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
AU G U S T 2 0 0 9 A Business Information Group Publication #40069240
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VOL. 76, NO.8, AUGUST 2009 CANADA’S INSURANCE AND RISK MAGAZINE. PUBLISHED BY BUSINESS INFORMATION GROUP
www.canadianunderwriter.ca
Phoenix Rising
36
Risk managers concede the global financial crisis exposed those few who relied too heavily on risk modelling to do their work for them. But risk management as a disclipline has nonetheless emerged from the ashes of the global economy with a clearer and stronger sense of what it is doing and how it should be done. BY VANESSA MARIGA
FEATURES
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22
Kidnapping Insurance
Boating
It’s a little-known fact that insurers are often left holding the bag when corporate executives and employees are kidnapped and held for ransom.
Pleasure craft boating losses have evolved into big business for marine insurers, and the origins of the losses may not always be what people expect.
BY CHRIS BECK
BY CAPTAIN JOHN. W. HOSTY
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18 A New Partnership
46 Used Land, New Life
Aviva Canada is throwing its full weight behind Canada’s independent broker channel, offering a “new partnership” with brokers who would allow the company to take full advantage of underwriting tools such as credit scoring.
Insurance products can help to restore used, abandoned lands that have been neglected due to the possibility of huge clean-up costs and potential environmental liability.
BY DAVID GAMBRILL
26 Without Compromise Risk managers can do a number of things to help cope with the effects of a recession without compromising their company’s risk management efforts. BY PERRY BRAZEAU
30 Incidental Insurance
Collecting accurate and reliable claims data is essential for the development of good risk management programs. BY SHERI MARTINELLO
64 ERM Program A four-step process can help establish an enterprise risk management (ERM) program for your company. BY RICHARD DAUKANT AND ANDY HIRST
New Brunswick is offering comprehensive new protection for fire fighting services that vastly reduces a firefighter’s exposure to liability. BY JULIE G. LEBLANC
BY J. BRIAN REEVE
BY SUSAN WATTS
Firefighter Immunity
Insurance products might be more effective than regulation when it comes to reducing the number of domestic oil storage tank leaks. BY MICHAEL FREILL
Canadian Underwriter August 2009
50 Claims Data
Insurance regulators have taken a practical approach to the incidental selling of insurance, finding that nonregulation has thus far been to the benefit of Canadian consumers.
Oil Tank Leaks
4
BY CARL SPENSIERI
72 Emerging Risks Risk managers are guarding against emerging, future perils, many arising from technological development.
Customers are best served by: Direct Writers Brokers Just in case there is any doubt about this, we’ve chosen to only sell our products through brokers. That’s why we are dedicating all of our resources to supporting our broker partners. We’re all about winning together.
Aviva CU August.indd 1
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VOL. 76, NO.8, AUGUST 2009
PROFILE
12 Stretching Risk RIMS vice president Terry Fleming advocates expanding the role of risk managers in the future. BY DAVID GAMBRILL
SPECIAL FOCUS
8
Editorial
10 Marketplace 76 Moves & Views 79 Gallery
Editor David Gambrill david@canadianunderwriter.ca (416) 510-6796
Art Director Gerald Heydens Art Consultation Pylon.ca
Associate Editor Vanessa Mariga vanessa@canadianunderwriter.ca (416) 510-6793
Production Manager Gary White (416) 510-6760
Senior Publisher Steve Wilson steve@canadianunderwriter.ca (416) 510-6800
Subscriptions/Customer Service Gail Page gpage@bizinfogroup.ca (416) 442-5600 etx 3549
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Account Manager Michael Wells michael@canadianunderwriter.ca (416) 510-5122
Print Production Manager Phyllis Wright
Advertising Sales Christine Giovis christine@canadianunderwriter.ca (416) 510-5114
President Bruce Creighton Vice President Alex Papanou
Canadian Underwriter is published thirteen times yearly (monthly + the Annual Statistical Issue) by Business Information Group, a division of BIG Magazines LP, a leading Canadian information company with interests in daily and community newspapers and business-to-business information services. Business Information Group is located at 12 Concorde Place Suite 800, North York, ON, M3C 4J2. Phone: (416) 442-5600. Canadian Underwriter, USPS 022-494. US office publication: 2424 Niagara Falls Blvd., Niagara Falls, NY 14304-0357. Periodicals Postage Paid at Niagara Falls, NY, USA. US postmaster: Send address corrections to Canadian Underwriter, Po Box 1118, Niagara Falls, NY 14304. All rights reserved. Printed in Canada. The contents of this publication may not be reproduced or transmitted in any form, either in part or in full, including photocopying and recording, without the written consent of the copyright owner. Nor may any part of this publication be stored in a retrieval system of any nature without prior written consent. Š Published monthly as a source of news, technical information and comment, and as a link between all segments of the insurance industry including brokers, agents, insurance and reinsurance companies, adjusters, risk managers and consultants. Privacy Notice From time to time we make our subscription list available to select companies and organizations whose product or service may interest you. If you do not wish your contact information to be made available, please contact us via one of the following methods: Phone: 1-800-668-2374 Fax: 416-442-2191 E-mail: jhunter@businessinformationgroup.ca Mail to: Privacy Officer, 12 Concorde Place., Suite 800, North York, ON, M3C 4J2 Subscription Rates: 2009 Canada 1 Year $35.95 plus applicable taxes 2 Years $56.95 plus applicable taxes Single Copies $10 plus applicable taxes Annual Statistical Issue (included with above subscription) or separately $38 plus applicable taxes Elsewhere 1 Year $42.00 2 Years $68.00 3 Years $95.00 Subscription Inquiries/Customer Service Gail Page (416) 442-5600 ext 3549 gpage@bizinfogroup.ca
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Canadian Underwriter August 2009
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EDITORIAL
Electronic Branches
Banks should not be allowed to do electronically what they cannot do in their physical branches. David Gambrill, Editor david@canadianunderwriter.ca
8
Canadian Underwriter August 2009
The latest ruling by the Office of the Superintendent of Financial Institutions (OSFI) — which holds that a bank’s Web site is not the same as a bank “branch” for the purpose of selling or promoting insurance products — may have unintentionally sideswiped consumer protections contained in the Bank Act. Strictly in terms of semantics, Canada’s solvency regulator is correct: a Web site is not a physical “office” structure as implied by the definitions of a “branch” in both the Bank Act and the Bank Act Regulations. In the Bank Act, the definition of a branch is: “an agency, the head office or any other office of the bank.” Alas, a definition of an “office” in the contemporary context — featuring the meaninglessness of location characterized by the Internet — does not appear in the document. We then go to Section 5 (cc) of the Bank Act Regulations for further clarification. It defines a “branch” or “branch office” as a place “…at which deposits are received, cheques cashed or moneys lent, and for the purposes of s.35 includes any place of business where any other form of business referred to in subsection 1 of Section 6 is transacted.” [Section 6 includes a long list of transactions involving credit, notes, traveler’s cheques, etc., none of which has anything to do with insurance.] Presumably, OSFI reads the above and concludes that even though we can shift our funds around electronically on a bank’s
Web site, we are not physically in a place “at which deposits are received, cheques cashed or moneys lent.” Furthermore, in a footnote, OSFI observes that various sections of the Bank Act related to public disclosure explicitly differentiate between “branches” and “Web sites.” For example, s. 413.1(2)(a) says banks will, before opening an account, “post notices at all of its branches, and at prescribed points of service, in Canada where deposits are accepted, and on all of its Web sites at which deposits are accepted in Canada.” And thus OSFI is certainly within the letter of the law to say, as it does in its ruling, that “the definition of [a] ‘branch’ in the Bank Act, both in English and in French, refers to physical premises, and not to the location-less, electronic world of cyberspace. But does OSFI’s conclusion support the spirit of the Bank Act? Based on the fact that a Web site can be distinguished from a bank branch, OSFI concludes that, “as a result, a bank may, on its Web site, promote in Canada any insurance policies or any insurance companies, agents or brokers, subject to the conditions that the regulations impose on such promotion outside a bank.” Wait a second, here. Is this conclusion warranted based on the legislative intent of the Bank Act? One of the three principal purposes of the Bank Act is to promote the efficiency of the financial system through competition. This implies fair competi-
tion between banks and insurance companies, which, to put it crassly, means neither one is allowed to eat each other’s lunch (i.e. sell each other’s products). The ban against banks selling insurance through their local branches is to ensure that banks can’t leverage their status as money-lenders to coerce a person to buy insurance or other financial products. And so the question must be asked: Are banks now allowed to do through Web sites what they cannot do through their local branches? If the answer to this is yes, then what happened to the public protection afforded to consumers by banning the banks from promoting or selling insurance through the physical branches? Did cyberspace just render such protection irrelevant? When Parliament last assented to the Bank Act in 1991, an Internet browser was still three years away from becoming commonly known to the public. And thus the language contained in the Bank Act has very little, if anything, to say about the impact of the Internet on banking activities and transactions — including the sale of insurance. It is time for regulators and politicians to consider whether the Internet has indeed perverted the spirit of the Bank Act, which is to protect the public by prohibiting banks from selling insurance in their physical office spaces. Banks should not be allowed to do electronically what they cannot do in their physical branches.
