplugged: How to Get, Keep & Grow All Four Generations. Also scheduled to appear is comedian Erica Sigurdson. Lethbridge was born and raised in Paradise River, Labrador. By day, he works in St. John’s, Newfoundland as a claims specialist for Intact Insurance. The inter-company arbitration agreement is intended to provide an informal alternative to litigation when there are subrogation claims between insurance companies. “That agreement is used daily” at his company, notes Lethbridge. “We do plan — and the chapters would probably be spearheading this — to send letters to executives at big companies, reminding them of our arbitration process and our capabilities there,” says Lethbridge, who originally got involved in CICMA during the late-1970s. “The arbitration process applies to most any type of claim,” he notes of the inter-company arbitration
agreement. “There are exceptions, but even the exceptions can be sent to arbitration with special agreement by both sides,” Lethbridge adds. Most times, he suggests, insurers “confer with each other and, most times, they can reach an agreement
“The arbitration process applies to most any type of claim. There are exceptions, but even the exceptions can be sent to arbitration with special agreement.” between themselves, but if they can’t, it needs to go to arbitration and that’s where the CICMA comes in.” With the arbitration agreement, insurers would take the report of a dispute to a panel, have it arbitrated “and report the decision back to the companies,” Lethbridge explains. Before joining Lethbridge Adjusting Ltd. in the early 1970s — at the time, a St. John’s-based family firm — Lethbridge reports he spent a year working as a
substitute teacher. “That was the only other job I did besides insurance,” reports Lethbridge. “I started quite early.” The family firm has since been sold. After a short stint with the family business, he worked for St. John’s brokerage Crosbie Insurance from 1972 through 1975. “After the two years I worked as a trainee adjuster, I went to work for an insurance broker, so I was into selling for a while, but I also did claims work when I was with the broker,” says Lethbridge. “It was general claims, automobile, property and some specialties as well,” he adds. Lethbridge’s next employer — for whom he started working in February 1976 — was Insurance Corporation of Newfoundland Limited. That firm was acquired about 20 years ago by AXA Group. In 2011, Intact Financial Corporation announced that it had agreed to acquire the Canadian operations of AXA Group. “I am technically still here because Insurance Corporation of Newfoundland was bought by AXA,” Lethbridge points out. “It was ironic, because I started working for one of the smallest companies in the country and
ended up with one of the largest companies in the country.” Within a few years of joining Insurance Corporation of Newfoundland, Lethbridge became active with CICMA. Initially, he joined the Nova Scotia chapter, with which he spent about a year. “After a couple of years, myself and a couple of other claims managers here worked together to get a Newfoundland chapter” for CICMA, he relays. “That’s where I became most involved, was helping to get a chapter for Newfoundland — before it was called Newfoundland and Labrador even,” he quips. Before his election September 19, Lethbridge had been vice president of CICMA. “The year before I served as vice president, I did a term as treasurer,” Lethbridge reports. “Before that, I did a year as secretary.” CICMA’s activities include funding awards for students with the highest marks — in courses such as the Chartered Insurance Professional (CIP) and Fellow Chartered Insurance Professional (FCIP) programs at the Insurance Institute of Canada. “Most times we support the highest overall achiever
Photo: Amy Fitzpatrick
PROFILE
and, of course, we encourage claims courses as well,” says Lethbridge. “I find the organization is in very good shape with a lot of good people involved,” he says. “We are making some small improvements to help it run more efficiently. The goal is to help out the chapters and to make them run more efficiently.” Lethbridge says he does not “expect any major changes,” but, rather, there would be small “housekeeping” changes, such as making the reporting back and forth from the chapters to the national office “more efficient.” Noting that CICMA has “a new website that was
only developed last year,” Lethbridge says “there are still improvements being made there as well.” Another goal is to “make more people aware of the organization and the benefits of it,” he adds. At Intact, Lethbridge handles both commercial and personal claims. “I do a bit of everything at this stage,” he reports, adding he handles some “large complicated claims.” When he is not working as a claims specialist or volunteering with CICMA, Lethbridge enjoys both saltwater and fresh-water fishing. “I have a great love for the outdoors,” he says. “I love
hunting and fishing.” Other hobbies include carpentry and music. After more than 40 years in the insurance industry, Lethbridge finds one of the challenges facing claims professionals is weather-related natural disasters. “Down east, you have the hurricanes that blow in, and you get flooding sometimes too from storms,” Lethbridge notes. “Natural disasters are becoming quite a challenge I find for the industry as a whole,” he observes. “Each one that happens will uniquely have its own challenges. We are seeing more of them than we ever saw before.” January 2017 Canadian Underwriter
11
Beyond Fort Mac Tom Johansmeyer Assistant Vice President, PCS Strategy and Development, Verisk Insurance Solutions
Ted Gregory Director of PCS Operations, Verisk Insurance Solutions
Property Claim Services Canada has designated nine catastrophe events in Canada in 2016. Though most of the $4.9 billion insured loss arose from the Alberta wildfires, the data indicates hail and thunderstorms events are becoming more severe. In 2016, Canada experienced its most active catastrophe year in recorded history. On the surface, it may be easy to cite the effects of the Fort McMurray, Alberta wildfire. Data from Property Claim Services (PCS) indicates that there were nearly $4 billion in insured losses from the disaster, which represented the most severe wildfire in North America. The headline loss, however, obscures a number of other factors that contributed to a recordbreaking year, including a significant increase in frequency. To look only at Fort McMurray is to miss some of 2016’s most important insights. The largest Canadian catastrophe in history certainly contains lessons for the global insurance and reinsurance industry. And other events that occurred in Can-
12 Canadian Underwriter January 2017
ada in 2016 could provide food for thought for years to come. Catastrophe frequency has been on the rise in Canada for several years. The event count increased sharply from 2015 to 2016, with last year’s total coming in at 50% above the historical average of the data. Further, aggregate insured losses for the year — net of Fort McMurray — still would have made 2016 the fifth-most severe year on record with the company. For a global risk and capital supply chain looking at Canada because of Fort McMurray, it might be an opportune time to review the entire catastrophe landscape, rather than focus on a single outlier event.
2016 IN REVIEW In 2016, the nine designated catastrophe events resulted in an aggregate $4.9 billion in insured losses across the industry. Both frequency and severity increased sharply from 2015 and were well above the database’s annual averages of six events and $1.3 billion in losses. Year-on-year comparisons do not reveal much, given the magnitude of the Fort McMurray wildfire, which was responsible for approximately 81% of the year’s insured catastrophe losses, the data shows. Only a single Canadian event included in the database has exceeded $1 billion. That was the Alberta floods of 2013, with insured losses of $1.7 billion industry-wide.
Six of the nine events that occurred in Canada last year were considered “wind and thunderstorm” and amounted to $861 million in losses, the largest annual aggregate total for this storm family since 2013 (at $2.9 billion). One of them, a $370 million event affecting Alberta, Manitoba, Ontario and Saskatchewan, was the second-most severe event in 2016 and 25% larger than the average industry event loss recorded in the database since 2009. And the remnants of Hurricane Matthew led to a wind and thunderstorm event in the Maritime provinces, a $95 million loss event that remains under review. Additionally, there were two designated winter storm events. Although relatively small (together reaching $64 million in insured losses), they were the first Canadian winter storm catastrophes since 2013, when winter events resulted in industry-wide insured losses of $239 million. Since 2009, the aver-
age winter storm insured loss, across six events, has been $68 million.
ALBERTA CONCENTRATION In 2016, eight provinces sustained catastrophe losses. The annual average has been five provinces. Because of the wildfire, Alberta was the most severely affected last year. Net of Fort McMurray, the province experienced approximately $500 million in insured losses, more than twice the amount sustained by Ontario ($190 million). More than half (56%) of the year’s non-wildfire loss-
Six of the nine events that occurred in Canada last year were considered “wind and thunderstorm” and amounted to $861 million in losses.
es occurred in Alberta, followed by 21% in Ontario and 9% each in Nova Scotia and Quebec. Alberta has been the most affected province every year since 2009, with average annual catastrophe losses of $1.2 billion, a number driven higher by both Fort McMurray and the flood event of 2013. In 2014, Alberta accounted for more than half of the year’s $860 million in insured catastrophe losses and 90% of 2015 catastrophe losses. But without the wildfire, Alberta’s losses in 2016 were in line with those of 2014 and 2015. On an annual average, Ontario follows Alberta at $403 million, along with Quebec at $102 million and Saskatchewan at $59 million. Even so, the frequency of events affecting Alberta varies. As with Canada as a whole, the province was active with four events (Ontario had the same number). In 2016, only three events included Alberta, as opposed to just one
2009. Yet, an occasional major event potential consequences from Alberta to can cause the annual aggregate to spike, Ontario, and even straight down to Texas. as witnessed with the Ontario and Insurers all over North America have Alberta floods of 2013, and, of course, seen hail and thunderstorm events beLESSONS LEARNED Fort McMurray. By understanding the come more frequent and more severe. The numbers from 2016 tell a story, baseline, insurers and reinsurers can More than 93% of 2016’s non-wildfire but insight is often powerless unless it refine their thinking about catastrophe losses in Canada came from that risk, drives action. In addition to a fresh look activity across Canada. and it is a trend that bears watching and at wildfire risk — across Canada and Additionally, overlooking hail and integrating into catastrophe manageYTD 2009 2010 2011 2012 2013 2014 2015 2016 Average throughout the$ continent there are $ thunderstorm can be problematic, with Losses (in $millions) 933.50 — $ 815.00 1,610 $ 1,130 $ 3,159 $ 858 $ ment 509.40 plans. $ 4,906.2 Number of Cats 9 5 7 6 6 5 3 9 plenty of ways insurers can learn from5 Number of Cats 9 7 6 6 5 3 9 the robust catastrophe year. 10-YEAR REVIEW, CATASTROPHE LOSSES IN CANADA Some of the most important lessons $6,000 10 include benchmarking a “normal” year 9 $5,000 in Canada, focusing more on hail and 8 thunderstorms, and remembering that 7 $4,000 hurricane risk from the East Coast of the 6 $3,000 5 United States can lead to losses in the 4 Maritime provinces. $2,000 3 First, there appears to be something 2 $1,000 of a “steady state’” for losses in Alberta 1 of around $500 million per year, as well $0 - 2009 2010 2011 2012 2013 2014 2015 2016 as $1.7 billion countrywide. Net of Fort Losses (in $millions) Number of Cats McMurray, 2016 was only 23% below the annual average of $1.2 billion since Data from Property Claim Services (PCS), a Verisk Analytics business in 2014. Since 2009, Alberta has been included in an average of two events per year.
A catastrophic event
13921.1 50 50
2010 5 4
REMNANTS OF MATTHEW
Tropical events may not affect the MarFinally, the Canadian losses from the itimes frequently, but when they do, the wind and thunderstorm event gener- losses have the potential to be extreme. ated by the remnants of Hurricane MatAll eyes may have been on the loss thew amounted to almost $100 million estimates for Fort McMurray, but the in insured losses, a total that could go other eight events that occurred last higher, depending on the results of re- year demonstrate that so-called “smaller survey activities. That is roughly consis- big” catastrophe events should continue tent direct losses Super- to receive appropriate examination. The 2011 with the 2012 2013 from2014 2015 2016 Average 7 6 6 5 3 9 storm Sandy in 2012. seemingly secondary catastrophes of 6 3 7 5 2 8
PROVINCES AFFECTED BY CATASTROPHES IN CANADA 10
9
9
8
8
7
7
6
6
5
5
4
4
3
3 2
2
1
1
0
2009
2010
2011 2012 Number of Cats
2013 2014 Number of Provinces
2015
2016
Data from Property Claim Services (PCS), a Verisk Analytics business
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2016 may not have captured headlines, but they round out the picture of what is possible in Canada. Insurers and reinsurers gain the opportunity to learn more about their books of business and ensure that their catastrophe plans reflect emerging trends on the ground and result in risk transfer that is reflective of the threats 50 they face. Ultimately, there is no substitute 0 for knowledge, and last year’s activity offers plenty. The industry’s goal following an experience like 2016 should be to demonstrate a more vi brant understanding of what has just happened. The insurance industry should be able to show how activity based on insight can help protect the balance sheet, optimize resource utilization and, ultimately, grow shareholder wealth. Each loss provides significant opportunity for increasingly prudent, data-driven decision-making.
demands a decisive response. FirstOnSite has the leadership, resources and ability to manage any disaster event. Since 2007, our work has been our proof. From devastating wildfires in Fort McMurray and Slave Lake to flooding in Southern Alberta, from windstorms in Southern Ontario to Atlantic Hurricanes and an F3 tornado in Goderich, Ontario, our CAT experts have mobilized and successfully led large scale responses across the country. We are committed to providing rapid and superior disaster restoration services in times of emergency.
Visit us at firstonsite.ca/CATresponse for more information. Or call our emergency hotline at 1.877.778.6731
Personal Liability
Christopher Mutcheson
Head of Directors and Officers and Financial Institutions, Financial Lines Canada, Allianz Global Corporate & Specialty
As insurers carve back language excluding pollution clean-up in directors’ and officers’ (D&O) liability policies and regulators impose administrative monetary penalties on corporate directors, D&O programs may be hit with new claims in 2017. The liability landscape for directors and officers (D&O) is increasingly fraught with risk. Since the 2008 global financial crisis, governments have sought to hold D&Os personally liable for the actions (or inactions) of the companies they govern. In addition to action by regulators, shareholder activism, third-party funding of litigation, and lawsuits filed in foreign jurisdictions can be expected to significantly increase D&O risk exposures in 2017.
16 Canadian Underwriter January 2017
There are several key developments in D&O liability of interest to commercial liability claims professionals. The top cause of D&O claims is non-compliance with laws and regulations, followed by negligence and maladministration. Actions against directors and officers are being dismissed or resolved more slowly. This results in lengthier litigation and higher settlement expectations. Skyrocketing legal defense costs will only continue with more complex cases and third parties funding litigation. While securities class actions always get the most ink in any analysis of D&O trends, there are two areas of evolving risk in Canada that insurers and risk managers should be mindful of going into the new year. The first — for those with memories long enough — will seem all too familiar: environmental cleanup costs are once again being assessed against directors and officers personally, necessitating an insurance response. The second — administrative monetary penalties — have proliferated in recent years and may not be fully understood, or covered, by traditional D&O policies.