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MARKETPLACE
Canadian Market ONTARIO AUTO RATES UP 5.86% IN 2009 Q2 THE FINANCIAL SERVICES Commission of Ontario (FSCO) approved an average rate increase of 5.86% for auto insurance, when weighted by market share, in 2009 Q2. Belair Insurance Company Inc. received approval for a decrease of 0.47%. It was the only insurer to decrease its rates in the quarter. CAA Insurance Company (Ontario) received approval for the largest rate increase at 12.10%.
MANITOBA BEEFS UP FIREFIGHTING EQUIPMENT Manitoba will upgrade its forest-fighting fleet with a Cdn$1.4-million investment in advanced avionics. The seven water bombers will be enhanced with vision systems for pilots to help battle fires when visibility is low, said Stan Struthers, Manitoba’s conservation minister. “This is key. It will increase our efficiency and make sure our crews are safe,” he said. As of June 25, Manitoba Conservation’s Fire Program has recorded 115 fires in 2009, despite wet and cool conditions earlier this year. Human beings caused 63 of these fires, a Manitoba government release says.
10 Canadian Underwriter AUGUST 2009
Manitoba Conservation now has a total of 294 firefighters and six contract helicopters, in addition to the seven water bombers, to battle forest fires.
Risk Management ADOPTION OF ERM PLATEAUS The adoption of enterprise risk management (ERM) seems to have reached a plateau at 65% of firms, according to a joint Marsh and Risk and Insurance Management Society report. In the sixth annual Excellence in Risk Management VI: Strategic Risk Management in Practice, 450 risk managers were surveyed during 2009 Q1 about the impact of the financial crisis on their risk management programs and strategies. Sixty-seven per cent of businesses reported plans to adopt a more strategic approach to risk management, of which ERM is generally seen as a component. “While the movement toward partial implementation of ERM may now be somewhat related to current economic conditions, it’s more likely that many risk managers view partial implementation of ERM as a step along the way,” said Richard Roberts, a member of the RIMS board of directors.
Reinsurance PARTNER RE TO ACQUIRE PARIS RE HOLDINGS PartnerRe Ltd. has inked a US$2-billion,‘multi-step transaction’ that will see it acquire Paris Re Holdings Limited. In the first step of the transaction, expected to close in 2009 Q4, PartnerRe will acquire the shares held by several significant shareholders — including Stone Point Capital and Caisse Depot et Placement du Quebec — representing approximately 57% of Paris Re’s outstanding common shares, a Paris Re release says. Following the block purchase, PartnerRe intends to commence a voluntary public exchange offer on all outstanding shares of Paris Re not then owned by PartnerRe. The exchange is expected to close in 2010 Q1. The transaction is subject to regulatory and anti-trust approvals and the listing of PartnerRe shares on Euronext Paris, the release adds.
EL NIÑO'S ARRIVAL MAY SUPPRESS ATLANTIC HURRICANE ACTIVITY El Niño has arrived, potentially suppressing hurricane activity in the Atlantic Ocean, scientists at the National Oceanic and Atmospheric Administration (NOAA) say. El Niño is the periodic warming of central and east-
ern tropical Pacific waters. It occurs on average every two to five years, and typically lasts for about 12 months. The most recent El Niño event occurred in 2006, a time of relatively fewer catastrophe claims paid out by North American insurers. The NOAA says this current round of El Niño is expected to last through winter 2009-10. “On the positive side, El Niño can help to suppress Atlantic hurricane activity,” NOAA said in a press release announcing El Niño’s arrival. “In the United States, it typically brings beneficial winter precipitation to the arid Southwest, less wintry weather across the North and a reduced risk of Florida wildfires.” On the flip side, however, “El Niño’s negative impacts have included damaging winter storms in California and increased storminess across the southern United States,” NOAA says. “Some past El Niños have also produced severe flooding and mudslides in Central and South America, and drought in Indonesia.”
Regulation CANADIAN FIRMS LAG BEHIND IN IFRS CONVERSION Despite the fast-approaching Jan. 1, 2011 deadline for the implementation of international financial reporting standards (IFRS), more than 12% of public companies and 20% of the private com-
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panies surveyed by PricewaterhouseCoopers have not yet taken the first step in the conversion process. PwC surveyed 256 companies — 147 of which were public, 51 were private and 28 were Crown corporations. There are several reasons for the delay in taking the first step of beginning the initial diagnostic assessments, with 41% of public companies and 54% of private companies stating in the survey that they had other, higher priorities. About 80% of public companies remain short of the halfway mark of the overall conversion process, the survey found. Private companies were lagging behind public companies, with 51% of the private companies saying that only 20% of their conversion process was complete. “Our survey shows that companies were more likely to put cost containment at the top of the list of activities rather than IFRS,” said Diane Kazarian, PwC Canada’s national IFRS leader.
Casualty Insurance, outlines 14 key principles that should be incorporated into any new capital framework. The paper is intended to help lay the groundwork for introducing a measure for insur-
ance risk in 2014. In addition to “encouraging good risk management,” any new framework should minimize the effects of insurance business cycles, the paper says. It should be part of the
supervisory rating and staging process that defines possible supervisoryinterventions too. The full paper is available on OSFI’s Web site: www.osfibsif.gc.ca/osfi/index_e.aspx? ArticleID=3090
Cunningham Lindsey offers expert claims handling for the most complex and specialized losses. To access our team of experts, write to us at corpservices@cl-na.com for a copy of our new Specialty Services Directory.
OSFI RELEASES DISCUSSION PAPER ON NEW CAPITALTESTING FRAMEWORK Canada’s solvency regulator, the Office of the Superintendent of Financial Institutions (OSFI), released a discussion paper on developing a new capital-testing framework. The paper, Key Principles for the Future Direction of the Canadian Regulatory Capital Framework for Property &
www.cunninghamlindsey.com
AUGUST 2009 Canadian Underwriter 11
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PROFILE
Stretching the Role of Risk Management David Gambrill Editor
Terry Fleming, who is likely to become RIMS president in January 2010, is open to the idea of risk management expanding beyond its traditional frontiers. Listening to Risk and Insurance Management Society (RIMS) vice president Terry Fleming, you get a sense of how his professional background and outlook reflect the evolution of the risk management discipline in North America. Having come to risk management in a “traditional” way — starting to work first in the field of insurance and then ultimately finding his way into a career in risk management — Fleming’s professional background characterizes the historical evolution of the risk management discipline from an adjunct of insurance into a discipline in its own right. Secondly, reflecting risk management’s current global outreach, Fleming’s personal experience is international in
12 Canadian Underwriter August 2009
scope. A Canadian by birth, Fleming’s father worked for the Canadian External Affairs Department (as it was known at the time) in Ottawa, Ontario. His parents moved the family to the United States when he was in Grade 1. He is currently working towards his personal goal of obtaining dual citizenship in both Canada and the United States. Finally, Fleming’s cast of mind is open to change. He makes no bones about his desire to see the risk management discipline stretch beyond its current frontiers. “I think there’s a great opportunity to recognize risk management not only as a discipline to uncover and mitigate loss exposures, but as a vehicle to achieve positives in all of the silos of an organization,” Fleming says on the phone from Maryland. “That’s where I see risk management evolving.” Fleming is the director of the division of risk management at Montgomery County, Maryland, a position he has held since 1988. Managing a staff of 12 employees, he is responsible for all aspects of the county’s US$100-million risk management program, including the purchase of insurance, risk financing, loss control, and management of the county’s selfinsured property and casualty operation covering more than
50,000 employees, in a pool arrangement consisting of 13 public entity participants. When Fleming talks about the future of the discipline, he recalls, although not by name, a commercial broker campaign launched a few years ago that encouraged risk managers to consider ‘The Upside of Risk.’ “‘All management is risk management,’ is what Douglas Barlow used to say,” Fleming says, adding that Barlow was the 18th president of RIMS and often referred to as the “founding father” of the risk management discipline. “When you think about it, there’s a positive and a negative to every decision that you make as a risk manager. You recognize the positive and attempt to magnify it. “When you evaluate, for example, whether you should get into a new business relationship or [offer a] new product, there are opportunities for loss, obviously, but there are also opportunities for gain-sharing, new profits and new relationships across the world. “It does stretch [the role of risk management]. But that’s our goal, to stretch the discipline… These are new opportunities for risk managers to become more of a player at the C-suite and board of directors’ level. I think that’s where risk managers belong.”
Fleming himself got into risk management by way of insurance claims adjusting, claims handling and loss control. He graduated from college with a wife, a child and a need for stability at a time when the Vietnam War was on. He had several opportunities available, and in 1969 he chose to capitalize on Liberty Mutual Insurance Company’s reputation for good training in handling insurance claims. “Frankly, I feel lucky that I started in claims because when you think about what’s involved in an insurance claim, there are aspects of finance in reserves and payments, legal aspects and litigation, medical components and aspects of risk management [as well],” he said. “I think it was a good beginning.” After several years of working for insurance companies, he caught on with a third party administrator (TPA) that handled worker’s compensation claims, mainly, but also some liability for a self-insured group. “There were a number of questions and issues that came up that were not really insurance issues, but they were safety issues, coverage issues, accident prevention issues and questions that employers had about how to recognize exposures to loss before they became issues. That experience really developed what
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eventually became my risk management skills.” Fleming was eventually hired by one of his clients, Fairfax County Public Schools in Virginia, to be their risk manager. After about a year there, he moved to his current post in Maryland. In a way, Fleming sees his route into risk management, via the route of insurance, as being inverted. The opportunity now exists to specialize in risk management first, and then, through the path of risk management, learn more about the insurance field. For example, he observes that although he says he is practising risk management at Montgomery County, the structure of the department in which he works is really not unlike that of a modern-day insurance company. “In my organization, for example, I have a claims component,” he says. “We have a TPA that we work with. We do underwriting since we have a self-insurance pool set up here with 14 different entities that participate. There’s the budgeting and finance and actuarial pieces. I have an Occupational Safety and Health section. So just like a mini-insurance company, there are opportunities to bring [risk management] people in and teach them the [insurance and self-insurance] business.”
This is the opposite of what Fleming experienced in his becoming a risk manager. “When I started back in risk management, there were very few formal educational opportunities in risk management, per se,” Fleming says. “Those opportunities are more recognized, especially in the financial side of the business.” The old adage about crisis leading to opportunity is partic-
ularly appropriate in the risk management field. Fleming notes the corporate governance issues precipitated by the meltdowns of WorldCom and Enron — followed by the subsequent financial issues that led to the bankruptcies or sales of venerable investment institutions such as Lehman Brothers and Merrill Lynch — have created a need for risk managers who know about financial issues.
“It’s evolved significantly,” Fleming said of the risk management field. “When we started out, the insurance buyers were considered risk managers. But risk managers have had to evolve — especially on the finance side, but also on the governance side, as crisis after crisis occurs in the market — and there are so many opportunities to mitigate exposure that we’ve had to evolve in order to stay relevant. And that’s going to continue. Risk modelling will never completely eliminate the human element of risk management.” Many people before Fleming have described their involvement with RIMS as a family affair. For Fleming, his initial introduction to RIMS was quite literally a family affair. His wife Karen, who was a risk manager prior to Fleming’s becoming one, introduced him to RIMS. Once Fleming started working as a risk manager at Fairfax, he had the opportunity to make his mark as a member of RIMS in his own right. Likely to become RIMS president in January 2010, Fleming is currently vice president of RIMS and serves as the board liaison to the RIMS finance committee. He has been a member of RIMS board of directors since 2004 and has served on RIMS conference programming committee and audit committee.
August 2009 Canadian Underwriter
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Kidnapping company representatives for ransom has become a modern-day scourge, and kidnap and ransom insurance policies are quietly offering victims a way out. Chris Beck
Senior Vice President, Insurance Sales, Clements International
After the kidnapping in April 2009 of an American ship captain by pirates off the Somali Coast, viewers are left to wonder: how could this happen? In reality, this occurs more often than you think. Expatriates working overseas on behalf of a company or organization are frequent targets of kidnapping, particularly as globalization takes business to new corners of the world.Thousands of kidnapping cases occur worldwide every year; as current events show, this number is growing. “There is an intense focus right now on Africa and the region surrounding the Gulf of Aden due to the recent increase in piracy and kidnapping, but this is certainly not a new problem,” said Yan Bui, a commercial insurance executive at Clements International, a Washington D.C.-based firm specializing in international insurance solutions.
KIDNAPPING: A THRIVING INDUSTRY The International Maritime Bureau reports that Somali pirates seized 815 crew members in 2008, proving that kidnapping is not an isolated activity.The threat has long existed and the number of events is increasing in many countries, in-
14 Canadian Underwriter August 2009
cluding Afghanistan, Mexico, Pakistan, the Philippines and Venezuela. A Canadian woman was abducted in mid-April in the city of Kaduna in north-central Nigeria. Nigerian kidnappers demanded 20-million naira (Cdn$136,000) ransom for the release of 45year-old Julie Ann Mulligan, one of five Canadians on a Rotary exchange program in the country. Although kidnapping is common in this area, victims are usually oil workers or other contractors, making this a unique case. In another incident, two Canadian U.N. staffers were captured by Al-Qaida’s North Africa branch in Nigeria last December and released on Apr. 22. After months in captivity, the two men were released unharmed following negotiations with the Al-Qaida group. Although less publicized, hundreds of expatriates and Nigerian workers have been kidnapped in just the past three years. According to the 2008 Kidnap Risk Brief published by Clayton Consultants Inc., at least 172 foreigners were kidnapped in Nigeria alone in 2007. The risk level for kidnapping remains high in Latin America and Africa, but Central Asia is seeing dramatic growth, particularly in Afghanistan and Iraq. However, the majority of kidnapping incidents are still occurring in Latin America. In most cases, the ransom is paid and the victim is safely released.1 Organizations and financial institutions with a significant global presence can be targeted for ransoms ranging from thousands to millions of dollars. Expatriates working abroad face a credible risk in high-risk areas away from home,
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where their companies cannot protect them. It may seem rare, but kidnapping is a thriving, corrupt business that is more common than companies would like to admit. Statistics are difficult to gather because only about 10% of incidents are reported on average.
KIDNAP AND RANSOM INSURANCE The United States government recently intervened in negotiations to rescue an American ship captain kidnapped by Somali pirates, but governments are rarely involved in these cases. Absent the resources of a powerful government and military, insurance becomes increasingly important to an organization’s ability to resolve kidnap and ransom situations both independently and expeditiously. Companies rarely discuss kidnap and ransom (K&R) coverage unless asked, and most employees would not know to inquire in the first place, unaware that this type of coverage is even available. Companies often avoid discussing kidnap and ransom (K&R) coverage because
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they do not want publicly to highlight the risk — or their viability as potential targets. But despite its minimal exposure, K&R insurance is carried by many organizations that operate in high-risk countries and employ executives overseas. There are many compelling economic and ethical reasons for companies to invest in K&R insurance. Ransom demands can be staggering, particularly in the context of a struggling global economy. In recent years, more than 14 countries have recorded kidnapping cases involving ransom demands of $25 million or more. Cases are usually settled for between 10% and 20% of the demand, but in certain territories, the kidnappers refuse to negotiate and resort to excessive violence until their demand is met. “Companies cannot afford to deny the threat that K&R poses to their operations and employees,” said Bui. “It is imperative that they put mechanisms in place to safeguard against these risks, particularly as we work to grow and stabilize the global economy.”
The tragedy of a kidnapping is overwhelming and most companies have no idea how to manage such an incomprehensible event. Therefore, a critical element of an effective disaster management plan is K&R insurance. This type of insurance coverage can be purchased by individuals or corporations and is available from many large insurance providers. Human resource executives, relocation professionals or corporate risk advisors should discuss possible options with their insurance agent.
K&R COVERAGE Most policies cover the ransom paid connected with a kidnap or threat, hijack, wrongful detention, death or dismemberment, legal liability, crisis management team expenses and fees incurred while using an independent negotiator or public relations consultant. A K&R policy covers a ransom demand up to the limit of the policy. Most policies are written with a limit of at least Cdn$1 million, but this figure can be
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higher depending on the number of possible targets and the sensitivity of the mission. Also, most policies will reimburse the insured for covered expenses when a kidnapping, threat of property damage, extortion or ransom demand occurs. Expenses include: • interest costs associated with obtaining the ransom; • travel and accommodation for victims and relatives; • salary of the kidnapped individual(s); • medical and hospitalization expenses; • personal financial loss of the insured; • costs incurred during business interruption; • interpreters; • increased security; and • job retraining after release. The most important considerations when evaluating a K&R policy are coverage territory, definition of insured, policy limit and additional coverage. It is important to review the coverage territory to ensure it is applicable worldwide
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so that incidents are covered no matter where they occur. Next, the definition of an insured person should be as broad as possible. A corporate policy will include directors, officers and employees, in addition to guests, relatives and residents of the individual’s household. This assumes unintended people may also become victims. They may be relatives, servants, guests or simply innocent bystanders who suddenly find themselves in the middle of a dangerous situation. As a result, the policy should not discriminate against nor exclude those individuals. The amount of coverage to purchase is a corporate decision. Each organization must review the possibility that their employees may be kidnapped and determine the right amount of coverage.The industry, resources, number of travellers and destinations are vital considerations in the decision-making process.The existence of issued policies remains strictly confidential, as the confirmation of this type of coverage can serve as an incentive for a kidnapping plot.
Finally, many K&R policies provide risk evaluation services to the insured. This helps an organization review its security policy or evaluate the risks of a potential location. If an insured person is contemplating a trip to a particular area, the risk evaluation service can provide a detailed description of the risks involved at that destination.These evaluations will describe the crimes that have occurred there, police protection and tips for travellers, including airport security and public transportation information. If an organization is proactive in maintaining a crisis management plan, securing adequate insurance and requiring employees to follow travel guidelines, they can effectively reduce their exposure to kidnap situations. However, if the worst occurs, they will have an effective and organized approach to managing a truly unpredictable situation. 1 According to The Inkerman Kidnap and Ransom Monthly Review, the number of kidnap victims killed increased by 7% in January 2009, up to 19.3%.