ENVIRONMENTAL CLEAN-UP Remediation and clean-up costs have long been banished from D&O policies through the use of broad exclusionary language. But a trend towards carving back this language in recent years combined with recent court decisions and new legislation means increased liability may be on the horizon. On December 10, 2016, the Forfeited Corporate Property Act came into force in Ontario. The act was partly in response to concerns that corporations were strategically dissolving themselves in order to avoid liability for environmental remediation costs. Under the new law, corporations must seek the consent of the province when dissolving and the Minister of Economic Development, Employment and Infrastructure may now seek an order to recover remediation costs from any person who was a director or officer in the two years prior to dissolution. There are no defences in the wording of the law. Directors and officers will be unable to claim that they did not cause the contamination or are not at fault. Their liability is absolute. The aim of ensuring that corporations take responsibility for remediation of polluted sites is laudable — why should taxpayers be expected to foot the bill when corporations use legal
Administrative monetary penalties are appealing to governments because they often allow a regulator to impose a penalty without having to hold a proceeding. manoeuvring to side-step liability? But for D&O insurers, this legislation needs to be viewed in the broader context of a trend that started with the Baker/Northstar Aerospace case. In 2012, current and former directors of Northstar Aerospace were targeted by Ontario’s Ministry of the Environment (now known as the Ministry of the Environment and Climate Change) after Northstar Aerospace obtained court protection under the federal Companies’ Creditors Arrangement Act. Ontario’s environment ministry voiced concerns that remediation work already under way at a former Northstar Aerospace facility in Cambridge would be discontinued and wanted to ensure that ongoing funding would be available. The clean-up order was challenged, but the directors were compelled to continue to personally fund the remediation while the appeal was pending. The case was eventually settled, but insurers were put on notice: a newly emboldened Ministry of the Environment would pursue the personal assets of directors and officers for clean-up costs if pursuing the corporation itself was no longer viable. And the ministry would not limit its targets to current directors — in the Baker/Northstar Aerospace case, one of the directors had ceased sitting on the board more than a year before the corporation entered restructuring. Absolute liability does not follow culpability where the environment is concerned.
Insurance Brokers Association of Ontario Elects New President
Traci Boland, CAIB
The IBAO is proud to announce that Traci Boland has been elected as its 2017 President. Traci was officially inducted at the 96th Annual IBAO Convention in October along with the 2017 Executive and Board of Directors. She formally assumed her position as of January 1st. Traci is a partner at Ontario West Insurance Brokers located in London, Ontario. She attended Fanshawe College to become a police officer, became a competitive figure skating coach in Canada, Finland and the US, and returned to Canada to join the insurance industry, obtaining her licence in 2004. Traci became partner in 2012. “It’s a privilege to serve as President of our provincial association,” said Traci. “2017 is about coming together across the industry and working towards a common goal. I’m looking forward to representing our 12,000+ members and their clients, and working with the Board to drive solutions that resolve insurance industry issues.” As President, Traci will lead the Board in setting and implementing the IBAO’s long term strategic direction. Following a formal process in the fall of surveying members and stakeholders, the association is heading into strategic planning to formalize its direction for the next three to five years. Traci will not only play an integral role in leading this process, she’ll also work closely with politicians at federal, provincial and municipal levels to advocate on behalf of consumers across Ontario. “In today’s world, it’s important consumers work with insurance brokers to ensure they have the coverage they need to protect themselves, their families and their assets,” said Traci. “Brokers bridge the gap between what’s happening around us – cyber crime, driverless cars, the sharing economy – and how consumers are impacted. We’re passionate and skilled about understanding our clients’ risk profiles and needs, and aligning them with the best available products in the market.” Traci has been very active within the broker channel. She received her Canadian Accredited Insurance Broker (CAIB) designation and Future Leaders certification. She joined the IBAO’s Young Brokers Council (YBC) in 2004, was a YBC Territory Leader for three years and served as Vice President, President and Chair. She joined the IBAO Board in 2012 and assumed the role of 2nd Vice President in 2015. “We are honoured to have Traci as our President,” said IBAO CEO Colin Simpson. “Traci’s passion for the industry, her wealth of knowledge and enthusiasm for everything she’s involved in is a great asset to the association as we embark on leading the industry to collaborative change.”
January 2017 Canadian Underwriter 17
What underwriters face now is a formalizing of the absolute liability of directors and officers for remediation costs that started with Baker/Northstar Aerospace. The trend of carving back the exclusionary language with respect to pollution claims might now risk overwhelming D&O programs with unintended claims. The pollution exclusion itself was crafted in response to these very concerns, and from the belief that these risks were more properly insured under separate cover. Robust underwrites with an eye to possible pollution exposures may be required. And underwriters should be vigilant about ensuring that their policies respond appropriately to these risks.
ADMINISTRATIVE MONETARY PENALTIES Another area that may require attention in the new year is the increasing use of administrative monetary penalties by 18 Canadian Underwriter January 2017
Directors and officers will be unable to claim that they did not cause the contamination or are not at fault. regulatory agencies. These penalties have become increasingly fashionable, and have migrated out of Ontario’s Securities Act and into a host of other legislation, including Canada’s Anti-Spam Legislation (CASL), immigration compliance regulations for employers, and environmental legislation across the country. Administrative monetary penalties are appealing to governments because they often allow a regulator to impose a penalty without the requirement of a proceeding. And a reverse onus in legislation often forces those targeted to
bring their own action against the regulator in court. In an attempt to shield these penalties from challenges under the Canadian Charter of Rights and Freedoms, administrative monetary penalties are explicitly framed in legislation as “non-criminal” and “nonpenal” — they are meant to encourage compliance, not to punish. The lack of a proceeding and the reverse onus may pose a challenge to traditional D&O insuring language. Defence costs may not be triggered when a director seeks to challenge an order. And the order itself may be insufficient to trigger the insuring agreement. There is also a public policy issue of insurability that may eventually need to be addressed. Because the fines are connected to conduct, it may be that they fall outside insurability entirely, despite the fact that they are explicitly “noncriminal” in nature. And while directors and officers rarely face personal liability under these regimes, the enforcement posture of Canadian regulators could very easily change. As these fines spread — and there is every reason to believe that they will — thought leadership in primary markets will be critical in ensuring that directors and officers are properly covered for these risks. Growing public concern over the conduct of corporations, the quality of oversight by directors and officers, and the increasing awareness of the importance of environmental protection means that risk managers increasingly look towards their D&O policies to cover ever-more complex risks, both in Canada and elsewhere in the world. Underwriters have their eyes on activist shareholders, third-party litigation funding, new whistleblower incentives in Canada and foreign torts. However, they must also look out for the changing ways in which increasingly aggressive and creative regulators are moving the bar on personal liability for directors and officers in 2017.
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Canadian Board of Marine Underwriters Fall Conference Toronto
Broken The explosion that destroyed the AMOS-6 satellite will “heavily hit the London market,” a reinsurance executive predicts, while a marine underwriting official reports about a third of Canada’s $321-million marine insurance market, in 2015, was from yacht and $55 million was from hull. Greg Meckbach
Associate Editor
There is “a lot of capacity” in the Canadian marine insurance market, the Canadian Board of Marine Underwriters (CBMU) president reported at the organization’s recent fall conference. Guest speakers gave presentations on a range of topics, including Hanjin Shipping’s insolvency, how courts use surrounding circumstances when interpreting contracts and the impact on insurance of the SpaceX disaster in Florida that destroyed the AMOS-6 telecommunications satellite.
WITHOUT CAUSE A Supreme Court of Canada ruling released last year has “huge ramifications” for employers in the trucking industry, a lawyer suggested during the Canadian Board of Marine Underwriters (CBMU) fall conference in late November. In its ruling in Wilson v. Atomic Energy of Canada Ltd. (AECL), Canada’s highest court “held that federally regulated employees cannot be terminated absent cause,” reported lawyer Rui Fernandes, whose clients include transportation and insurance companies. “So if you want to terminate someone, and you just want to give them severance pay for the notice period that normally is given, you can’t do that, which means that if you operate an airline, a shipping company, inter-provincial trucks and railways, you can’t terminate your employees without cause.” Fernandes, a partner with Fernandes Hearn LLP, made his remarks November 29 during a presentation at the CBMU conference. Member-
20 Canadian Underwriter January 2017
ship in CBMU is open to companies underwriting marine insurance in Canada. Court records indicate that AECL hired Joseph Wilson in 2005 as a buyer/order administrator. Wilson was later promoted to procurement supervisor and had a clean disciplinary record. He was dismissed in November 2009 and paid six months of severance. Wilson filed an unjust dismissal complaint in accordance with the Canada Labour Code, which gives the federal labour department the authority to appoint adjudicators to hear complaints. In Wilson’s complaint, an adjudicator ruled that the code did not allow dismissals without cause. AECL applied for judicial review to the Federal Court, which ruled in favour of AECL. The court ruling was upheld in 2015 by the Federal Court of Appeal, but overturned last year by the Supreme Court of Canada, in a divided ruling. “An employee dismissed without cause, but given reasonable notice is not wrongfully dismissed,” Justice David Stratas of the Federal Court of Appeal wrote in 2015. However, in 1978, the federal government amended the Canada Labour Code “to offer an alternative statutory scheme consisting of expansive protections much like those available to employees covered by a collective agreement,” Justice Rosalie Silberman Abella wrote for the majority of the Supreme Court of Canada, in a decision that was released July 14, 2016. Industries covered by that statutory scheme
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include, among others, airlines, banks, broadcasting, inter-provincial and international services (such as railways, telecommunications, pipelines, canals and shipping) and Crown corporations. The Supreme Court of Canada ruling against AECL “has huge ramifications for the trucking industry,” Fernandes said during the CBMU conference. “Generally it’s 180 degrees from previous position at law.” Fernandes noted there are some exceptions — such as employees who have been employed less than 12 months, and where a position has been eliminated. Section 241(1) of the Canada Labour Code — which requires employers to provide reasons for dismissal — would be redundant if employers could dismiss without cause, Justice Abella wrote. “If an employee were ordered to be reinstated under Section 242(4)(b), it could well turn out to be a meaningless remedy if the employer could simply dismiss that employee again by giving notice and severance pay,” she added on behalf of the majority. “You have to give them warnings,” Fernandes told conference attendees. “You can’t just say, ‘I don’t like you anymore, I will pay you to get rid of you.’ You can’t do that anymore.”
AGING VESSELS The marine insurance market is “very competitive,” though premiums worldwide dropped 10.5% from 2014 to 2015 due, in part, to currency fluctuations, the president of the Canadian Board of Marine Underwriters said at the organization’s recent fall conference. In Canada’s marine insurance market, net premiums written were about $321 million in 2015, CBMU president Isabelle Therrien told attendees. “The Canadian market is still very competitive and there is a lot of capacity,”Therrien reported. “There are new entrants coming into the marine market,” she said. “With respect to hull, we are faced with an aging fleet of vessels and we are also faced with larger losses this year,” added Therrien, who is also vice president at Falvey Cargo Underwriting. 22 Canadian Underwriter January 2017
Of net premiums written in 2015, $109 million or 34% was in cargo, Therrien noted. A third, or $106 million, was in yacht, $55 million (17%) was in hull and $51 million (16%) was in marine liability, she said. Those figures are approximations. Citing figures from the International Union of Marine Insurance, Therrien pointed out that the worldwide market in 2015 was US$29.9 billion, down 10.5% from 2014 as a result of mainly of currency fluctuations. Of the premiums in 2015, 25% was from hull, 53% was from cargo, 7% was from protection and indemnity, and 15% was from offshore energy. In 2016 in Canada, there was a $3.5-million fishing vessel loss on the east coast of Canada, Therrien said. Another incident last year was the sinking of a barge in the St. Lawrence Seaway
“Courts can also look at the surrounding circumstances that existed when the contracts were made.” near Montreal, where the loss repairs and salvage is estimated to be more than $1 million.“There has been another barge that broke loose in B.C., causing a diesel spill and the word is that the pollution part of it, the spill, is said to have broken the $1 million primary limit of the P&I (property and indemnity) and the loss is expected to settle at upwards of $2 million.” The Fort McMurray, Alberta wildfire “had a lot of impact” on the economy, Therrien said during her presentation, adding the Canadian economy has been “hit hard over the past couple of years,” with a decline in exports, a drop in crude oil prices and the depreciation of the Canadian dollar relative to U.S. currency. “The most recent wildcard sits with the [North American Free Trade Agreement] that President-Elect [Donald] Trump wants to renegotiate,” she said. “If and when this happens it will certainly have an impact on our economy. To what extent? Only time will tell.”