When you’re not FirstOnSite, who is?
2/25/09 9:53:29 AM
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Aviva’s
New Partnership with Brokers
David Gambrill Editor
Aviva Canada is unequivocally endorsing a “new partnership” with the independent broker channel in Canada, betting all of its chips against a direct method of distribution. The new partnership with the independent broker channel features a quid pro quo: Aviva Canada wants to be able to count on its independent broker partners not to take away underwriting tools that the insurer might use to help independent brokers compete against the direct channel. Credit scoring — a practice that independent broker associations across the country have asked regulators to ban — would be an obvious example of just such an underwriting tool. In a wide-ranging, sit-down interview with Canadian Underwriter, Robin Spencer, the president and CEO of Aviva Canada, dealt head-on with rumours circulating within the Canadian broker community that Aviva Canada would ultimately substitute its terminated corporate partnership with PC Financial (PCFi) earlier this year with a new kind of direct distribution method.
18 Canadian Underwriter August 2009
“We are firmly committed to the broker channel as, quite frankly, the dominant channel in which we are going to be investing all of our resources,” Spencer said. “That is a change. I think brokers, once they saw what I did about PCFi, they might have taken that as a one-off as opposed to a strategic position that Aviva is taking towards the Canadian marketplace. I don’t want there to be any ambiguity. From a consumer perspective, we think that even if corporate sponsorships spring up, they are better served with a broker model than a direct model.This is a very clear statement to be making that hopefully allow brokers to overcome that doubt.” Aviva Canada in January 2009 terminated its corporate sponsorship with PC Financial, a direct writer that once offered auto, home, pet and travel insurance. At the time, both companies said the relationship no longer served each other’s strategic needs. PCFi’s Web site indicates PC Financial has now “discontinued” its offer of auto and home insurance. PCFi’s pet insurance is
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Bell Canada, a wholly owned subsidiary of BCE Inc., to incur substantial debt. The BCE board accepted an offer valued at $52 billion, representing a 40% premium on the trading price of BCE shares at the relevant time. BCE Inc.’s board underwritten by SecuriCan General Inmembers believed the offer was in the surance Company, and AIG Commercial best interests of BCE and its shareholders. Insurance Company of Canada underAlthough an overwhelming 97.93% of writes its travel insurance. BCE’s shareholders approvedwith thePCFi, offer, Aviva Canada’s relationship the plan of arrangement was strongly although it only represented 4% of opposed by a group of financial and Aviva’s business, nevertheless repreother institutions that held debentures issented a thorn in the side of Canada’s insued by Bell Canada.The debenture holddependent broker community. Brokers ers argued that theprivately actions ofthat the board often grumbled they in accepting offer weren’t sure the what to were makeoppressive: of Aviva’sif the sale proceeded, theyinobserved, the public pronouncements support of short-term trading value of the debenchannel when in the independent broker tures would decline by an average fact the company had a business rela-of 20% andwith could loseSpencer investment tionship PCFi. was grade well status.The debenture holders brought an aware of the brokers’ skepticism. oppression action under section 241 of the CBCA.They suggested the tests found We are firmly committed to in section 192 of the CBCA, requiring courtbroker approval channel for a changeas, in corporate the structure, could not be met, thereby quite frankly, the dominant precluding the takeover. channel in which we are The trial judge agreed with BCE, finding that the company was at liberty going to be investing all of to proceed with the transaction.The Quebec our resources. Court of Appeal, on the other hand, found the actions of theofboard were invested hundreds millions “We’vethat oppressive. BCE Inc.’s ought over the last couple of directors years in the bro-to have considered planofofhelping arrangement ker channel in the aform sucthat not only provided a satisfactory price cession, by clearly being out there advoto the shareholders, but also avoided an cating on behalf of the independent adverse effect on the debenture holders, broker channel,” Spencer said. “But as the appellate court ruled. this noise… around long as we had PCFi, the brokers, although we had all of A DIRECTOR’S DUTIES these structures that were totally supThe Supreme Court of always Canada in setthe the portive of them, were its decision by providing stage offortheir ‘We can’tan minds saying: backs overview directors’ generally. thoughduties we were putthem,’ofeven trust An essential component of a corporating hundreds of millions of dollars their tionI is its capital stock,to divided fracway. don't want there be anyinto of that tional parts known as “the shares.”While ambiguity. We’re here to invest in them the independent corporation ischannel].” ongoing, shares con[the firm no right into itsthe underlying mill Spencer suspects rumour assets. A share is notbecause an isolated piece offrom propin part he arrived thrived ertyUnited but a Kingdom bundle of two interrelated rights the years ago to and liabilities. These rights include the succeed Igal Mayer as president and CEO right to a proportionate part of the assets of Aviva Canada. (Mayer moved across of pond the corporation wind-up, and the to becomeupon the CEO of Northe right to oversee the management wich Union). In the United Kingdom,of the corporation by office its board of directors where Aviva’s head is based, the by way of votes greater hasatashareholder substantiallymeetings. channel direct
Page 13
The directors are subject to two duties: a fiduciary duty to the corporation and a duty to exercise the care, diligence and skill of a reasonably prudent person in comparable circumstances. The fiduciary duty of directors the foothold in the marketplace than itto does corporation, and particularly the fair in Canada. treatment component of this duty, is had fun“I think they [Canadian brokers] damental to the reasonable their doubts about what expectations Robin was of the stakeholders an brokers oppresabout,” said Spencer. claiming He suspects sion remedy. might have thought that “just because he The from fiduciary dutywhere of directors act comes the U.K., there istoa lot
in the best interests of the corporation is mandatory. Although the interests of shareholders and other stakeholders are often coextensive with the interests of the corporation, if they conflict, the director’s duty is clearly to the corporaof direct business, Robin Spencer’s about 1 tion first. to launch a direct business in Canada as In — considering theAnd best of well like a belair. theinterests answer is, the corporation, the directors may look ‘no, we’re not.’ From my perspective to the the shareholders, that is a interests very clear of statement.” employees, creditors, consumers, But what’s also clear is thatgovernAviva ments the environment, among Canada’sand support of the independent
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broker channel is based on a “new partnership,” according to which the insurance company and its brokers work together to achieve a common purpose — i.e. to gain market share at the expense of Canada’s direct distribution channel. This can’t be done, however, if Aviva’s broker partners are attempting to remove underwriting tools or methods that can help them compete against the direct channel. “Traditional insurers are just supporting brokers,” Spencer said. “I’m saying, ‘Hang on. If I’m dedicated to you, you’re getting all of the firepower, all of the intellectual property, you’re getting all of the access to long-term investment from the Aviva group, supporting you, the broker channel.’ The quid pro quo is, as partners, this goes two ways, which means that we have to be involved in, quite frankly, big decisions about all sorts of things like credit.” Spencer said he fears broker associations calling for bans on credit scoring have already taken a definitive position even before the dialogue around credit scoring has started.This dialogue might include how to use credit scoring in a transparent, ethical way that would allow independent brokers to compete against direct writers. The Insurance Bureau of Canada, Spencer noted, is now working on a Code of Conduct related specifically to the use of credit scoring in areas allowed by regulation. When asked about his views on the use of credit scoring, Spencer says there is no such thing as a bad customer, just a bad price. To the extent that credit scoring can help price risks correctly, he said, direct writers using it have an advantage over insurers and independent brokers that don’t. “If we look at the direct writers and we look at the banks that have used [credit scoring] already, the bottom line is that they’ve got their books of business and they are clean, scrubbed books of business that have already got good risks and the right price to them,” Spencer says. “Which puts them at a huge, struc-
20 Canadian Underwriter August 2009
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tural advantage — a competitive advantage — because now, with everything they do from today, they’re starting with a totally clean book and they’re pricing from that… And if you’ve already got a very clean book, your loss ratios are very low. And so basically what [direct writers and banks] can do is say: ‘You know what? In the future, even if they close down my [use of] credit [for underwriting], given that I’ve got this nice book of business already, I have really tight underwriting rules and I only let really good business flow into this part of my model.’” Credit scoring thus becomes a key weapon in an insurers’ — and brokers’
The decision I am making is a $10-million decision every time we give somebody a long-term policy. And I’m not allowed to use credit? — arsenal to chip away at these clean books of business, Spencer said. “If I wanted in the future to get at any one of those customers, if I want to work with my brokers… to become competitive to try and win customers back, I have no vehicle if [Aviva’s broker partners] have taken credit away. In my mind, brokers are not allowing me to help them to try and win those customers back by offering them great prices on the best risks. “So again, I am seeing totally through the eyes of the brokers. I’m saying:‘How can I, using all of these progressive tools — being credit or other things — how can I use all of these things to allow you to be most competitive, Mr. Broker?’The irony is, I’ve got the brokers going:‘Just close it down. We don’t want to use credit.’ And I’m saying:‘Guys, you’re basically going to help the direct writers. This isn’t going to stop them; it’s going to help them.This is going to cement the fact that those guys have already got
great, scrubbed books.That’s a big issue for me.” Thus the “new partnership” involves a choice: Aviva will align itself with brokers agreeing to use underwriting tools and methods that allow Aviva to help the independent channel. In exchange, broker partners agreeing to help Aviva will receive full benefit of Aviva’s full endorsement of the independent broker channel. Spencer said the industry should not be afraid to consider the use of credit as means to help price insurance policies correctly. He said he found a great deal of irony in the use of credit scoring in other industries, where the risks involved represent only a fraction of the risks assumed by an insurer. And yet, the insurer may or may not be able to use credit scoring, depending on the lines of business and the regulatory jurisdiction. “If you go and get a mobile phone, and you’re going to use credit, they automatically do a credit check to see whether you can have it and how much access to how much use per month you can have,” Spencer says. “Let’s say that’s a $50/month purchase…. And we’re fine with giving them our data, allowing them access to credit. It’s exactly the same whether your house is half a million or a million dollars, you still allow the mortgage company to get the credit details so that they can make sure you can pay, etc. etc. “Where I struggle is that most people think about an insurance purchase as a $1,500 purchase. I think about it as a choice between a person who is potentially going to claim nothing, or potentially [make] a $10-million catastrophic claim. So the decision I am making is a $10-million decision every time we give somebody a long-term policy. Up to $10 million, I’d say, and I’m not allowed to use [credit]? That’s hundreds of times greater than a mobile phone decision. But the regulators don’t think to stop them (mobile phone companies from using credit). The risk is far greater for us.”