OUTSIZED ATTENTION When the Costa Concordia cruise ship capsized five years ago, it was the biggest marine loss “up to that point,” but that record was broken in late 2012 in the aftermath of Hurricane Sandy, a reinsurance professional told attendees of the Canadian Board of Marine Underwriters’ recent fall conference. Hurricane Sandy was downgraded to tropical storm status before it made landfall about 200 kilometres south of New York City on October 29, 2012. The marine loss from that storm was greater than US$2.5 billion, suggested Sean Dalton, head of marine underwriting, North America for Munich Re. At the time, Swiss Re estimated total insured losses from Sandy at more than US$20 billion. “If you look at losses during Super Storm Sandy, it wasn’t just cargo in the port areas that got damaged,” Dalton said. “It was warehouses sitting up in Secaucus, New Jersey that were completely inundated.” Dalton made his remarks at the CBMU conference during the presentation, Accumulation, modelling and CAT Management in the Marine Market. Lloyd’s reported earlier that 32 died after the Costa Concordia, which was carrying 4,200 passengers, capsized January 13, 2012 off the west coast of Italy. That tragedy resulted in “the largest and most expensive wreck removal operation in history,” Dalton said. Marine insurance is “a tiny line,” with “anywhere from 1.5% to 4%” of global property and casualty insurance premiums, Dalton explained to attendees. “But we get outsized attention, because when things go wrong, they are rather spectacular in nature,” he said. Two more recent losses “will heavily hit the London market,” Dalton suggested. One of those is the September 1 loss of a rocket and satellite. Space Exploration Technologies Corporation (SpaceX) was preparing to conduct a “pre-launch static fire test,” at Cape Canaveral, Florida, of the AMOS-6 satellite, SpaceX reported at the time. The AMOS 6 was built by government-owned Israel Aero-
A N N OU NC EMEN T As the President of IFS, Jai has focused his first year meeting with IFS brokers and identifying areas where they could help support their growth. Recent major changes; simplifying the endorsement process and introducing credit card and online payment option with our new partner KixPay as well as the addition of new sales team members are evident of their commitment to the broker. When asked about how he felt about his first year at IFS he said the following: “I am thrilled with our 2016 results. It was a great year for IFS and our partners. We are on the right track and the progressive changes we’ve made are reflected in the positive momentum. Maintaining an exceptional customer service level has been the true secret to our success. The personal touch we give to our brokers and clients is second to none. As we transition into 2017 we will continue our efforts to meet the growing expectations of our brokers across Canada and look forward to strengthening our current relationships and building new ones.” IFS are excited to introduce its growing sales team and its newest member, Kathy Walters. Kathy will represent IFS as the Director of Sales for Ontario, effective January 2017. As IFS continues to grow, we felt it was important to have a presence in Ontario to support our growing partners. Kathy brings 15 years of Insurance experience, and a passion for building relationships. Please contact Kathy directly to set up an appointment to discuss how IFS can support your Insurance financial needs. We are also excited to welcome Lynne Gerhardt as Director of Sales, Atlantic. Lynne joined IFS September of 2016 with 12 years of experience in the insurance industry. She has built exceptional relationships with the Atlantic Brokers and is looking forward to making new relationships in her role with IFS. Our Western region continues to be supported by Brenda Brelis who brings her past experience as a Broker to better understand our partner’s needs. Brenda has a strong connection with our partners in the region, and is always looking to expand our Western presence and welcomes the opportunity to introduce herself and the IFS proposition to new Brokers.
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Jai M. Laba, BComm, CAIB President, IFS Financial Services
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Lynne Gerhardt Director of Sales, Atlantic Canada lynne@ifs-finance.com
Brenda Brelis Business Development Manager, Western Canada brenda@ifs-finance.com
space Industries (IAI) and owned by Space Communication Ltd. “An anomaly took place about eight minutes in advance of a scheduled test firing of a Falcon 9 rocket,” SpaceX reported. That “anomaly” caused both the rocket and satellite to be destroyed, The Associated Press reported at the time. Israel Aerospace noted in 2012 its deal to design and produce the AMOS-6 for Space Communication was worth about
US$195 million. The payload included 45 transponders, allowing the satellite to provide communication services, including direct satellite home Internet, adds IAI. In addition to AMOS-6, another loss that will hit the London market is the bankruptcy proceedings of South Korean firm Hanjin Shipping Company Ltd., Dalton said. Court documents indicate that as of June, 2016, Hanjin had loans — of more than 3 trillion South Korean Won
— which “will mature within one year,” but which the firm will be unable to repay on time. At press time, the Canadian dollar was trading at about 900 Won. “The performance of the maritime transportation business, which the Debtor is engaged in, deteriorated since the 2008 financial crisis after a lack of demand resulting from the ongoing contraction of the global economy, which led to a reduction in cargo volume and drop in freight charges over a long period of time,” Hanjin states in a filing in a United States court, in which it seeks relief from several creditors, including BNSF Railroad, Union Pacific Railroad, CN Rail,Yusen Terminals LLC and Maher Terminals. “The Hanjin insolvency is going to bring some pretty significant container leasing losses,” Dalton argued.
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24 Canadian Underwriter January 2017
A ruling two years ago by the Supreme Court of Canada means that courts will want to “determine the intent of the parities” when presented with contract disputes, a lawyer suggested during the recent fall conference of the Canadian Board of Marine Underwriters. Court records indicate that in 2007, Creston Moly Corporation, formerly known as Georgia Ventures, agreed to pay a finder’s fee to Sattva Capital Corporation, which “introduced Creston to a potential molybdenum mining deposit in Mexico.” That fee was to be paid in Creston Moly shares or a combination in cash and shares subject to certain conditions. But the firms disagreed as to which date should be used to determine the value of the Creston Moly shares, which were trading at 15 cents when Creston Moly agreed to buy the property, but at 70 cents each when the property sale closed. An arbitrator’s 2008 ruling in favour of Sattva Capital was upheld by the Supreme Court of British Columbia, overturned by the province’s Court of Appeal and restored in 2014 by the Supreme Court of Canada. “The Supreme Court essentially clarified how you interpret contracts,” Rui Fernandes, a partner with Fernandes
Hearn LLP, told attendees during a presentation at CBMU’s fall conference. In previous centuries, interpretation of contracts “had to be considered questions of law because only the judge could be assured to be literate and, therefore, capable of reading the contract,” Justice Marshall Rothstein of the Supreme Court of Canada wrote in Sattva. But today, the interpretation of contracts “has evolved towards a practical common-sense approach not dominated by technical rules of construction,” Justice Rothstein added. “The overriding concern of the court is to determine the intent of the parities and the scope of their understanding,” Fernandes told those attending the recent CBMU conference. The Sattva ruling “did a little bit of a turn-around in saying courts can also look at the surrounding circumstances that existed when the contracts were made,” Fernandes added.
The Supreme Court of Canada also found that the standard of review, on appeal, in the Sattva case, was reasonableness rather than correctness. “In the context of commercial arbitration, where appeals are restricted to questions of law, the standard of review will be reasonableness unless the
“With respect to hull, we are faced with an aging fleet of vessels and we are also faced with larger losses this year.” question is one that would attract the correctness standard, such as constitutional questions or questions of law of central importance to the legal system as a whole and outside the adjudicator’s expertise,” Justice Rothstein wrote. But the Sattva ruling “should not be
read as holding that contractual interpretation is always a question of mixed fact and law, and always owed deference on appeal,” Justice Richard Wagner of the Supreme Court of Canada wrote in the 2016 ruling, Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., against insurers over a faulty workmanship exclusion in a builder’s risk policy. In Ledcor, “the Supreme Court said, ‘Yes we did say in Sattva that the standard of review was reasonableness, but in a standard form contract, such as insurance, it’s going to be correctness,’” Fernandes told conference attendees. The court “made a comment that contractual interpretation with a factual matrix — what was going on in the background — carries less weight in the interpretation of standard form contracts,” Fernandes explained. The Ledcor case arose when windows were damaged during cleaning on an Edmonton office tower under construction.
January 2017 Canadian Underwriter 25
Homeward Bound
Daniel Shum
Partner and National Insurance Leader, Deloitte
A recent survey of first-time homeowners indicates widespread frustration with insurers, including too many underwriting questions, lack of information in plain English and an inability to complete insurance transactions online. While evolving consumer behaviours, intensifying competition and disruptive technologies continue to create new business pressures, they are also creating opportunities — especially when it comes to the app-savvy, online consumer. Indeed, Deloitte research released in 2016 involving 25- to 40-year-old first homeowners points to both “pain points� in the overall insurance experience, and also clearly articulated areas where the property and casualty insurance sector can focus its innovation efforts. The study is based on interviews with respondents who were asked broad questions on their
26 Canadian Underwriter January 2017
thoughts on insurance and how they want their insurers to engage with them. The findings suggest that, for firms still operating largely in a legacy context, chances are good they are either not attracting as many Millennial customers as they would like, or they are frustrating the ones they do have. Specifically, respondents spoke of pain points in all four stages of the insurance customer life cycle. The first was in the discovery phase, where prospective customers seek to find the right coverage and carrier. The second was in the quote and buy phase, where the customers obtain quotes, select coverages and, ultimately, bind their coverage. The third stage is the claims phase, where customers will engage with their carriers after incurring a loss. The other phase is in servicing, where customers will engage with their carriers to make inquiries or change their policies. In general, most of the issues identified centred on an overall lack of information quality, transparency and accessibility, and on organizational responsiveness to customer needs. In the discovery phase, for example, respondents reported mistrust because of legalese and industry jargon, lack of clarity on what products/
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services might be relevant to them, and inability to find and compare coverage options. With regard to purchasing insurance, issues cited include an emphasis on both too much information and not enough customization of information to match the customer’s situation, as well as inability to complete a transaction online. Typical frustrations in making a claim include, among others, poor communication regarding important updates (for example, rate changes and claim denials) and a lack of transparency on what events are covered. Finally, overall customer engagement was seen by respondents as typically involving incomplete knowledge on policies and coverage, a lack of engagement beyond the sales cycle, and minimal recognition of customer loyalty. A case in point is Dave and Emily, a busy professional couple who are trying to close the purchase of their first home. They have their financing, but neither their realtor nor their lawyer advised them upfront that funds to close the deal cannot be transferred to the seller without insurance on the purchased property. With only a day until close, and already stressed out and overwhelmed by the process, their lawyer “reminds” them of the insurance requirement. 28 Canadian Underwriter January 2017
Upon looking at other insurers’ websites, the couple is confused by the insurance jargon, does not have answers for many of the required questions, and does not know what coverage is most appropriate for them. They worry that an insurer will not be there for them when needed most.
Respondents reported mistrust because of legalese and industry jargon, lack of clarity on what products/services might be relevant to them, and inability to find and compare coverage options. Emily discovers a digital insurance offering and finds a simple, straightforward mobile app that lets her purchase home insurance quickly and easily. There are no confusing questions and most of the required information is already automatically populated for her to validate. She obtains a quote in less than a minute. Dave and Emily proceed to purchase, and avoid costly penalties by meeting
the closing date on their new home. After moving into their new home, the insurer’s simple portal helps them manage their home insurance and other insurance. As a result, they consider their insurance provider to be a partner in maintaining the value of their home value, and come to fully appreciate the importance of their home insurance. In order to compete with the insurer selected by Dave and Emily, many p&c insurance providers have their work cut out for them. The good news is that companies in Canada are taking cues from the wider financial and banking sector in evolving their digital strategies, and these firms are poised to win their markets going forward. There is growing evidence that insurers are understanding the needs of their customers and are starting to respond with digital offerings that address many of the aforementioned pain points. These offerings would include the ability to quote and bind insurance without answering a large number of questions, policy information presented in plain English, the ability to access their policy information 24/7 and, finally, the ability to make changes to their policies anytime, anywhere without having to contact a person. Responses from the Millennials surveyed indicate that the near future is an omni-channel world for insurers where all facets of a company’s operations are designed to compete in the increasingly customer-centric universe. This means developing processes and tools that put strong emphasis on personalized service, anticipating customer needs and providing easy access to relevant information. As one research subject put it: “I found it to be just a hassle to read through all the info, as opposed to having it placed very simply in front of me so I can click through and grab what I need with an icon, or whatever the case may be.” It means being social, networked, valuecentric (incentivized, loyalty rewarding and aimed at reducing consumer cost), customizable and one-stop. Another respondent called for online services, in particular, to be modular and
interactive, with the ability to quickly and easily see how changes made to a property or insurer’s circumstance can be seen immediately and intuitively. “If we decide to add a pool... or if we get solar panels, this is what that would look like — as you slide a bar across, you can see this is what your premium is now and this is what it would be.” In a word, the focus needs to be on customer engagement — and insurers should strive for experiences that fully develop an omni-channel approach to their products and services that, in the process, also build in an emphasis on being human-centred. This includes options for human interaction through real-time tools such as click-to-chat. They should also strive to provide more advisory services, helping to educate and guide through the insurance experience. One respondent recounting a personal domicile loss recalled how the company was not able to provide even practical advice for managing the crisis, including
One respondent recounting a personal domicile loss recalled how the company was not able to provide even practical advice for managing the crisis, including first steps like securing sleeping accommodation for the night. first steps like securing sleeping accommodation for the night. Finally, insurers need to ensure that processes and an evolved online capacity to give customers what they want is mutually beneficial — to make interactions valuable for both their customers and for the organization. It is not news that digital is on everyone’s agenda, but the focus until recently
has been on explication of the problem. However, the opportunity is at hand to fully explore solutions and identify the conditions under which they can unfold. Three such conditions jump out. First, customer behaviours continue to change at a rapid pace, but customers are also open to — and interested in — seeing insurers in a better light. An essential component of this as a positive outcome is better and more frequent interaction with customers, and enabling better and more frequent customer interaction with the insurance provider. Second, simplification is key — customers desire ease of access, and want to interact with insurers in a simple, transparent way, and on their terms. Third, the time is now for insurers to find new ways to engage customers directly. There is no shortage of emerging examples of advanced digital strategies for advancing customer engagement in the industrial and service sectors, including the p&c industry.
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Severe Burns Water losses may be high on the list of claims professionals’ concerns, but disasters in Tianjin, China, Oakland, California and Fort McMurray, Alberta serve as poignant reminders that fire is still a major cause of insured loss for commercial properties. Risk mitigation measures — such as sprinkler systems — can help reduce frequency and severity. But some insurance professionals point out that the use of plastics in manufacturing, expensive equipment and a lack of alternate facilities can exacerbate the severity of an industrial fire. BY GREG MECKBACH
30 Canadian Underwriter January 2017
W
hile the number of fires causing injury or monetary loss in Ontario has dropped by 33% over 12 years, fires still cause more than $1 billion in losses nation-wide every year, and 2016’s wildfire affecting Fort McMurray, Alberta is, by far, Canada’s most expensive natural disaster when measured by insured losses. The use of sprinklers — along with the ability to monitor heating, ventilation, air conditioning and security systems — are among the factors contributing to fire safety. But experts point out that the use of plastics in manufacturing, the high cost of sophisticated manufacturing equipment and business interruption losses resulting from fire are some of the trends affecting severity. “Oftentimes, the business interruption claims are far in excess of the property loss,” says Greg Madill, executive general adjuster at SCM Insurance Services Inc.’s ClaimsPro Inc. subsidiary. Fire and explosion ranked seventh (up from eighth in 2016) on the Allianz Global Corporate and Specialty (AGCS) top 10 business risks for 2017, released January 11. Fire and explosion and natural catastrophes “are the top causes” of business interruption (BI) “that businesses fear most,” AGCS reports in the Allianz Risk Barometer, based on a survey of 1,237 respondents in 55 countries. “What I am seeing is that from a severity perspective, we have probably an increasing severity or collateral damage or other damage,” from non-residential fires, suggests Richard Smith, vice president of ClaimsPro Inc.’s specialty risk division for Ontario.