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Full Steam Ahead Captain John W. Hosty
Master Mariner , Senior Marine Surveyor, Cunningham Lindsey Marine
Properly handling losses involving pleasure craft is not only a big concern, it is big business. The Canadian pleasure craft industry is a significant part of our overall economy, with approximately 2.8 million pleasure craft across the country.The operation of these crafts tends to be concentrated — upwards of 40% of vessels reside in Ontario and more then 20% in British Columbia — which leads to high-density traffic and therefore higher potential for incidents. According to Transport Canada’s Safe Boating Guide, a pleasure craft is “any boat that is used only for pleasure activities like fishing, water sports and entertaining friends. It also includes a boat used for subsistence hunting and fishing or for the necessities of daily life. It does not include a boat that is used for work or commercial activities.”1 A broad variety of pleasure craft are in operation including canoes, open boats, runabouts, fishing craft, cruisers, houseboats and a wide variety of sailboats ranging in size from a simple dinghy to the most elaborate of yachts.
22 Canadian Underwriter August 2009
Pleasure craft are made from a variety of construction materials including steel, aluminum, wood, cement, plastic and, most commonly, fibreglass.
COMMON LOSSES Pleasure craft do not require the appointment of “competent crew” for lengths of less than 24 metres. However, all operators are required to hold a Pleasure Craft Operator’s Certificate (PCOC) by Sept. 15, 2009.The intent of the safe boating guide and examination process is to prevent common incidents that risk life and property. There are several causes of losses involving pleasure craft. Many are the direct result of operator errors. Typical losses, causes and outcomes are as follows:
Pollution Smaller vessels, such as skiffs and open boats, tend to have self-contained fuel supplies. However, larger sail and powerboats are fitted with permanent tankage that is capable of holding hundreds of litres of gasoline or diesel fuel. Common losses of these fuels occur during re-fuelling or normal operation and storage. For example, tanks might overflow or connections fail, allowing a release into the vessel’s bilge. Larger vessels are often fitted with automatic bilge pumps,
Illustrations by Philippe Béha/www.i2iart.com
Pleasure craft boating losses have become a big business, and they don’t always come from sources one might expect.
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which do not differentiate between oil and water. Recently a large power vessel was overflowed during fuelling and 800 litres of fuel entered the bilge. As a precaution, the owner of the vessel isolated the bilge pump to prevent a release. Several hours later, the high-level bilge alarm sounded; a member of the marina’s staff overrode the owner’s isolation efforts and mistakenly pumped several hundred litres of fuel overboard. Losses included damage to nearby boats, other structures and to the local wild life and fauna.
Vessel Collisions Surprisingly, the number of collisions between sailing vessels is low. The majority of incidents occur between racing sailboats or by powerboats operated at excessive speed. Collisions that occur between docked vessels and other vessels maneuvering around them are more significant. All too often, vessels maneuvering between a string of docks are overly influenced by the wind, causing the vessel to drift down onto moored vessels. A diligent skipper would stop the boat, put out additional protective fenders and allow the vessel to safely “land” on the nearest vessel. Alas, this seldom happens; in most cases, the skipper alternatively runs the engine full ahead and full astern, with the helm being pointed in all kinds of different direction, with devastating damage to the surrounding vessels. Damage in these circumstances can include loss of upperworks such as safety lines and rails, severe gouging of the hull, damage to electronic equipment and, in some cases, sinkage of other vessels. Strandings An old salt knows that a boat with a draft of seven feet will not float in water depth of five feet. Strandings occur for a variety of reasons including poor navigation, improperly marked waterways, unexpected currents, heavy weather, shifting mud and sandbanks and very occasionally uncharted hazards.Typical damage sustained in strandings includes lost propellers, bent sterndrives, rudder and keel detachment, 24 Canadian Underwriter August 2009
flying object damage and injuries to boat occupants.
Foundering Foundering is the technical term for sinking. Foundering may be a consequence of stranding, but it might also be due to poorly maintained through hull devices, overflowing and burst liquid hoses on the vessel. Often when a vessel is affected by water in this way, the boat’s electrical system — a key component in the on-board bilge pumping system — is among the first casualties. In extreme conditions, foundering may cause a constructive total loss. It can certainly lead to many expensive damages such as wood swelling, electrical shorting, dam-
age to motors and auxiliaries (such as refrigerators, air conditioners, heater and soft furnishings). If left untreated, damage due to foundering might result in the development of mould.
Fire This is a common occurrence on pleasure craft and is probably one of the most costly losses affecting the industry. Typical causes of fires include cooking devices, fuel leaks and subsequent ignition, mistakes by service providers, welding, faulty wiring and poor ship/shore electrical connections. Unfortunately, as vessels are usually moored or stored in close proximity, heat and flames are transmitted from one hull to another, damaging several vessels as a result. In winter, the situation is much worse: boats are generally “hauled out”
and stored in very close proximity. Fire often results in actual or constructive total losses; even when the structure is not significantly damaged, cleaning, rewiring, odour control and other potential consequences are challenging to overcome.
Theft and Vandalism Theft of entire vessels is rare in Canadian waters; however, a significant number of small vessels have been stolen while on their trailer. Vessel break-ins are more problematic; typically they will result in the theft of portable items stored on board or semi-fixed equipment such as TVs, sound systems, computers and other electronics. Of more concern is deliberate vandalism, including ripped furnishings, damaged electronic equipment, stoved-in bulkheads, engine damage and in extreme circumstances, arson. Extreme Weather A review of statistics shows there are few significant losses incurred while vessels are actually underway during extreme weather. Most boaters exercise good diligence in checking the weather forecast before leaving and remaining alongside when extreme events such as consistent high winds or “pop-up” thunderstorms are anticipated. Of greater concern is the damage done to vessels alongside when they are hit by extreme weather. The most costly event is lightning strikes. When lightning is discharged in a marina area, several vessels may be affected. Significant electrical damage can be done to the complex and expensive electronic controls and navigation aids found aboard modern pleasure craft. A recent incident in Lake Ontario damaged seven vessels, not all moored adjacent to each other, causing about Cdn$300,000 damage in total. There are several causes and numerous consequences of losses to pleasure craft. They emphasize the need to solicit the advise of a qualified marine surveyor, especially when the loss is significant. With the right experts on board, it’s clear sailing! 1 http://www.tc.gc.ca/publications /en/tp511/pdf/hr/tp511e.pdf)
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No Compromise How risk managers can cope with the economic effects of a recession without compromising their risk management efforts. Perry R. Brazeau Senior Vice President, Manager, FM Global (Canada Division)
Although some analysts say the economic slump is decreasing in its intensity, dreary profit reports continue, as do staff layoffs. Corporate budgets remain tight, balance sheets fragile, supply chains stressed and many risk managers expected to make do with less. That can put you somewhere between a rock and a hard place. Now is a great time to become even more resourceful and vigilant: in today’s fiscal environment, should you have a sizable insured loss, there are likely to be business repercussions that no amount of insurance will cover. The economic downturn has brought with it many new risks; several relate to the unintended consequences of recent unprecedented job cuts. Many companies are still trying to figure out how to use fewer people and keep their businesses sustainable. Lower staff counts with increased pressure on productivity often results in employee responsibilities being stretched to tasks they might not have previous experience doing,
26 Canadian Underwriter August 2009
thus raising the risks of something going wrong. Furthermore, when it comes to people and risk management practices, studies by commercial and industrial property insurer FM Global continue to show that 70% of all property losses are caused by people rather than by economic conditions or industry. The good news is that companies can ensure their reduced workforces will not lead to sacrifices in an organization’s ability to manage risk. Increased risks stemming from the poor economy can easily be identified, better understood and dealt with — often at a minimal cost. Let us examine some of the common areas of increased risk often seen during difficult fiscal times and some affordable solutions.