January 2017 Canadian Underwriter 31
COVER STORY
Severe Burns “When we have major industrial or commercial losses, they tend to have a bigger impact on other elements of business because everything is so interconnected these days and everything is so just-in-time these days and so we are seeing problems when equipment goes down,” reports Smith. RSA’s experience with fire claims is that there are “a lot of occurrences where there is shared loss between BI and property,” reports Ryan Jones, claims relationship manager for RSA Canada. Outside of Canada, one fire that caused BI losses was in the Chinese port of Tianjin in August 2015. The Associated Press reported at the time that explosions originated from a warehouse storing 700 tons of sodium cyanide, which can form a flammable gas on contact with water. Guy Carpenter & Company LLC reported that the fireball and shock wave from the explosion “blasted shipping containers; incinerated vehicles in the port and on an adjacent highway overpass; destroyed warehouses, production facilities and dormitories.” The Tianjin disaster was the “biggest insured loss” of 2015, Swiss Re Ltd. noted in Natural Catastrophes and Man-Made Disasters in 2015, published by the reinsurer’s economic research and consulting unit.
BUSINESS INTERRUPTION “Business interruption forms a large part of the uncertainty surrounding the ultimate loss for the insurance industry in this incident,” A.M. Best Company Inc. reported in 2015 of the Tianjin explosions. In Canada, a total of 42,753 fires were recorded in Ontario, British Columbia, Alberta, Saskatchewan, Manitoba, New Brunswick, Nova Scotia and the Northwest Territories in 2007, the Council of Canadian Fire Marshals and Fire Commissioners (CCFM/FC) reported. That was the most recent year for which CCFM/FC reported statistics. “Direct property damage from these 32 Canadian Underwriter January 2017
“When we have major industrial or commercial losses, they tend to have a bigger impact on other elements of business because everything is so interconnected these days,” reports ClaimsPro’s Richard Smith. fires” was estimated at $1.552 billion, reported CCFM/FC. The most recent year for which CCFM/FC published nation-wide statistics was 2002. That year, a total of 53,589 fires was reported, combining for more than $1.489 billion in property losses. More recent data from some provinces indicates that while the total number of fires is decreasing — despite an
increase in population — fire losses are rising. In 2014, 1,809 fires were reported to Alberta’s fire commissioner, down from 1,935 in 2013. The dollar loss was about $192 million in 2014, down from $209 million in 2013. While Alberta reported a decrease in dollar loss, Ontario’s Office of the Fire Marshall estimated losses rose 52%, from $480.6 million in 2003 to $730.5 million in 2015. At the same time, loss fires declined 33%, from 16,451 in 2003 to 10,951 in 2015. In Ontario, a loss fire is one in which there is a death, injury or an estimated dollar loss. There are “probably a number of reasons” for the decrease in frequency of fires, says Paul Hancock, vice president, global technical services, Canada and Toronto branch manager for Crawford & Company (Canada) Inc., commenting in general on non-residential fires and not on the Ontario fire marshall’s statistics. “Risk management would be one of them.”
RISK MITIGATION Examples of risk management measures include self-monitored buildings and buildings with fire and smoke detection, Hancock adds. “They have (heating, ventilation and air conditioning) systems that are monitored electronically (and) security systems that are monitored electronically,” he reports “You’ve got more sprinklered risks today than we’ve ever had, so that alone reduces the exposure.” In Winnipeg, one concern with industrial buildings is when “changes to the structure or industrial process within it are not made under permit” notes Mark Reshaur, assistant chief of the Winnipeg Fire Paramedic Service. “Changes to either can contribute significantly to the likelihood of a fire, influence a fire’s behaviour, its intensity and negatively impact the safety of building occupants and firefighters,” adds Reshaur. “When these changes are made outside of the permit process, the
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COVER STORY
Severe Burns fire prevention, fire suppression and life safety provisions are often inadequate.” Examples of permits could include those issued by the municipality or by the province. There could be “modifications to a facility or process” that city officials “may not be aware of because the proper permits or applications were not filed either with the city or other regulatory agencies,” reports a spokesperson for the City of Winnipeg. “When an occupancy permit is applied for, sealed drawings are submitted,” the spokesperson explains. “An engineer has examined the process and certified that it meets current regulatory requirements regarding the structure, the fire and life safety systems and the industrial process. They do this by affixing their seal to the plans. By making changes to the building or industrial process outside of the regulatory process, the owner is circumventing this important check in the system.” The City of Winnipeg rarely has fires in high-hazard industrial occupancies, reports Reshaur.
WASHER FLUID “The most significant in recent memory was a fire in a windshield washer fluid manufacturing facility in 2012,” he says. “Significant quantities of flammable liquid were stored on site within the building and in a rail car adjacent the structure. The fire levelled the majority of the building and threatened the surrounding businesses and community,” he points out. Reshaur was alluding to a fire at the Speedway plant in St. Boniface, estimated at the time to have caused $15 million in damage. In the aftermath, “the City of Winnipeg took a hard look at the existing inspection standards for all industrial properties,” he reports. “It was decided that all high-hazard industrial occupancies require a comprehensive fire inspection on an annual basis.” In manufacturing, an increase in the use of plastics, in the last five to 10 years, is “making for larger losses,” suggests Douglas Backes, manager of 34 Canadian Underwriter January 2017
“Significant quantities of flammable liquid were stored on site within the building and in a rail car adjacent the structure. The fire levelled the majority of the building and threatened the surrounding businesses and community,” reports Mark Reshaur of Winnipeg Fire Paramedic Service. staff claims for FM Global. Recently, Backes suggests, there was a fire in a facility with a printing press that had polyvinyl chloride (PVC) piping. “When that PVC was involved in the fire — mixed with products combus-
tion — it turned to hydrochloric acid,” Backes recounts. “So what looked to be a fire that was controlled by automatic sprinklers and the fire department and the fixed protections that were there... next thing you know, we saw rust and corrosion start to occur throughout the entire facility.” The use of plastic is “making clean-up and repair more complicated and more costly and more time as well,” Backes points out. Another issue is mould. “Just the presence of mould by itself is something that most property policies, if not all property policies... don’t insure,” Backes notes. “If you have a fire, and you get the firefighting hoses and the sprinklers going... if you don’t get the humidity out of the building, you are going to have mould. The awareness to mould, the idea of working where there is mould that is dangerous to your health... is really much greater now than it was five or ten years ago.” Backes suggests that following a fire, “both the policyholder and the insurance company sometimes need to employ industrial hygienists and we really need to be careful to remove that mould from the building, from the equipment, from the occupancy following the fire.” Costs of industrial fires “are probably escalating,” notes Hancock. “The manufacturing equipment today is considerably different than it was 20 years ago,” he reports. “It’s more computer-controlled, more robotic. I think the risks are more complex.” Hancock cites as an example a fire loss at a rocket fuel manufacturing plant. “The costs alone to deal with a small fire in that facility were astronomical compared to the size of the facility,” he reports. “The facility was about the size of a garage, but the costs were huge because of the equipment that was there.” The equipment that was lost was not easy to replace, Hancock suggests, so this resulted in downtime. “One of the things I have definitely noted in the last couple of years is there
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COVER STORY
Severe Burns tends not to be, on the industrial side of things, viable alternative operations — back-up redundant units — that can come into play,” says ClaimPro’s Richard Smith. “We used to have that on a regular basis, years back, but organizations these days are not spending the money necessarily on heavy equipment sitting around doing nothing, so they are relying on manufacturers and suppliers to get them repaired and replaced quickly, and it doesn’t always happen, particularly if you have remote-site losses.” Backes suggests that frequency and severity can be reduced when clients implement loss prevention advice. “What we see is the severity of the loss is reduced when a company installs automatic sprinklers,” he reports. “We see unsprinklered fires are seven times more severe in terms of dollars than unsprinklered fires. That’s not rocket science, but we have put kind of the statistic to the test and that just seems to be proving out year over year.” Sprinklers “are very effective, not only in sometimes extinguishing but containing the fire until fire crews get there,” reports Carol Hanke, the Calgary fire department’s public information officer. Hanke is quick to suggest that sprinklers are an advantage only when they are being maintained.
PROPER MAINTENANCE “You can put all of these systems in place and if they are not being maintained by the building manager or the building owner, then really they are not effective because they might not work when you expect them to,” Hanke warns. RSA’s Ryan Jones echoes Hanke’s comments, noting there are “losses that would not have been so large or great had the systems been maintained otherwise.” Factors affecting severity include age of the building, age of the equipment, and age of the occupancy, reports Backes. In 2001, a fire at a British Columbia warehouse, which was storing unprocessed paper, caused a loss of about $16 million, court records indicate. The warehouse was about 25 kilome36 Canadian Underwriter January 2017
“You’ve got more sprinklered risks today than we’ve ever had, so that alone reduces the exposure,” reports Paul Hancock of Crawford Canada. tres southeast of downtown Vancouver in New Westminster. A piece of paper caught fire in the exhaust grill of a forklift and drifted to a stack of unprocessed paper rolls. First Choice Logistics operated the warehouse to store products for Kruger Products LP, formerly known as Scott Paper.
Kruger’s wares include Cashmere toilet paper, Scottie’s facial tissue and White Swan paper towels, among others. Its warehouse was divided into areas “where parent rolls were stored, where finished products were stored, and where both were stored,” wrote Justice Grant Burnyeat of the Supreme Court of British Columbia in a ruling released in 2010, on a lawsuit filed by Kruger against First Choice. “The aisles in the warehouse ran in a north/ south direction and were used by the forklift drivers to access product.” Earlier, lift truck operators noticed that one forklift would “overheat due to paper debris being sucked up into the body of the vehicle by the operation of the radiator cooling fan,” Justice Burnyeat noted. “From time to time, operators also noticed that they could smell paper smouldering within the machine as a result of contact with various hot elements associated with the engine and exhaust system.” On July 31, 2001, one forklift operator “noticed a piece of paper approximately two to three feet long in the vicinity of the exhaust grill” of another forklift. “The paper was on fire,” Justice Burnyeat wrote, adding the operator of the other forklift “saw the paper drifting away from the back of the forklift. The burning paper landed at the base of a stack of parent rolls. The burning paper immediately transferred flame to the stack of parent rolls.” The building and contents — including about 3,713 tonnes of parent rolls of tissue paper and about 236,262 cases of finished paper products — were destroyed. Before the fire, Scott’s property insurer, FM Global, had “analyzed the sprinkler system of the warehouse and recommended a maximum storage height of 15 feet for parent rolls,” Justice Burnyeat noted, adding that “instructions were later received from Scott to return to the former storage heights so that the 60-inch parent rolls would be stored four high, so 20 feet in height, and the 90-inch parent rolls would be
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COVER STORY
Severe Burns
“The awareness to mould, the idea of working where there is mould that is dangerous to your health... is really much greater now than it was five or 10 years ago,” reports FM Global’s Douglas Backes. stored three high, so 22-1/2 feet in height.” Justice Burnyeat allowed Kruger to make a subrogated claim, but his ruling was overturned in 2013. British Columbia’s appeal court cited a “trilogy” of Supreme Court of Canada rulings during the 1970s, including Cummer-Yonge Investments Ltd. v. Agnew-Surpass Shoe Stores Ltd., which arose when a landlord’s insurer tried to pursue a subrogated fire claim against a commercial tenant. “Where there is in a lease a covenant by a landlord [in this case, bailor] to insure, the tenant [in this case, warehouser] should benefit from it unless there is something inconsistent with such a result contained in the lease document,” the British Columbia’s Court of Appeal ruled. “Large warehouses filled with smoke are super-dangerous for firefighters,” reports Hanke. “It is very easy to get disoriented and lost.” Pulp and paper, power generation and 38 Canadian Underwriter January 2017
steel mills are some of the more complex risks, notes Jones. Some “external forces” on the insurance market include the wildfire last May that resulted in the evacuation of Fort McMurray, Alberta. Verisk Analytics Inc.’s Property Claim Services unit estimated last summer that insured losses could be $4.67 billion, while Catastrophe Indices and Quantification Inc. (CatIQ) and Insurance Bureau of Canada released a loss estimated of $3.58 billion, subject to revision. CatIQ managing director Carolyn Rennie said this past May that in the wildfire, there were about 27,000 personal lines claims averaging $81,000 each, about 5,000 commercial claims averaging “close to” $250,000 each and about 12,000 auto claims averaging about $15,000 each.
OAKLAND TRAGEDY South of the border, a fire in a warehouse killed 36 this past December in
Oakland, California. The Associated Press reported that the building had been converted to artists’ studios and illegal living spaces. AP quoted Jill Snyder, a special agent with the United States Bureau of Alcohol, Tobacco, Firearms and Explosives, as saying there were no sprinklers or fire alarm systems in the building. Investigators told AP the fire started on the ground floor and soon was raging, with smoke billowing into the second level and trapping victims whose only escape route was through the flames. The investigators were examining a refrigerator and other potential sources. “Fires are largely caused by some type of human element action, whether it’s improperly supervised hot work in a facility, cutting and welding — things like that — or just literally putting storage too close to an ignition source or keeping people from smoking in the plant,” says Backes.
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Breach Notification Greg Meckbach
Associate Editor
Ottawa is expected this quarter to publish regulations outlining the Canada-wide data breach notification regime. Once the obligations are in force, experts warn of an explosion in privacy class action lawsuits. Federal regulations requiring organizations to notify individuals of data breaches that could potentially expose them to harm will probably be in place this year and could cause an increase in class-action lawsuits, lawyers familiar with privacy laws suggest. The Digital Privacy Act (DPA) was passed into law June 18, 2015. Tabled in 2014 as Bill S-4 by Senator Yonah Martin, DPA makes changes to the Personal Information and Protection of Electronic Documents Act (PIPEDA).
SIGNIFICANT HARM When there is a “real risk of significant harm,” an organization affected by a data security
breach would have to report that to the federal Office of the Privacy Commissioner (OPC) and any individual at risk, notes Innovation, Science and Economic Development Canada on its website. “Significant harm is defined really broadly,” Patrick Hawkins, a partner with Borden Ladner Gervais LLP recently said. “It includes the potential for damage to reputation. It includes the potential for financial loss, identity theft, negative effects on credit records.” Hawkins, who has represented healthcare organizations, made his remarks during the November luncheon of the Property Casualty Underwriters Club (PCUC). The mandatory breach notification provision will not be in force until new regulations are passed and, as of press time, the federal government had yet to say when that will be. “We don’t have a timeline on when they are going to be in force,” Hawkins said. “I will say best guess is some time in 2017.” Another lawyer, Imran Ahmad, said in an interview that he heard “through the grapevine” that “there is probably going to be an announcement come February or beginning of March that the regulations are coming into force either by
January 2017 Canadian Underwriter 41
the end of Q3 or by Q4 2017.” Ahmad, Toronto-based partner at Miller Thomson LLP, specializes in data breach incident preparedness and response. “We suspect it is going to be very similar to what you have in Alberta” where there is mandatory breach notification, Ahmad says of the new regulations. Alberta’s Personal Information Protection Act requires private sector organizations to notify individuals of “loss or unauthorized access to or disclosure of personal information” when there is “a real risk of significant harm,” the provincial government states on its website. Many of the health privacy laws across this country have breach notification requirements, but currently with respect to ordinary businesses Alberta, is the only province that has mandatory notification,” David Fraser, then branch section chair of the national privacy and access law section of the Canadian Bar Association, told the Senate Standing Committee on Transport and Communications in 2014. “We have found that because of that, with large organizations that operate across Canada, they comply with Alberta’s requirements and do notification across the country,” Fraser said at the time during hearings on Bill S-4.
GROWTH INDUSTRY “I anticipate a significant increase in litigation once mandatory data breach notification kicks in,” Ahmad told Canadian Underwriter last December. “You see what happens in the U.S. Anyone can go on the Attorney General’s website of any state. They will see the breach that’s occurred, and class action lawyers, media folks, other people see that notice and it just leads to litigation right away. I expect you are going to see more of that in Canada starting whenever the notification comes in.” Echoing Ahmad’s concerns, Hawkins warned at the PCUC luncheon of a “growth industry” in class action lawsuits alleging privacy breaches, due, in part, to the Court of Appeal for Ontario ruling in 2012 in Jones v.Tsige.
Sandra Jones had sued Winnie Tsige, one of her co-workers at the Bank of Montreal (BMO). Tsige was involved in a relationship with Jones’s former husband. Jones was also a BMO customer. Court records indicate that Tsige accessed and reviewed Jones’s bank records on 174 occasions in 2006 through 2009 and that Tsige wanted to confirm whether or not Jones was receiving child support payments. Initially, Jones’s lawsuit against Tsige was dismissed, in 2011, by Ontario’s Superior Court of Justice, which found that Ontario does not have a tort of invasion of privacy.
“I anticipate a significant increase in litigation once mandatory data breach notification kicks in.” NEW TORT But in overturning that ruling the following year, the Court of Appeal for Ontario recognized the common law tort of “intrusion upon seclusion.” The court ruled that changes in technology pose “a novel threat to a right of privacy that has been protected for hundreds of years by the common law” and by the Canadian Charter of Rights and Freedoms. In ruling in favour of Jones, the Court of Appeal cited the 2006 decision from Ontario’s Superior Court of Justice in Somwar v. McDonald’s Restaurants of Canada Ltd. “With advancements in technology, personal data of an individual can now be collected, accessed (properly and improperly) and disseminated more easily than ever before,” Justice David Stinson wrote in Somwar. “The traditional torts such as nuisance, trespass and harassment may not provide adequate protection against infringement of an individual’s privacy interests.” So in Jones v. Tsige, the Court of Appeal for Ontario really created a new tort, Hawkins notes.
“On the healthcare side, there has been mandatory notification of individuals since 2004,” Hawkins told luncheon attendees. “We have seen the notice often creates the complaint and leads to a class action.” Lawyers at Miller Thomson are starting to field questions about the Digital Privacy Act, Ahmad suggests. “What we anticipate is there is going to be an intense period of education for clients in terms of what they need to do,” he predicts. “The challenge is the regulations haven’t been finalized or released yet.” Without the new regulations, “businesses are not obligated to notify Canadians of security breaches involving data under their control,” James Moore, then Canada’s industry minister, told the House of Commons Standing Committee on Industry, Science and Technology in February 2015, during hearings on Bill S-4. “In other words, if a company’s data is compromised and a hacker gets a hold of your credit card number, the company is not under any obligation to notify you,” Moore said at the time.
RECORD KEEPING The Digital Privacy Act also requires “organizations to keep records of data breaches of any kind,” privacy commissioner Daniel Therrien said during the same committee hearing. “Let’s say a misprinted address label goes out in the mail that includes in the address window the party’s age,” said David Elder. special digital privacy counsel for the Canadian Marketing Association, before the Commons industry committee in early 2015. “That’s a breach, a piece of personal information tied to an identifiable individual. Let’s say you’re in a store and the clerk leaves somebody’s order printed out on the counter while he turns to get the phone and it’s visible to other consumers and all that may have been disclosed was somebody’s shoe size. That’s a breach. A record would have to be kept for each of them under this law and retained indefinitely until January 2017 Canadian Underwriter 43
the OPC requested it.” Companies who reviewed breaches and “found that there is no risk of harm” are still “required to maintain a record on those,” Chris Padfield then director general of Industry Canada’s digital policy branch, said during the committee hearing. The OPC “could ask the individual company to report all of those records to them at any time,” Padfield added.
ACCOUNTABILITY MECHANISM “Requiring organizations to keep and maintain a record of every breach and provide our office with a copy of such record on request are important accountability mechanisms that will allow our office to evaluate compliance with the notification provisions and assess how organizations are making the determination whether
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to notify,” Patricia Kosseim, OPC’s senior general counsel, told the Senate transport and communications committee in 2014. The following year, Padfield was asked by then-New Democrat MP Charmaine Borg whether or not small and mid-sized businesses would be “given tools to guide them as they try to figure out whether a breach poses significant harm.” Padfield told the Commons industry committee that “there are lots of things that have to be established through regulation.” With DPA, PIPEDA will give the federal government “the authority to list the types of information that must be included” in a breach notification report “and to specify a particular form and manner for such reports,” ISED states on its website. But it is not clear yet how those records should look, Ahmad says. “If I lose, let’s say, a USB key in my office that had my client information on it, for example, what does that log look like?” asks Ahmad. “Is it just an incident description? How long do I have to keep it? What level of granularity has to be provided? Do I have to explain what remedial action was taken and whether it was found later on? That is where the details are missing and that is where the regulations will be particularly helpful.” The federal government is “looking for the most simplistic ways we can have in terms of reporting, in giving out clear guidance,” Padfield told the Commons industry commitee in 2015. “We’ll work with the privacy commissioner’s office once the provisions are in place to come up with really clear, straightforward guidance for small companies,” he said. “We are conscious of the fact that this does apply all the way from the mom-and-pop shop up to the major multinational corporations that are better prepared for these kinds of things,” he added. Organizations that “deliberately cover up privacy breaches and destroy records will face fines of up to $100,000 for ev-
ery person or client that they intentionally fail to notify,” Moore told the committee in 2015. Penalties under DPA “are pretty clear,” Imran said in an interview in December 2016. “It is going to be up to $100,000. We don’t have to wait for the regulations to come out for us to know what the amounts are going to be like.” One data breach resulted in a class action lawsuit against Home Depot of Canada Inc. and its corporate parent. “Between April 11, 2014 and September 13, 2014, there was a data breach at Home Depot,” Justice Paul Perell of Ontario’s Superior Court of Justice wrote in a ruling released this past August. “Its payment card system was hacked by criminal intruders using custom-built malware to clandestinely breach Home Depot’s computer system.”
ers Equifax credit monitoring at no charge, Justice Perell wrote. The retailer also offered “Equifax identity theft insurance through an AIG policy” and credit repair services from AllClear ID, Inc,” he noted. AllClear ID’s services “provided access to investigators who would determine if the customers had suffered fraud or identity theft and would assist them in
recovering financial losses and restoring their identities to proper conditions,” he added. In general, organizations responding to data breaches will offer credit monitoring and “are trying to negotiate that into their insurance policies for that to be covered,” reports Ahmad, adding that cyber insurance “will typically cover the cost of regulation.”
PROPERTY RESTORATION SPECIAI..ISTS
“Significant harm is defined really broadly.” In that ruling, Justice Perell approved a settlement agreement signed in early 2016. As part of the settlement agreement — valued at $400,000 — Home Depot agreed to create a non-reversionary fund of $250,000 “for the documented claims of Canadians whose payment card information and/or email address was compromised as a result of the data breach during the data breach period.” There was no evidence that any plaintiff in the class-action lawsuit absorbed a fraudulent charge, Home Depot customers who inserted chip cards and entered a PIN were not affected and the “only affected purchasers were those that used their payment card by swiping its magnetic chip through the card reader at self-checkout terminals... that had been infected by the malware,” Justice Perell noted in his ruling.
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Flood Money
While the federal government continues to “explore options” for a national approach to flood insurance, a major reinsurer warns coverage is unaffordable to many high-risk properties. Greg Meckbach
Associate Editor
The Insurance Brokers Association of Canada (IBAC) contends that flood insurance should be affordable to all Canadians who need it, but coverage is either not available or “preventatively high” for about one in 30 homes, Swiss Re reports. While Britain and the United States have subsidy programs, the Canadian government has not specifically committed to providing a similar subsidy. “Public Safety Canada continues to work with key stakeholders, including provinces and territories and the Insurance Bureau of Canada (IBC), to explore options for a national approach to facilitate the entry of the insurance industry into the residential flood insurance market,” a federal government spokesperson writes in an email to Canadian Underwriter. “Among other initiatives, federal, provincial and territorial governments are currently working to leverage national flood mapping and risk assessments to inform decisionmaking, and to determine how to better promote public education and flood risk mitigation.” Overland flood insurance for residential properties was generally unavailable in Canada until 2015. Before 2013, Canada’s most expensive natural disaster, by insured losses, had been the ice storm in 1998 that affected Quebec and eastern Ontario.
46 Canadian Underwriter January 2017
Then in June 2013, southern Alberta was affected by floods that inundated downtown Calgary and resulted in the evacuation of several communities, including High River. Total economic losses were approximately $6 billion, but the insured loss was about $1.7 billion, mainly from sewer back-up, Bill Adams, IBC’s vice president, western and Pacific, reported earlier. Less than a month after the Alberta floods, two separate storm cells hit the Toronto area. While the normal rainfall for the entire month of July is less than 75 millimetres, Toronto International Airport got 126 millimetres on July 8, 2013. Insured losses were about $1 billion.
TASK FORCE IBAC later formed a task force to study overland flood and water damage. “We learned about flood insurance in other countries,” then IBAC president Lorne Perry said in October 2015 at the annual members meeting of the Insurance Brokers Association of Ontario, where he was a guest speaker. “We learned that flood maps in Canada need to be greatly improved,” Perry noted. The task force completed a flood principles document, which IBAC provided to Canadian Underwriter in December 2016.
Personal flood insurance should be “available to Canadians who need insurance,” and “must be affordable,” IBAC states in its flood principles document. “There must be a partnership of the public and private sectors that is clearly understood by all.” IBAC suggests that while government “should not be an insurer of first resort,” government should be available to provide a “backstop to catastrophes.” In Canada, water protection coverage has “now become prevalent with the vast majority of nationwide insurers in various phases of roll-out across the country,” Willis Re, Willis Towers Watson plc’s reinsurance intermediary, notes in its 1st View report, released January 3.
UNAFFORDABLE “Fortunately, various Canadian insurance companies are working to offer more comprehensive flood coverage, which contributes to reducing the flood protection gap,” Balz Grollimund, head of underwriting for Canada and the English Caribbean at Swiss Re, reports in a statement. “However, flood insurance continues to remain either not available or unaffordable for Canadian property owners in areas with high flood exposure,” Grollimund continues. Maz Moini, vice president of commercial lines and reinsurance at Aviva Canada, told Canadian Underwriter earlier that with some properties, the “actuarially sound premium” could exceed $10,000 a year. An assessment by Swiss Re found that “9% of Canadian homes are located in a 100-year flood zone and can be considered at risk for severe flooding,” notes Grollimund. “For these homes, and especially the ones located within the 10to 50-year flood zone, which affects 3% of all homes, flood insurance is either not available or the premium is preventively high,” he adds. In its 2014-2015 budget, tabled about three years ago by then-Conservative finance minister Jim Flaherty, the federal government announced it “proposes to consult with the insurance industry, provinces and territories to explore options
for a national approach to residential flood insurance.” The Liberals came to power in 2015. IBC is “advocating for a public-private partnership that would see more of the water risks in Canada taken on by the private sector, but for government to formalize its role in providing both support to get people out of harm’s way — to prevent them from building in floodplains — and to ensure those who are at highest risk would also continue to have some type of insurance coverage,” Adams reported earlier. In 2015, Don Forgeron, president and chief executive officer of IBC, said new residential flood products in the Canadian market “will likely not deal with all of the high-risk properties” and suggested “government involvement” is likely needed to cover those high-risk properties.