LACK OF STAFFING Every company has senior employees who, given their longevity with an organization, are best acquainted with an organization’s risk management practices. Unfortunately the most tenured employees are often the first to be cut when layoffs begin.With organizations under pressure to slim down staffing, those lucky enough to keep their jobs are frequently left to pick up any slack. More likely than not, less experienced employees may be left to handle production, maintenance or emergency response, which can lead to potential
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errors in judgments and actions, despite their best intentions. Misuse of equipment or improper maintenance, for example, can lead to costly property losses such as fires, explosions and equipment breakdown. It therefore becomes paramount to make sure less-experienced staff members are aware of your risk management procedures. Proper employee training and communication is of the utmost importance. Human element programs, which help educate employees about the common causes for frequent and/or severe losses within that organization and ways to prevent such calamities, typically can be offered by an organization at little to no cost. Given the current freezing of travel budgets and related restrictions on attending conferences and seminars that help keep people’s skills sharp, it can be a great time to examine the benefits of online training courses and seek out such offerings. Courses designed to help organizations address common costly human factor hazards can take less than one hour to complete. They can be accessed any day, at any time, from any computer connected to the Internet. Such curricula can be incorporated into in-house training programs; often there is no limit to the number of employees that can register. Best of all, managers can track an employee’s course performance and progress. Training, supported by top management, can also be a big benefit to an organization that relies on an increased use of contractors.
CONTRACTORS Along with today’s layoffs come new means for human error to sneak into the risk equation. Companies trying to reduce their expenses often hire outside contractors for maintenance and repair jobs that an organization’s employees might have previously handled. However, such reliance on contractors, combined with a lack of supervision of their activities when they are doing work at your site, can be a costly recipe for disaster. It takes just one contractor to make a mistake or cut a corner for things to go terribly wrong.
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FM Global studies have revealed that a fire or explosion due to a contractor’s oversight(s) can average US$1.3 million per incident. That is often because contractors are usually the most unfamiliar with your business or facilities. Moreover, contractors are usually hired for maintenance and repair activities that require the use of open flames, or generate heat such as welding, cutting brazing and torch-applied applications. Many contractors also often have a mindset that they must work efficiently and get on to their next customer job quickly in order to maintain profitability. To start, pay close attention to a contractor’s insurance policies.Then look at their safety and loss records. Ensure the written agreements you have with your contractors indicate they agree to accept responsibility for any damage due to their actions or lack thereof. Developing formal policies and procedures on contractor management can be very effective
Every company has senior employees who are best acquainted with the organization’s risk management practices. Unfortunately, the most tenured employees are often the first to be cut when layoffs begin. in this regard, along with establishing protocol for selecting, inducting, managing and supervising such workers. Assign someone in authority to be accountable for ensuring that the policy and procedures are followed, audited regularly and updated as necessary. When contractors arrive on site, ensure they sign in and sign out and that you know where they will be working on site. Sit down with them and go through your organization’s internal safety procedures. Be sure to monitor their work the whole time they are on site to ensure it is done properly and safely. Contractors are less likely to cut corners when they are being observed
and their work is being documented. Such steps are simple but often overlooked. You might be thinking that, ironically, the very staff reductions that often cause the need for contractors also make for a shortage of staff to monitor the contractors. However, the lessons learned from contractor-related losses show that you really cannot afford not too.
IDLE FACILITIES In today’s recession, many companies have idle or underused facilities that must be shut down to save costs. Such facilities may be empty or full of valuable production equipment. In either case, such property should not be neglected. One might think there is less risk or need for insurance when a facility is not operational. But in fact you potentially could be at greater risk from such threats as fire, arson, theft or vandalism if you are not paying attention to these facilities. The average fire loss at an idle facility is upwards of US$700,000, according to FM Global studies — not something most companies would want to deal with in good times or bad. Furthermore, many idle facilities often contain flammable liquids, wood pallets and/or highly combustible materials, making it necessary that fire protection remain operational. Another precautionary measure is to notify your fire department if a facility will be sitting idle for a period of time. In addition, ensure you have a security crew or maintenance worker making regular rounds to curb the potential for vandalism and to keep an eye on any building deterioration that would increase a facility’s vulnerability. Overall, history shows the majority of losses caused by these risk factors are preventable. The solutions to mitigate such perils are simple, inexpensive and have an unlimited upside — especially important when times are tight. Budgets for risk improvement may be constrained, but getting the most out of your risk management dollar may never have been more important than during these hard times.
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S MORE
LESS I
More regulation may not necessarily be the best method to handle the incidental sales of insurance.
J. Brian Reeve Partner, Cassels Brock & Blackwell LLP.
The sale of insurance as a part of consumer goods transactions has increased significantly during the past few years. Manufacturers, distributors and retailers all view the sale of extended warranties and service contracts, as well as other types of insurance products, as an important source of additional profit. It is becoming more difficult for consumers to purchase any type of goods or service without being offered some form of warranty or insurance coverage. This coverage is usually offered at the point of sale by an unlicensed person. In November 2008, the Canadian Counsel of Insurance Regulators (CCIR) and the Canadian Insurance Services Regulatory Organization (CISRO) jointly released An Incidental Selling of Insurance Report. The purpose of the report was to provide recommendations with respect to whether additional regulation by provincial and federal insurance regulators was necessary regarding the incidental selling of insurance products by unlicensed persons.
30 Canadian Underwriter August 2009
The CCIR began reviewing the incidental sale of insurance with respect to licensing and consumer issues in 2007. On Feb. 27, 2008, the CCIR and CISRO jointly released a consultation document in order to get input from industry and consumer associations.The consultation document defined an “incidental seller of insurance” as follows: “a person who, in pursuing activities in a field other than insurance, offers as an accessory, for an insurer, an insurance product which relates solely to goods sold or services offered by the person or secures a client’s enrollment in respect of such an insurance product.” It is important to distinguish between various types of insurance products that are sold by incidental sellers. Some products, such as lost luggage or towing services in the event of an accident, are not important to the consumer and are often provided for little or no additional cost. As a result, there should be less need for regulation of the sale of these types of coverage. However other products, such as extended warranties on automobiles and consumer electronic products, may cost hundreds of dollars and might include significant limitations of coverage. Examples of sales by incidental sellers of insurance include the following: • automobile extended warranties (considered to
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be insurance in some provinces and not in others); • warranties on consumer products such as electronics; • insurance coverages offered as part of credit cards; • insurance coverages provided by automobile clubs; • pre-need funeral insurance offered by funeral homes; and • travel insurance offered by travel agencies. The definition of an “incidental seller of insurance” in the report does not include an employer “enrolling” an employee under a group life policy since it was not considered to be an offer of insurance. Banks and other lenders that sell group creditor insurance to cover the amounts due on loans in the event of death, disability or job loss are also not covered by the report. Banks and other lenders have an insurable interest with respect to the amounts of loans that are outstanding. As a result, they can offer coverage to their customers under group policies they have obtained. The report also did not cover warranties. However, for all practical purposes, a third party warranty is an insurance product regardless of how it is regulated in a particular province. The fact that warranties are not directly regulated as insurance in some provinces such as Ontario complicates the regulation of sellers of these products. However, the reality is that warranties are basically insurance products and the sale of them by unlicensed persons may still result in consumer issues that require some form of regulation.
REPORT RECOMMENDATIONS The report identifies the fundamental question with respect to evaluating the appropriateness of an incidental sale of insurance as follows: “Is the consumer in a position at the time of sale to make an informed decision about his purchase?” The purpose of the report was to provide overall recommendations that would enable each insurance regulator to make its own decisions with respect to how to regulate the incidental sale of
32 Canadian Underwriter August 2009
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insurance. The most important conclusion of the report is that it does not call for the blanket licensing of incidental sellers of insurance. As a result, the report basically recommends that the status quo of not requiring incidental sellers of insurance to be licensed should be maintained.This conclusion has already received significant criticism from various groups including the Insurance Brokers Association of Canada (IBAC). IBAC wishes to see licensing required for all incidental sellers of insurance products. IBAC’s concern is that unregulated and unlicensed sellers of insurance products are not necessarily sufficiently knowledgeable regarding the insurance products they are selling to enable consumers to make an informed choice. IBAC is basically arguing that a level playing field should exist for all sales of insurance products. The report provides four basic recommendations as follows:
Improve the application forms and other documents Many incidental insurance products include exclusions, restrictions and limitations that are difficult for consumers to understand.There are also concerns about the ability of consumers to understand their eligibility for insurance coverage. The report recommends the use of plain language wordings in all documents provided to consumers. Improve the training and supervision of sellers The report recommends that training programs for incidental services of insurance should focus on enabling the seller to understand the product, eligibility requirements and the extent of the coverage. The report also provides that insurers should ensure sufficient procedures are in place to train and supervise the incidental sellers of insurance products. Provide consumers with an opportunity to assess purchase of the product The report advocates a sufficient cooling-off period to allow consumers to assess the suitability of the product based
on their total financial position, rather than solely with respect to the risk created by acquisition of a specific good or service. The current practice in the industry is to provide a 10-day cooling-off period during which the product can be refunded. The report suggests that a longer cooling-off period be provided.
Obtain statistical information In order for insurance regulators to be able to identify problem areas, it is important that relevant and reliable statistical information — including the tracking of complaints — be obtained on a timely basis.The report calls for a better system for tracking these types of statistical information.