“9% of Canadian homes are located in a 100-year flood zone and can be considered at risk for severe flooding.” Forgeron made his comments in 2015 during the National Insurance Conference of Canada (NICC). How government involvement in flood insurance would work in Canada is “one of the key public-private discussions that we are going to need to engage in the immediate future,” Craig Stewart, IBC’s vice president of federal affairs, suggested in early 2016 during CatIQ’s Canadian Catastrophe Conference in Toronto. “There will be those who find themselves in homes that are flooded over and over and over again, and they are going to be the ones that will have difficulty getting insurance,” Stewart said. “So a robust solution that’s going to work for all Canadians — when will that be available? That will depend on societal decisions with governments on how we are going to roll out to make sure that those Canadians aren’t left behind.” A “good example of how flood insur-
ance can be made available to everybody” can be seen with Flood Re in the United Kingdom, Grollimund contends. Flood Re, a special purpose vehicle and a not-for-profit monoline reinsurer, was launched in April 2016. It is subsidized by a tax levied on all insurers offering home insurance in the U.K. — a combined total of 180 million pounds to the industry. Each insurer is charged based on market share. “The premium we charge insurers is below the rates insurers would normally charge on properties at the highest risk of flooding,” Flood Re reports.
CROSS-SUBSIDY This way, there is a cross-subsidy from about 98% of the U.K. population to high-risk property owners, Brendan McCafferty, then Flood Re’s chief executive officer, reported at the 2015 NICC. Flood Re estimates that, “over time, around 350,000 households could benefit” from the program. “With Flood Re, the U.K. government is taking the steps necessary to support insurers and help at-risk households obtain affordable flood insurance,” Grollimund contends. Forgeron suggests “there is no single correct answer, and certainly no flood insurance model elsewhere in the world that can serve as an off-the shelf solution for us here in Canada.” IBC was taking the approach of studying “what is in place elsewhere,” and to “identify best practices that could be applied,” he said at the 2015 NICC. “The big variable for us is the role that government can play,” he said. “Do they run the program, as they do in some jurisdictions? Or do they simply enable it by fostering the conditions necessary to make sure flood insurance is available? Or is it somewhere in between?” The United States government created its National Flood Insurance Program (NFIP) “in 1968 to provide flood coverage to consumers who were unable to get coverage from the very limited private market,” Emanuel Cleaver, a member of the United States House of Representatives, said at a hearing in January 2016 January 2017 Canadian Underwriter 47
The Restoration Contractors Organization of Canada (RCOC) Announces Executive Appointments The Restoration Contractors Organization of Canada (RCOC) is pleased to announce the following executive appointments:
Kabir Shaal Executive Director Kabir Shaal has been appointed as Executive Director of the RCOC and will work closely with the Board on RCOC’s various projects and initiatives. Please join us in welcoming Kabir to his new role. He can be contacted at kabir.shaal@rcoc.ca Ken Tucker has completed his term as Chair of RCOC and will be replaced by Will Cook, President, Belfor (Canada) Inc. Belfor is one of the founding members of RCOC and Will has been on the RCOC Board of Directors since inception. Mike Sully (On Side Restoration) is retiring from the RCOC Board and will be replaced by Craig Hogarth, President, On Side Restoration. “Ken Tucker and Mike Sully have been great assets to the RCOC. Their contribution to the leadership and direction of the Organization has placed us in a good position going forward. I’d like to thank them both for their hard work and advice over the years.” – Will Cook, Chair RCOC
About the RCOC
The Restoration Contractors’ Organization of Canada is a non-profit association that represents the interests of 75% of the fullservice restoration contractors in Canada.
Will Cook Chair Since 2010, the organization has worked on matters relating to health & safety, governmental and regulatory affairs, and business practices. The RCOC is a run by an eight-member Board consisting of six Directors, a Vice Chair, and a Chair as well as an Associate Member representing the Restoration Industry Association (RIA). An Executive Director manages day-to-day operational matters. The Board meets regularly and conducts an Annual General Meeting that is open to all members.
Craig Hogarth Board The RCOC offers educational courses through an agreement with the Restoration Industry Association (RIA). The Canadian Council of the RIA oversees the educational agreement as well as other matters related to the RCOC and RIA. Members of the RCOC sit on the RIA Canadian Council. The RCOC’s 2017 Board is as follows: Will Cook (Chair), Belfor (Canada) Inc. Glenn Woolfrey (Vice Chair), Winmar Canada
All of the RCOC’s members service the insurance industry. Therefore, a core component of the RCOC’s mandate is to promote professionalism, training, and development amongst its members so that customers receive high-quality service that is transparent, consistent, and effective.
Bill Dietz, Paul Davis Canada
Its members invest significantly in specialized equipment and training. They employ sophisticated safety programs and carry appropriate insurance coverage. They operate 24 hours a day. Their employees are properly vetted. All members offer consistently high standards that ensure the well-being of employees and the satisfaction of customers.
Chris Schmidt, DKI Canada Ltd.
Stephan Roy, ServiceMaster of Canada Ltd. Kevin Clarke, FirstOnSite Ltd. Frank Mirabelli, First General Canada Craig Hogarth, On Side Restoration Services Ltd. In addition, Kabir Shaal is the RCOC’s Executive Director and Steve Whittick is the Associate Member representing the RIA.
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of the House financial services committee’s subcommittee on insurance. At the time, the subcommittee was studying the Flood Insurance Market Parity and Modernization Act, passed last year by the House, but not by the Senate. That bill, if passed into law, would “allow private insurers to come into the flood insurance market, creating competition and choice in policies,” stated Dennis Ross, the Republican congressman who sponsored the bill. Speaking against the bill was Birny Birnbaum, executive director of the Center for Economic Justice, a Texas-based organization that advocates for availability and affordability of insurance. “There is no insurance mechanism — public, private or combo — that will be able to finance increasingly frequent and severe flooding, and a focus on resiliency and sustainability means federal expenditures as investments today, to replace disaster relief expenditures tomorrow,” Birnbaum argued before the subcommittee.
NFIP policies cover building and/or contents, including the foundation, the electrical and plumbing system as well as central air conditioning, furnaces and water heaters, the U.S. Federal Emergency Management Agency (FEMA) reports on its website. NFIP also covers refrigerators, stoves, dishwashers and permanently installed carpeting. Contents coverage includes
INDEBTED TO TREASURY NFIP “was set up to be self-funded and to repay its borrowing with interest,” Standard & Poor’s Financial Services LLC notes in a report released this past June. “But that’s exceedingly difficult given that it doesn’t charge actuarial rates and, therefore, relies on the Treasury as a backstop.” NFIP is “now indebted to the U.S. Treasury to the tune of (US)$23 billion, most of which it borrowed after Hurricane Katrina,” S&P adds in the report, Privatizing U.S. Flood Insurance: A Trickle-Down Effect, Or Opening Floodgates? “That 2005 disaster alone cost the NFIP (US)$16.3 billion,” it adds. NFIP also had to pay out US$8 billion in 2012 after Hurricane Sandy, which was downgraded to tropical storm status before it made landfall about 200 kilometres south of New York City. “The NFIP’s losses since 2000 have totalled (US)$42 billion,” S&P reports. “As of 2015, the NFIP had 5.2 million policies in force covering (US) $1.3 trillion worth of property,” the company adds.
clothing, furniture, electronic equipment, curtains, washing machines and clothes dryers, among others, FEMA states. A property cannot qualify for NFIP unless it is in a community that has joined NFIP and agrees to enforce certain floodplain management standards. “The NFIP is not only responsible for providing flood insurance, but for providing flood maps and promoting mitigation activities,” Cleaver said during a committee hearing in 2016. In Canada, “there must be a common standard for flood mapping that will be used across the country,” IBAC states in its flood principles document. IBC reported in 2016 that it had “received the results” of flood hazard maps and property-level exposure data developed by a group led by RELX Group plc’s LexisNexis Risk Solutions unit. “Essentially, what it does is the company took river gauge and rainfall data to measure flood extent and depth,
flood defence information, historical flood records, snowmelt and terrain data,” Stewart said in 2016 during the panel discussion, Floods: Where do we Stand and What’s Next?, at the Canadian Catastrophe Conference. A co-panelist was Kurt Kornelsen, network manager for FloodNet, a network of researchers. Some models used to forecast future weather patterns give a “range of possible outcomes,” Kornelsen said at the time, telling attendees that one of the problems is municipal engineers need to “make a single decision” when planning for future flood frequency. In 2006, the City of Toronto approved the Basement Flooding Protection Program, which includes construction of surface storage ponds and upgrades to storm and sanitary sewers. About $1.527 billion has been allocated to the city’s 2017-2026 capital plan for “projects in 67 chronic basement flooding areas across the city,” notes an October 2016 report from Toronto Water. As part of that program, the city’s service standard requires storm drainage systems to accommodate one-in-100year storm events — up from the onein-two- to one-in-five-year frequency events. The program was one response to a 2005 summer storm that Property and Casualty Insurance Compensation Corporation previously reported gave rise to almost $600 million in insured losses. In a report released in 2013, city staff identified issues that can lead to basement flooding. One is when the sanitary sewer system is overloaded. This can cause storm runoff to enter the system through various points, such as maintenance hole covers, flood drains of flooded basements, surcharged storm sewers leaking through cracked pipes, illegally connected downspouts to sanitary sewers and illegally connected private catchbasins. “Mitigation education is paramount for the entire sector to advance at every possible opportunity,” IBAC maintains in its flood principles document. January 2017 Canadian Underwriter 49
KPMG’s 25th Annual Insurance Issues Conference Toronto
Risk and Disruption The threat of extortion-driven cyber attacks is “a massive issue now” for insurance companies, while insurers’ own risk and solvency assessments have been “quite well done,” speakers told attendees of KPMG’s recent insurance issues conference. Angela Stelmakowich Editor
Jason Contant
Online Editor
At KPMG’s recent Insurance Issues Conference, speakers explained how insurance providers are responding to fintech, the challenge of assessing the impact of cyber risk on solvency and the risk to insurers of data breaches affecting healthcare organizations. One expert further suggested that industry consolidation could lead to fewer mid-sized players.
CYBER RISK Data breaches involving personal and healthrelated information are a “huge risk for those in the insurance industry” given that the shelf-life of the data likely runs as long as the affected individual remains alive, Kevvie Fowler, national leader of cyber response for KPMG in Canada, suggested at KPMG’s 25th Annual Insurance Issues Conference, held this past December in Toronto. Fowler made that observation during a panel discussion, Navigating today and tomorrow’s risk landscape. How long is the shelf life of personal and healthrelated information? “Hopefully, infinite, but in reality, as long as the individual who owns the record stays alive,” Fowler told attendees, estimating that would likely be “40 or 50 years on average.” Citing a recent KPMG review of some top breaches — involving a million records or more and occurring from December 2013 to the end of April 2016 — Fowler reported that personal and health-related information was the category most often involved. That sort of information — “other” and finan-
50 Canadian Underwriter January 2017
cial data were the other categories — includes “medical and insurance information, personally identifiable information, usernames, passwords, anything along those lines,” Fowler said. “A lot of people in the insurance industry have” all three types of information, he pointed out. And the shelf life of personal and healthrelated information dwarfs that of other information types, expected to be “a few weeks or a few months tops” before the breach is discovered and records cancelled. Fowler argued that cyber criminals are looking for the longest possible expiring date. In some cases, criminals are “breaking into the banks, they’re walking right by the financial data and they’re downloading personal and health-related information,” he said. Other developing risks in the cyber space include cyber extortion-driven attacks. “That’s a massive issue now for organizations,” including those in the insurance industry, Fowler said. These attacks can, for example, mean people are unable to get on a company website, make policy changes or apply for policies, he noted. “It really brings organizations down to a screeching halt,” Fowler told attendees. However, cyber criminals are not necessarily even hitting organizations before getting paid; they are simply threatening to attack. Called proactive extortion, “instead of sending an email, trying to entice someone to click on a link to
infect a machine or to open a delicious attachment,” Fowler said, criminals are just selecting an organization and sending an email containing a threat. These emails, he noted, might say something like the sender has not “done anything yet, but if you don’t pay us a ransom,” ransomware will be installed or the organization’s website will be disabled via a distributed denial of service attack. Consider the liability associated with a warning that was received, but ignored. It is “important that organizations have a protocol in place to actually deal with these to qualify them and, where required, to actually act on,” Fowler said. “Doing the right thing is half of the equation; being able to demonstrate proper oversight and governance at the senior levels of an organization are equally as important to put yourself in a cyber-defensible position,” he said.
LONG VIEW The insurance industry as a whole needs to focus more on long-term issues, Neville Henderson, the assistant superintendent of the insurance supervision sector of the federal Office of the Superintendent of Financial Institutions (OSFI), suggested at KPMG’s 25th Annual Insurance Issues Conference. Henderson told attendees that the industry often focuses its efforts on profitability and satisfying shareholders, with a tendency to focus more on the shortterm than the long-term. “I think companies need a heavier focus on the long-term issues,” Henderson said during the session, Regulation in a changing world. The long-term is changing so dramatically, he said, using the example that “we can no longer say that interest rates are cyclical. We are in a position where it looks like there is a structural change in interest rates and they will remain low for some time in the future.” Or consider an earthquake in the Toronto-Montreal corridor that has significant cost impacts right across the industry. “The real issue of catastrophes in Canada is the size of the industry and its
ability to take on a significant catastrophe,” he said during the session, moderated by Mary Trussell, global insurance change lead partner at KPMG in Canada. Looking long-term, “what could happen to the capital position if, in fact, some of these rather dire scenarios actually come to manifest?” Henderson asked. Yet another example is ORSA, the Own Risk and Solvency Assessment, an insurer’s own assessment of its risks, capital needs and solvency position. “I’ve always thought that ORSA should have been developed by the industry, not by us,” Henderson argued. “That would indicate they’re really thinking a long ways out and we don’t see that happening. The profession needs to think much
“We want to make sure companies have put reasonable protection inside their policies so they don’t take on more risk on an individual case that they can afford to manage.” further out.” For example, “stress testing is important in the long run to see what’s going to happen 30 and 40 years out and what changes could happen and how it could affect the company’s capital position,” he said. Despite the challenges in the longterm approach, ORSA is improving considerably, Henderson reported. While OSFI doesn’t demand every ORSA report from companies, it does monitor the issue, he said, adding that “the ones we’ve seen are quite well done. It used to be they were very actuarial — full of tables — but now we’re actually seeing them written towards the audience.” Henderson also touched upon insurers’ preparedness against cyber attacks, which he said is “kind of across the board,” with some companies pretty well-prepared and others less prepared. “The whole issue kind of took the industry by surprise,” he suggested. But the insurance industry, by and
large, has addressed the cyber issue. Henderson said OSFI has asked companies to do a self-appraisal of where they stand with respect to cyber risk, and monitored the performance. “Some of them have been very progressive,” he reported. “They actually invite outside groups of hackers in and don’t tell their internal people and say, ‘Go to it. Try to bring down our service.’” While recognizing that there is not a lot of experience on which to base cyber premiums, OSFI does look at whether companies follow a generally accepted pricing practice and have conducted appropriate stress testing. “It’s important that they can see what happens to their capital position if things get out of whack,” Henderson said. “We want to make sure companies have put reasonable protection inside their policies so they don’t take on more risk on an individual case that they can afford to manage. Their risk policies should reflect how they are going to manage that business. In other words, if it gets too large a block or if there is too much risk, when do I pull the trigger and either slow down sales or stop sales until I figure out the problem and fix it?” While risk assessments are helpful, the reality is that the insurance environment is constantly changing, as are the needs for insurance, Henderson told attendees. “I think it’s healthy for insurance companies to innovate and address those risks,” he suggested. “I think it creates new markets. I think if we ignore those markets, the industry will become redundant.”