ALTERNATIVE REGULATORY APPROACHES The report does not deal with the limited licensing that is provided in some provinces for certain types of insurance. For example, in some provinces it is possible for travel agents to obtain an insurance license limited to the sale of travel insurance. An individual is required to take a course and an exam that are limited to travel insurance. Normal educational requirements for an insurance broker are waived for a travel agent who wishes to sell only travel insurance. This type of limited license is logical because a travel agent is normally in a better position to be able to provide detailed information about a travel insurance policy based on work experience than is an insurance broker. Many types of insurance products sold on an incidental basis have a low cost and provide relatively limited amounts of coverage. As a result, they are not products that most insurance brokers would be interested in selling. One interesting statistic in the report is that 65% of Canadian families do not have an insurance broker. As a result, it appears insurance regulators were reluctant to impose a mandatory requirement for the licensing of all incidental sellers of insurance, since it might deny access to insurance coverage to many Canadians.
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In many cases, a knowledgeable seller of a consumer product or service is also in the best position to sell the applicable insurance coverage. For example, a funeral director may be in a good position to provide the necessary advice for the sale of a pre-need insurance policy to cover the cost of a funeral. There have always been types of incidental insurance products that may technically count as insurance, but insurance regulators have nevertheless decided that these products do not need to be sold by licensed insurance brokers. For example, automobile clubs have traditionally offered a number of services such as towing in the event of an accident. Credit cards have offered coverages including accident insurance and coverage for lost luggage during trips.
SUMMARY It is unlikely that any significant changes will be made in how incidental sellers of insurance are regulated over the next few years. However, unlicensed sellers are increasingly selling a large number
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of products on an incidental basis. As a result, more consumer issues may emerge over time. Insurance regulators have taken a practical approach in the past and decided that the non-regulation of incidental sellers of insurance has in most situations been to the benefit of Canadian consumers. If an insurer chooses to use an unlicensed incidental distribution channel for the sale of insurance, then it is really dealing directly with the public. As a result, a greater onus should be placed on the insurer to provide clear information about the coverages offered to consumers and to take additional steps beyond what would be done when brokers are involved. Another complication is that insurers are prohibited from paying commissions for the sale of insurance to unlicensed persons. As a result, the incidental seller of an insurance product should not receive any compensation from an insurer. However, many incidental sellers of insurance receive compensation from insurers, often characterized as an
administrative services fee rather than as a commission. Most consumer issues likely arise from a misunderstanding by consumers about what is actually covered and the steps that must be taken to make a valid claim. Better disclosure of the most important terms and conditions of a coverage sold by an incidental seller of insurance would assist in reducing the number of complaints from consumers. It is clear that a blanket requirement for all sellers of incidental insurance products to be licensed would be both impractical and also not in the best interest of consumers. However, many industry groups, including Insurance Brokers Association of Canada, have raised valid concerns with respect to the varying knowledge and professionalism that exists among unlicensed sellers of incidental insurance. An approach that would expand the number of types of insurance products for which a limited license could be obtained might be a reasonable compromise, balancing the interests between the sellers of consumer products and consumers.
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Phoenix Rising It seems the global financial conflagration was sparked in part by a handful of complacent decision makers who should have been challenging what their risk models were telling them. The resultant financial meltdown had the potential to devalue the entire risk management discipline and erode its credibility. And yet, risk managers appear to have emerged from the smoke and ashes with a stronger sense of purpose and a clearer sense of what constitutes good technique. By Vanessa Mariga
36 Canadian Underwriter August 2009
It’s
been nearly a year since the foundation of the global economy was shaken and splintered to its core. By now, we are all better acquainted with the dubious market practices that almost caused a handful of major financial institutions south of the border to collapse, generating a ripple effect that has caused risk managers in both the financial and non-financial sectors to wonder what exactly went wrong — and what needs to be adjusted in order to prevent it from happening again. The role, practice and value of risk management came under fire after the event. Some suggested the entire book on the discipline needed to be torn up and re-written. Others argue the fault does not lie with risk management, but rather with the lack thereof. Some suggest key financial institutions relied too heavily on financial models, causing risk managers at these firms to basically fall asleep at the wheel and grow complacent. As a result, myopic decisions were made with little to no consideration given to qualitative factors such as reputation risk. Highly improbable events were simply shuffled off of the radar screen. Some surmise that perhaps the most expensive words in the English language — ‘that won’t ever happen’ — replaced careful consideration and creative stress testing within the risk management departments at these troubled firms.
August 2009 Canadian Underwriter 37
COVER STORY
Phoenix Rising A global corporate calamity such as the financial crisis holds the potential to make or break the entire discipline of risk management. Ironically, the banking sector — the same investment banks that made questionable mortgage loans, thus contributing to the financial crisis — appeared to sit on the front edge of the risk management wedge, says Dr. Bob Mark, the CEO of Black Diamond Risk Enterprises. “They’ve published policies and designed methodologies to measure a lot of things,” he says. “They built the infrastructure and put a significant amount of investment into it, and yet they still had problems. I think that’s the dilemma.” But Mark cautions the answer is not to throw the baby out with the bathwater and jettison risk modelling altogether. By recognizing weaknesses in the systems that faltered, he continues, others are building and shoring up their respective programs. The event may have been the wake-up call that the C-suite needed to hear. An event of this magnitude — some insurers have projected the financial crisis will lead to liability claims of about US$10 billion, roughly one-quarter of the insured losses associated with Hurricane Katrina — is forcing risk managers in all sectors, both financial and non-financial, to stop and re-evaluate what led to the meltdown in the first place. Risk managers are already moving forward with lessons learned to improve risk management practices across the spectrum. “Bad risk management got us into this mess and good risk management will get us out of it,” says Perry Brazeau, FM Global’s chief agent in Canada. Lessons learned It’s an old adage that a tool is only as effective as the person using it. After all, businesses are essentially an aggregation of humans. Thus, when sifting through the ashes of the financial crisis, experts argue the post-mortem should not be on whether or not it was the financial models that faltered. Rather, analysis should concentrate on whether corporations failed to execute sound risk management principles. “In our experience, 38 Canadian Underwriter August 2009
many of the models were sound and credible,” says Don Mango, Guy Carpenter & Company’s chief actuary. “The issues really centred around systemic risk, which impacted all participants simultaneously, and a liquidity meltdown to unprecedented levels.”
Perhaps the most expensive words in the English language — ‘that won’t ever happen’ — replaced careful consideration and creative stress testing within the risk management departments of troubled financial firms. Financial models are basically a collection of theories and correlations, says Joanna Makomaski, a principal and senior ERM specialist with the V3 Advisory Group in Toronto. “Or as I like to call them, a Jenga tower of assumptions that are typically based on past observations and not necessarily on a current operating environment of any one organization. It’s a best guess.” Makomaski hypothesizes that the size and complexity of the models financial institutions use have simply grown to the point where no one really questions the assumptions on which they are based. “The models may have been perfectly sound, but no one likely was responsible for questioning the assump-
tions that were in them,” she says. Worse yet, she adds, “we got so close to these models that we failed to see the forest for the trees. You need to step back and regularly look inside the model to see if there might be something else that needs considering.” Before the crisis, most companies, and not just those in the financial services industry, approached risk with an eye towards compliance, Phillip Ellis, leader of Willis’ ERM Business, observes. Lost in this approach was the need to manage risk. “Models were often used as something of a crutch — sort of a reassurance that what management was already doing was okay,” says Ellis. “It has been widely noted and reported that most senior executives of most of the institutions that have been seriously damaged in the crisis didn’t really understand the models or the signals that many of the models were giving with regard to risk tolerances and risk barriers.” Complacency likely took hold, Makomaski says, and the models were being treated as crystal balls. Risk management really should be about preparation, not just prediction. “There was probably a combination of overly optimistic models that were based only on the recent past, when financial volatility was low, as well as lack of discipline to follow the models that did indicate stress and excessive leverage,” Mango says. Twisting the assumptions How do risk managers make sure they don’t retreat back into that comfort zone of complacency? First of all, they need to remember that models are more than just a collection of historical data: they are based on theoretical assumptions, and the currency and relevance of these assumptions should be re-evaluated frequently. This is part of what risk managers mean when they say the models’ assumptions need to be “twisted” every so often. “A lot of folks [were] …lulled into a false sense of security [about] risks [and] forecasts for the future because, by and large, their models were telling
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COVER STORY