CONSOLIDATION The continued consolidation in both the insurance broker and carrier spaces in Canada could create an absence of mid-sized players, a speaker suggested at KPMG’s 25th Annual Insurance Issues Conference in Toronto. “You could see a creation of an absence of mid-sized players, where there is a move to smaller, regional niche players and more on the larger players,” said Georges Pigeon, partner, deal advisory, with KPMG in Canada. “Now, whether in the (property and January 2017 Canadian Underwriter 51
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casualty) carrier space, we are going to see a development of larger players as it continues to consolidate and some of the smaller, niche/regional players and the middle will empty itself, it’s still to see.” Pigeon was a panel member of the Trends in P&C session at the conference. Moderated by Pierre Lepage, partner and business leader, p&c actuarial with KPMG in Canada, the panel also featured Joel Baker, president and chief executive officer at MSA Research Inc. and Houston Cheng, consulting actuary and senior manager at KPMG. Pigeon discussed merger and acquisition (M&A) trends related to the p&c, life and distribution channels, focusing on expected “drivers and catalysts” for M&A activity in Canada in the coming year. One is succession planning, especially in the broker space while another is fintech and insurtech. “Here, I would like to be careful,” Pigeon cautioned in relation to insurtech, or the application of technology in insurance. “Because having gone through the Internet bubble of the early 2000s, some would argue that maybe we are living through another bubble.” He pointed to some of the fintech data that has come out recently that has shown a slowdown in funding of fintech. “It doesn’t mean that the market is going to disappear. I think it will just morph into the more reliable or more solid players will continue,” he suggested. “I’m not saying either that the money is coming out of the market. There is also some repositioning there.” One recurring theme in the p&c space over the past 10 to 12 years has been one notable or sizable transaction per year, Pigeon continued. For 2016, he pointed to Aviva’s acquisition of the RBC General Insurance business “and turned it into a 15-year distribution agreement.” Another major M&A trend — besides entering a new geographic market, new products, new services or equipping operations with new tools — is accessing new distribution channels.
DISRUPTION The insurance industry is undergoing structural change with the emergence of platform-based business models and insurers need to ready themselves to be able to take part, Matthew Smith, insurance co-lead for the Global Strategy Group at KPMG, suggested during the firm’s 25th Annual Insurance Issues Conference. “The insurance industry is facing into a structural change. This is not a cycle; this is a fundamental structural change,” Smith, who is based in the United Kingdom, reported in December during the KPMG event in downtown Toronto. He spoke about fintech and insuretech developments around the world and what insurers and intermediaries are doing in response. Consider platform-based business models. “Netflix is probably the biggest provider of cinema content, but owns no cinemas; Uber is the biggest taxi firm, but owns no taxis; Airbnb is one of the biggest providers of accommodation,
but owns no hotels,” Smith said. “This platform-based business model is about connecting and convening and finding easier ways to choose to get to the things that they want,” he told attendees. One key driver of disruption is client experience. “People demand that experiences that are easy in parts of their lives are repeatable across all the experiences they have in their lives,” Smith said, adding that they are looking for something on par when interacting with insurance companies. “That interaction doesn’t mean frequency; it doesn’t mean that we’re trying to be in contact with them every day about their insurance policy. That’s not what they’re looking for,” Smith explained. “It means when they have to have those points of interaction, it’s easy, it’s convenient, it’s fast,” he said.
“You could see a creation of an absence of mid-sized players.” But to get to that point, Smith suggested yet another driver of disruption may come into play: understanding opportunities from disruptors to extract value from the value chain. “New and emerging insurtechs are really trying to enable incumbent players to be more successful, to be more effective and they actually want to partner and collaborate with you guys,” he said. “Most of the disruption through insurtechs we’ve seen is in the distribution end of the conversation and the distribution end of the value chain. Why? Because that’s where they see more value to be extracted and more opportunity and lower barriers to entry.” Smith told attendees that there looks to be opportunity in the emergence of new risks, such as virtual reality. “These emerging risks provide a fantastic growth opportunity,” he said. “Understanding and responding to these emerging risks is definitely going to be another fuel for growth,” he argued. Also emerging are on-demand solutions, Smith pointed out. “Whether it’s
getting on a flight and having cover for the duration of that flight,” or something else, this is coming, he said. Things like machine learning, artificial intelligence and sophisticated analytics are “changing the way that we do business. They’ll change to drive efficiency and, therefore, drive profitability, but it also means that it changes the profile of the industry and how we operate,” Smith emphasized.
Capitalizing on available opportunities — and being in a position to be able to do so — makes sense given that it is unlikely the soft market is likely to change anytime soon. “In order for the market to harden from where it is today and then have (excess) capital go elsewhere, we would need a combination of factors,” Smith explained, such as catastrophe events and interest rate changes.
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Putting the pieces together.
Events and Seminars Calendar CIP Society Events and Seminars give you the opportunity to learn, to network, to catch up on industry developments and to advance your professional and career development. CIP Society Seminars Toronto–Bridging the gaps with Legal Expense insurance .....................February 2 Ajax–Automated Vehicles .........................................................................February 3 Toronto–Teaching & Presentation Techniques ............. Fridays, starting February 3 St. Catharines–Industry Trends & Predictions: 2017 ................................February 7 Toronto–Essential Management Skills ................................................February 7–9 Ottawa–CIP Society Winter Luncheon–Industry Update .....................February 16 Cambridge–Distracted Driving Panel .....................................................February 21 BC Webinar–Insurance Fraud Webinar ...................................................February 21
CIP Society Events Kitchener–Axe Throwing Tournament .....................................................February 9 St. John’s, NL–Curling Event ....................................................................February 22 Scarborough–Curling Bonspiel .....................................................................March 1 Vancouver–8th Annual Battle of the Bands .................................................March 2 This February learn how to advance your career: For Underwriters........................................................................................February 2 For Claims Professionals ............................................................................February 2 For Brokers/Agents .................................................................................February 14 For Overview of www.insuranceinstitute.ca/mycareer ..........................February 14
Looking for insight and research on the latest trends in the p&c industry? Visit our free online library of Trends Papers at www.insuranceinstitute.ca/cipsociety/information-services. Looking for information to advance your career? Visit: www.insuranceinstitute.ca/mycareer.
Career Mapping
Peter Hohman President and Chief Executive Officer, Insurance Institute of Canada
Survey data indicates that more than three in four employees think there are good opportunities in the property and casualty industry, but more than one in four p&c professionals who left their jobs went into a different industry. Canada’s property and casualty industry has taken great strides in recruiting new insurance professionals in the fold, and career mapping is a way to help keep them there. “When we say career mapping, we’re talking about information to help people identify where they are in their career, see how they are performing in their current role, and whether their knowledge and skills fit a role they may be considering for the future,” says Margaret Parent, director of the Insurance Institute of Canada’s professionals’ division.
Career advancement is a significant factor in some of the “churn” witnessed in Canada’s p&c industry over the past five years, as discussed in the institute’s most recent industry demographics data. The data is based on a survey of 26 p&c industry human resource (HR) professionals, representing companies with an average of between 100 and 500 employees. It also includes a study of more than 4,000 p&c insurance employees. Overall, 75% of polled employees rated the opportunity for career advancement within the p&c industry as either excellent or good. However, about one-third said they planned to leave their current employer within the next five years. Career advancement ranked second among their Top 5 reasons for leaving (higher compensation topped the list).
OPPORTUNITIES FOR ADJUSTERS For HR professionals, the most urgent priority is to recruit and retain employees. Within the claims area specifically, they are looking for accident benefits adjusters and casualty adjusters. One way to retain p&c professionals within their organizations — and the p&c industry generally — is to recognize that not every career path moves vertically or in a straight line. Within a claims organization, for example, options exist for claims adjusters to skip from one career path to another within the same organization. “There are different lines or specialties within adjusting,” comments Tammie Norn, founder of ProFormance Group Insurance Solutions Inc. and January 2017 Canadian Underwriter 55
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now chair with The Executive Committee (TEC Canada). “Just like underwriters underwrite different policies, and brokers sell different policies, you adjust claims on different policies. It’s very typical for an adjuster’s training ground to be in auto physical damage claims or personal lines property claims,” Norn reports. “But from there, if they want to specialize or work on different types of claims, they need to understand all of the options,” she adds. Insurance professionals handle a wide variety of claims, creating opportunities for different types of adjusting, Norn observes. “Adjusters could specialize in transportation, energy, cyber, sports and entertainment — the options are endless. If adjusters want to pursue a different line within their organizations, they should find out what their training programs look like and whether their companies handle the kind of business in which they are looking to specialize.”
LEAVING THE INDUSTRY Current roles are likely to change in the future, making career mapping that much more important, says Pat Van Bakel, president and chief executive officer of Crawford & Company (Canada) Inc. “If you think about disruption, most of us in insurance have a pretty good sense or appreciation of the amount of change coming our way,” Van Bakel says. “It’s good timing to have career mapping tools for people who are potentially in roles that are going to change pretty significantly in the years to come. Career mapping won’t leave them sitting there like deer in the headlights.” From the industry’s standpoint, the least desirable outcome is for a frustrated p&c professional to bail out of the insurance industry altogether. Half of the HR reps surveyed reported that they had lost between one and 49 employees through voluntary exit over the past two years. On average, 27% of p&c employees who voluntarily left and found employment elsewhere wound up in a different industry. “If p&c professionals are reconsidering their current roles, or not feeling challenged, they don’t immediately think, ‘Where else can I go within this company?’” says Darlene Diplock, regional sales development manager for Canada at HUB International. “If they are not happy, their first instinct may be to look outside the existing company, which, unfortunately, is often outside the industry. I am frustrated when that happens because there are often other positions available within the same company — or, for sure, in the industry — that would fit their current skills and future career aspirations,” Diplock points out. Examples of possible shifts within a p&c organization include the following: • telephone claims adjusters wishing to explore a specialty such as accident benefits or wanting to take on a new
role as a team lead; • brokers in customer support roles looking to evolve their careers by becoming more sales-focused as producers; • junior underwriters ready to take on increased authority for writing higher premium limits and more complex coverages within their companies; and • new entrants to the industry thinking about how best to build their insurance knowledge or a future career plan. Career mapping identifies a comprehensive spectrum of options available for p&c professionals looking for their next career challenge, one reason the institute has expanded company access to career mapping with the launch of mycareer, a free online resource.
fessionals, for example, can see the core skills, knowledge and experience required of claims investigators to move from the early “foundational” part of their career to the “mastery” level. There is also a summary of attitudes and core values, leadership competencies, mentoring and industry engagement opportunities at each phase. The new website resource is designed
to “help focus career conversations between insurance professionals and their managers or HR representatives, so that employees can figure out their next career move within their organizations,” Parent suggests. “We look at it as another tool in the arsenal to unlock a person’s potential or talent, by bringing some of those career conversations to the surface,”Van Bakel comments.
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January 2017 Canadian Underwriter 57 TLF_Canadian Underwriter_HalfPageIsland_RT_Jan2017_003.indd 1
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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
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Doug Potentier [1a] has been elected as president and chair of the Board of Directors for Co-operatives and Mutuals Canada (CMC). The move follows the appointment of Lucie Moncion to the Senate of Canada. From Victoria, Potentier was elected to the Federated Co-operatives Limited (FCL) board in 2008 before becoming its vice chair and Calgary region chair in 2015. CMC director Mark Needham [1b] was elected vice president and will not fill the empty seat until June 2017.
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Boston-based Liberty Mutual Insurance has signed an agreement to acquire Ironshore Inc. from Fosun International Limited. Expected to close in the first half of 2017, pending regulatory approvals and customary closing conditions, the transaction means Liberty Mutual Insurance will acquire a 100% ownership interest in Ironshore. The purchase price is estimated at about US$3 billion. Once closed, Ironshore will operate with the same management team and brand, but as part of the Liberty Mutual organization.
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Intact Financial Corporation (IFC) has made two changes to the roles and responsibilities
58 Canadian Underwriter January 2017
of members of its Executive Committee. Mark Tullis [3a], IFC’s executive vice president of governance and capital management, will retire at the end of February. Starting in March, Tullis will take on the role of vice chairman. Don Fox [3b], currently vice chair of global investment banking at CIBC World Markets Inc., was to join IFC January 1 before taking on responsibilities as executive vice president, effective March 1. Fox will oversee investment management, corporate legal, corporate development, audit and finance functions.
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Burns Demeyere & Associates (BDA), an Ontario brokerage with a history dating back 125 years, joined McFarlan Rowlands Insurance Brokers at the start of 2017. McFarlan Rowlands reports it will welcome 13 new employees to its team in Tillsonburg, Ontario. The brokerages plan to operate under the McFarlan Rowlands brand. BDA managing partner Peter Burns [4a] will serve as an advisor and consultant to McFarlan Rowlands; Marg Aspden, partner of operations, will take on the task of Tillsonburg branch manager as of March 1; and Andrew Burns, partner of business development, will become a new shareholder in McFarlan
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Rowlands. Rodney Hancock [4b] will continue as chief executive officer of McFarlan Rowlands.
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Brooke Hunter [5], president of Hunters International Insurance, has obtained the Certified Advisor of Personal Insurance (CAPI) designation from the Aresty Institute of Executive Education at the Wharton School of the University of Pennsylvania and Chubb Ltd. Hunter was a managing partner at Hunter Keilty Muntz & Beatty, now known as Hub International HKMB, before founding Hunters International in 2005. The former Toronto Insurance Conference president is one of just 33 agents
to obtain the CAPI certification “after completing a one-year intensive educational program on understanding the lifestyle and risk management and insurance needs of high-net-worth individuals.”
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Candace Colquhoun [6a] of AIG Canada is the 2016 Young Insurance Professional of the Year, presented by the Young Insurance Professionals of Toronto. The award recognizes outstanding performance in one’s professional career, while making significant contributions to Toronto’s insurance community. Colquhoun was cited for successes in her role as AIG Canada’s regional underwriting manager (financial institu-
MOVES&&VIEWS VIEWS MOVES
of Calgary; Gordon Adams; Robert Cartwright, Jr.; Al Gorski; Leslie Lamb; John Phelps; Michael Phillipus; Frederick Savage; and Lori Seidenberg.
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9 positions have included general 6aadjuster, branch manager, vice president of operations and Lloyd’s Division leader. tions) and the breadth of her contributions to the organization. This year’s field for the award Macdonald included 20Chisholm nominees, Trask Insurance of which there was six (MCT) announced inRyan early finalists: runner-up January that it will join propSeager of RSA Group [6b], erty and casualty brokerage Andrew Clark of Aligned BrokerLink. The terms of the Insurance, Chris Mutcheson transaction were not disof Allianz Global Corporate closed, notesChris a statement & Specialty, Schmidt from BrokerLink. BrokerLink of DKI Canada and Kamran companies, subsidiaries of Afshar of Intact Insurance. Intact Financial Corp., includeChelsea 84 offices servinghas Avondale clients acquired in Atlantic Canada, MAX Canada AlbertaInsurance and Ontario. Dating Company, back more than 60 years, a faith-based company that MCT has more than 110 inprovides property insurance surance in 18 productsprofessionals in five provinces, offices. Michael Brien, who which will continue has led MCT overits theexisting last 12 operating under years, joins BrokerLink as name. Closing November head of its Atlantic operations. 30, the purchase included
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Carolyn Snow [7] will lead RIMS as president for the 2014 the acquisition of allterm, MAX which took effect January 1. Canada-related operations in Snow, who hasasbeen on the Canada, such Mutual Aid RIMS Board of Directors for Insurance Brokers Company. sevenCanada years, is currently diMAX will retain its rector of risk management brand, values, brokers and for Humana Inc. She previously personnel. David Wine, presiserved as RIMS’s treasurer, dent and chief executive secretary and director of officer of MAX North America, external affairs. TheCanada’s RIMS will stay on as MAX board for and 2014 alsoexecutive includes president chief vice president Richard officer during the transition, Roberts, Jr.; Shantz, treasurercurrent Julie while Elaine Pemberton; corporate secrechair of MAX Canada’s board, taryremain Nowell in Seaman, director will that role under of global risk management for the new ownership. Potash Corporation of Saskatchewan Inc.;General Gloria Northbridge Brosius; Steve Pottle, director Insurance Corporation of risk is management now writing services an auto at Yorkfor University; Jennifer policy RideCo, which Santiago; Janet Stein, provides what the com-director ofcalls risk management pany “personalized,and insurance at the University express transit service” in
6b
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says Chuck McTague, president of Anderson McTague & Associates, a familyowned MGA basedAssurance, in New offices of Alliance Brunswick. In January, Anwhich has nine locations in derson McTague & Associates New Brunswick, will now announced it was expanding, operate as new locations adding an office in Toronto to of Archway Insurance. service the brokers of Ontario Alliance Assurance president and Durepos Manitoba. Lily [9]Rayner’s will appointment the provide addedconfirms continuity, company’sa“commitment to becoming senior member theArchway Ontario/Manitoba of Insurance’smarketplace, and to team. the building of management a local support team to assist brokers withGlenn their surplus Wood, a lines and difficult place certifiedtoindustrial business,” hygienist McTague adds. and
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As of January 8, Toronto insurance broker Jones DesLauriers Insurance Management Inc. 4a (JDIMI) had acquired Whitley Insurance and Financial Services. Whitley Insurance has offices in Belleville, Ontario and the nearby communities of Trenton, Deseronto and Stirling. “The acquisition is expected to build a solid presence for JDIMI in Eastern Ontario and position the firm to better service their clients, 9 with strengthened commercial Kitchener-Waterloo and personal insurance the area offerings in the region and a of southwestern Ontario. new financial diviCustomers canservices order vans, sion,”ornotes a statement taxis private vehicles from JDIMI. President through a mobile and app CEO and Shawn DeSantis will lead share their rides with otherthe teams from both companies. passengers, RideCo reports. Loris Clarke [8] has The policy is “issuedbeen to named successor Paul RideCo, with bothto RideCo, Whitley,drivers president Whitley RideCo andofvehicle Insurance, who will remain owners as named insureds,” duringa aNorthbridge transition period. notes Insurance
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spokesperson. It includes a waiver of depreciation, and Rayner [9] has loss of Ken use coverage while joined Anderson the driver is en route to & Associates pick upMcTague a passenger or is Ltd. as its director of busitransporting a passenger. ness development, Central Region.Nova “Ken brings a wealth Scotia-based of experience to our combrokerage Archway pany, having held various Insurance acquired senior management positions Alliance Assurance on with insurers and other MGAs,” December 31. The existing
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registered occupational hygienist, has joined EFI Guarantee Global as an The occupational Company of hygiene specialist, while North America Meghan Brady, will take on has announced as that Tara responsibilities a field Wishart [10] vice technician forbecame the company. president claims forwill the be Both Woodofand Brady insurer’s Toronto branch on providing solutions to indoor December 2, 2013. Having air quality issues such as 21 years ofasbestos experience in The mould and in the Guarantee’s claims southwestern Ontario region, department, the company Wishart reports.will be responsible for the operations of the Toronto Branch Claims. She first joined The GuaranCorrection: tee in 1995 as an adjuster Canadian Underwriter offers andsincere has held roles of In increasits apologies. the ing seniority with the comMoves & Views department pany, including, mostwe for November 2016, recently, claims manager for misspelled the name of Kabir specialty lines. Wishart is a Shaal, who is serving as the member of both the Surety new executive director of Association of Canada and the Restoration Contractors the CanadianofAssociation Organization Canada. of Women in Construction. Follow @CdnUnderwriter on http://twitter.com/CdnUnderwriter
January 2017 Canadian Underwriter February 2014 Canadian Underwriter
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It was another capacity crowd for the 43rd Annual Engineering Conference. The annual event, presented by the Canadian Boiler and Machinery Underwriters Association, was held at the St. Andrews Club and Conference Centre in downtown Toronto on October 6. Attendees had a chance to network, enjoy a meal and get informed with a number of exceptional sessions, including the post-disaster economy and business interruption after Fort McMurray, the new engineering frontier of high-rise wood structures, asset performance management and the digital power plant, the 2009 SayanoShushenskaya hydro disaster, condition monitoring in the wind industry, and managing risk through reliability-centred maintenance.
60 Canadian Underwriter January 2017
Risk Solutions
GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery
“LBC Meaden & Moore International hosted its annual cocktail reception on October 5 at the CN Tower Horizon Restaurant. Clear weather enabled clients and insurance industry participants to mingle while enjoying the spectacular view.”
Appointment Diane Cooper
Branch Manager, Toronto The Boiler Inspection and Insurance Company of Canada (BI&I) is pleased to welcome Diane Cooper to the position of Branch Manager, Toronto. Diane will assume lead responsibility for the company’s marketing and underwriting services in Toronto and East Ontario regions. Diane is a seasoned industry professional with a strong focus on strategy, business development, and relationship management. She is a Fellow Chartered Insurance Professional with The Insurance Institute of Canada and is licensed by Registered Insurance Brokers of Ontario. The Boiler Inspection and Insurance Company of Canada, a member of HSB Group and part of Munich Re’s Risk Solutions family, provides the industry-leading range of specialty equipment breakdown insurance coverage for business and home. Visit munichre.com/HSBBII
January 2017 Canadian Underwriter
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GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery
The Registered Insurance Brokers of Ontario (RIBO) once again welcomed guests to the Arcadian Loft in downtown Toronto for good conversation, fine food and an update on RIBO activities as part of its 35th Annual General Meeting (AGM), held November 10, 2016. The update included the news from outgoing president Norma Hitchlock that RIBO has overhauled its spot check program to take into consideration conduct requirements and expectations. The expanded review – which Hitchlock told attendees was “being rolled out as I speak today – seeks to promote better consumer protection and broker risk management. The same can be said for, among other RIBO initiatives, last year’s development of a best practices guide to communicate expectations for brokers in serving client needs and coverage options.
62 Canadian Underwriter January 2017
Risk Solutions
GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery
On November 3, the 2nd Annual Lip Sync Battle took place at the King Valley Golf Club. This great charity event raised $25,000 for Victim Services of York Region, a non-profit, charitable agency that works in partnership with York Regional Police and the Ontario Provincial Police to provide 24-hour emotional support and practical assistance to persons victimized by crime or tragic circumstance. Sponsors of the event included KRG Insurance Brokers, Magna, Intact, Stronach Group, Northbridge Insurance, Shoppers Drug Mart, Travelers Canada, RSA Canada, Chubb, Zurich, Aviva, Nudura, York Regional Police, Wawanesa Insurance, Trisura, Christopher Davies and Jeff Medley.
Appointment Doug Laurin
Director, Special Risks and Renewable Energy The Boiler Inspection and Insurance Company of Canada (BI&I) is pleased to appoint Doug Laurin to the position of Director, Special Risks and Renewable Energy, leading in the development of the Special Lines business portfolio, including High Hazard Equipment Breakdown and All Risk Renewable Energy. Doug brings a solid background in commercial insurance with a career that spans several national insurers. For the past ten years, he has successfully led BI&I’s Toronto Branch. He is a Fellow Chartered Insurance Professional with the Insurance Institute of Canada. The Boiler Inspection and Insurance Company of Canada, a member of HSB Group and part of Munich Re’s Risk Solutions family, provides the industry-leading range of specialty equipment breakdown insurance coverage for business and home. Visit munichre.com/HSBBII
January 2017 Canadian Underwriter
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GALLERY
MDD Forensic Accountants hosted its American Thanksgiving Open House on November 24 at Real Sports Bar & Grill in Toronto. Hundreds of insurance claims industry professionals gathered for the annual event that also served as a fundraiser for the Starlight Children’s Foundation.
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FirstOnSite Restoration held a Customer Appreciation Night at Grace O’Malley’s in downtown Toronto on November 29. Brokers, insurers, adjusters, engineers, property managers and commercial end-users were among those to gather for a chance to show appreciation for their support throughout 2016 and a renewed future together.
66 Canadian Underwriter January 2017
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January 2017 Canadian Underwriter
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ORIMS (Ontario Chapter of RIMS) held its Christmas Luncheon on December 8, at the Westin Harbour Castle in Toronto. With record attendance of more than 800 guests, ORIMS continued with the spirit of giving by raising funds for The Daily Bread Food Bank. In all, $10,000, more than 250 pounds of non-perishable food and gift cards was collected to help the food bank in its fight to eliminate hunger in and around Toronto.
68 Canadian Underwriter January 2017
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January 2017 Canadian Underwriter
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GALLERY See all photos for this item at www.canadianunderwriter.ca/gallery
Canadian Underwriter magazine’s Senior Publisher, Steve Wilson, is leaving the publication after 23 years of service. Having joined Canadian Underwriter as publisher in 1994, at the end of January, Wilson departs for his new role as Vice President and Senior Publisher at iQ Business Media, which publishes Canadian Architect magazine, Canadian Interiors magazine and Building magazine. “I have thoroughly enjoyed and will most definitely miss all of the wonderful people that I’ve had the pleasure to work with and meet throughout Canada’s property & casualty insurance market over the years,” Wilson says. “I am also, of course, very proud of Canadian Underwriter and its position in the insurance industry and the quality and integrity of communications products that we deliver.” In addition to successfully publishing Canadian Underwriter monthly, including the Annual Statistical Issue, Insurance Marketer and Ontario Insurance Directory, Wilson was, along with the dedicated Canadian Underwriter team, instrumental in the development and launch of the group’s online presence and communications vehicles, including
70 Canadian Underwriter January 2017
CanadianUnderwriter.ca, i-hire.ca, InsuranceMarketer.com, insPRESS. ca, instouch.com, insBlogs.com, CU80Years.com, inswire.ca and insNews.ca, as well as being a shutterbug and driving force behind the magazine’s popular “Photo Gallery,” within each print issue and online at CanadianUnderwriter.ca/gallery. Wilson was also instrumental in the development and launch of Claims Canada magazine, the official publication of the Canadian Independent Adjusters’ Association. Since 2001, Wilson has been a member of the Board of Directors of WICC (Women in Insurance Cancer Crusade) and an ongoing supporter of the Starlight Insurance Gala and various other industry charitable causes. In his role with Canadian Underwriter, he was also involved as a supporter of industry associations and events across all segments of the market, including being a strong supporter of the Insurance Institute of Canada. The Canadian Underwriter magazine team will miss Steve and would like to express heart-felt thanks for almost a quarter-century of dedicated contribution and service. We wish him all the very best success in his new endeavours!
Announcing Announcing thethe Announcing theMay 20th, 2015Annou Announcing WEDnesday, Announcingthe the
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AIG Insurance Company of Canada is the licensed underwriter of AIG property casualty insurance products in Canada. Coverage may not be available in all provinces and territories and is subject to actual policy language. Non-insurance products and services may be provided by independent third parties. Š American International Group, Inc. All rights reserved.