Phoenix Rising them something that for a long time was right,” says Mat Allen, practice leader for ERM at Marsh. “And then with this crisis, the model’s output was wrong. Not only was it wrong, but it was big-time wrong.” That’s when it becomes a big problem, Allen continues. “The models are a reflection of what’s happened in history or the past. When you know what the past is, the models are pretty accurate. Well, when the past changes a bit, it starts to change the model pretty dramatically.” Mike Stramaglia, chief risk officer at SunLife Financial, agrees. He says the calibration of risk models using historical precedence or past experience is an inherent flaw. “As complex as some of these financial models are, of course the real world in which we are cursed to live really orders a magnitude that’s even more complex,” he says. “There’s an implicit assumption that the future will always look like the past, but we know that’s not always true. When those historical patterns break down, they often do so in a very significant way.” So, how do risk managers prepare for those momentous occasions that models reject as statistically improbable? “There are ways to get around history, and that would be to change the [models’] assumption base or the way that [their] assumptions are generated,” Allen says. Stress testing is a common procedure; in certain situations, it is a regulatory requirement. Whether required or not, stress testing always benefits from risk managers showing some creativity and imagination in an effort to explore hypothetical scenarios and assumptions. “For example, Quebec separates,” Mark says. “It’s not a crazy scenario, but you need to think of what would happen to your business if Quebec separates. I know that if Quebec separates, I have thought through the implications. Now if something happens to my currency, or the Canadian dollar gets whacked, I can have hedges in place. Do I have business risks because people don’t want to deal with me because they don’t know what’s going on? That’s my communication plan. I can tell them, ‘I’m okay. It’s business as usual for me.” 40 Canadian Underwriter August 2009
Sensitivity testing on the key model assumptions is paramount, as is an understanding of which assumptions have the highest leveraged effect on the results. “The idea is to really hone in on what you are actually betting on,” Stramaglia
Bad risk management got us into this mess and good risk management will get us out of it. says. “What are the functions that are really driving the bus in terms of impacting results?” Broadening engagement in the stress testing — incorporating as many different people and perspectives as possible — and expanding the timeline beyond a model’s projected result time frame can also help test the models’ assumptions and thresholds. “Involving people in the process that aren’t married to some of those past paradigms and [people] who continue to ask ‘Why not?’ can be particularly helpful,” Stramaglia continues. “Looking beyond the one-year horizon to what might happen in three or five years can help, too. Because we know that time frames are getting to be more and more compressed. It’s amazing just how quickly things can unwind.” The ‘unknown unknowns’ Borrowing a phrase from former U.S. secretary of state Donald Rumsfeld, Ellis says one of the primary challenges for risk management is to plan for the “unknown unknowns.” One can never really predict what the future holds, Ellis says. But by using a
combination of quantitative and qualitative methods — methods that take into consideration data, hard numbers and human experience — risk managers can drum up a series of estimates that would help define plausible calamitous scenarios. Stramaglia suggests turning a typical stress test on its head, working backwards through it. “Instead of first thinking up a scenario and then running it through your model and getting a result, start with a really bad result and then run it backwards and try to identify some scenarios or assumptions that might land you there. Then try to determine what you think about that. That has a tendency to put a focus on some of the more audacious scenarios than if you approached it in a more conventional sense.” Talk to management teams, Ellis says. Ask them about past surprises they have seen occur. Find out what kinds of potential scenarios are keeping them awake at night. Get estimates on how likely those nightmare scenarios are to occur. In obtaining these estimates, don’t get bogged down by data analysis; listen to their ‘gut feelings.’ “By mining human expertise to come up with the definition of the calamities, and the possibility of those calamities [occurring], management develops a comfort level that they have faced the abyss head on,” says Ellis. “But it’s defined by what the abyss looks like, and then they can come up with their risk management plans.” Using a model as a base, supporting its statistical findings with anecdotal data and good judgement, better supports an executive’s decision-making process, says Garry McDonnell, national director of Aon Global Risk Consulting in Canada. “I think reliance on a model [alone] will not give you the best outcome,” McDonnell says. He adds that he has observed a shift in risk management practices that sees the a higher premium being placed on the inclusion of judgement and human experience, not just the hard data. Makomaski agrees. “Models can act as wonderful benchmarks and support
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COVER STORY
Phoenix Rising
tools that can create boundaries with respect to risks. It might be slightly off, but at least it puts us in the ballpark, and we need that. There are some great benefits to having these tools, but they are just tools and need to be gut-checked.” Risk management is not merely an exercise in prediction, Makomaski continues. It’s about being prepared for those calamities as well. “It’s about rebound time, it’s not just about the nature of the risks. It’s about your ability to quickly rebound once something hits you and hopefully bounce back before your competition.” Embrace the fact that there will be failures and that bad things will happen, she says. Learn from them and adjust your business resilience plan. “If you know that you’re going to be in a jungle, you know there is a chance you may be bitten by a ferocious animal,” she says. “You can spend all your time trying to figure out the particulars of the tiger or snake that may bite you. Or rather think: ‘If I get bitten, how quickly will I be able to recover? Focus more on the action plan and the size of a bite that could actually pose a serious problem for you.” A voice in the wilderness One pertinent lesson learned from the crisis is the need to communicate those projected risks — and the planning undertaken around them — to the rest of the organization, from the mailroom to the C-suite. “The primary role of the 42 Canadian Underwriter August 2009
There are some great benefits to having these models as tools, but they are just tools and need to be gut-checked. risk manager is to make the risks transparent,” says Mark. “Reports need to be clear, and other people in the organization need to be brought into the process. I would ask for the help of the managers of the other units within the organization so that I could understand those units. I try to make it a partnership. I couldn’t do it by myself. These managers are your business partners; if something goes wrong, it’s both of your issues.” Today, more than ever, risk managers have tools available to communicate the risks, Craig Rowe, founder and CEO of ClearRisk, notes. “Through intranets, internal micro-blogs and networking sites, all kinds of opportunities exist for risk managers to keep risk management on top-of-mind in all levels of the organization.” Rowe says he doesn’t see the risk manager as being the only person within an organization that manages risk. “I don’t
think any one person within an organization can manage risk on their own effectively,” he says. “The risk manager is the person who leads the organization through the risk management process.” Taking on this leadership role requires a risk manager to think of their career in terms like that of a doctor or lawyer — i.e. a career that requires ongoing education. “You’ve got to stay on top of the case law, on top of the news and events in both your organization and the industry at large,” Rowe says. “And you have to keep communicating that inside of your organization. There’s nothing like a real-world example to get people interested, get their attention and make them remember. Be the risk library in your organization and pass it on.” Ellis agrees. “The models don’t need to get any more sophisticated,” he says. “What has to get more sophisticated is the communication” between senior executives and modellers. The senior executives need to be telling modellers in a clear way what they are looking for in terms of a model that can help them manage their business. Modellers, on the other hand, need to communicate coherent messages to the senior management about what their models are telling them. “The real issue — and one that’s really come into focus with this crisis, given that many companies have severe liquidity issues and are very worried about their level of debt and, in many cases, their cash flows — is that it’s extremely
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COVER STORY
Phoenix Rising
A lot of folks were lulled into a false sense of security about risks and forecasts for the future because by and large their models were telling them something that for a long time was right. And then with this crisis, the model’s output was wrong. Not only was it wrong, but it was big-time wrong. important to understand the catastrophic ends of things and how companies can protect themselves against those kinds of losses,” Ellis says. Decision-makers in organizations that suffered as a result of the crisis were clearly ill-informed about the risks and ill-prepared to deal with the consequences. “A lot of the time [the senior executives] are left disabled and they aren’t given the proper information,” Makmomaski says. “Management means that action is being taken and decisions are being made with the understanding of the risks. … I do believe that at the executive level, often people aren’t getting reliable business intelligence to actually apply sound risk management.” Culture shift Even though, as a result of the crisis, the C-suite now seems to be paying more attention to those within its risk management department, the awareness of risk still needs to permeate throughout the organization, experts agree. Well-crafted employee incentive programs and compensation plans are the single largest levers management has to 44 Canadian Underwriter August 2009
create a risk-responsible behaviour, Makomaski says.“ Often leaders and decision makers get ahead in organizations because they’re recognized for putting out fires, so naturally their incentive is to wait for the next fire so that they can show their abilities,” she says. “For me, it’s that kind of incentive, and it’s those kinds of performance metrics, that need adjusting…. People need to be rewarded for mitigating fires too.” Oddly enough, the crisis has accelerated the acute nature of the demands of the risk manager’s role, Allen says. “There is a fundamental shift in the expectation of what the risk manager does. More specifically, there is an expectation that the role is migrating in a different direction than it’s ever been in.” Historically, the risk manager’s role was typically one-dimensional. The risk manager was the person within the organization that purchased insurance. Since the economic downturn, however, senior managers have changed their views about what risk managers are and what they should be doing. The role is becoming now becoming more strategic, McConnell suggests.
“It’s creating a huge opportunity,” Allen adds. “The smart cross-section of risk managers understands that it’s an opportunity to make the role more strategic and get closer to the C-suite. The smart money is on the folks who are viewing risk in a much more strategic way and have the ability to talk about the financial structure of their organization and provide very specific value as it relates to the protection of that structure.” At the end of the day, risk management is not about eliminating or avoiding risks, it’s about striking the proper balance between an organization’s goals and the amount of risk that can be taken to meet those goals and remain profitable. “Be very conscious of what environments breed risk, work at thwarting and dampening the risks to eliminate the risks you don’t want and embrace the ones that you do want,” Makomaski says. “Risk management means preparing for and understanding what is creating volatility in your desired goals. It’s sound, it makes sense, but it needs to be practiced — it is like staying fit, we must go to the gym regularly — it doesn’t just happen.”
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New Life
for Used Lands Insurers can help restore new life to lands sitting abandoned or underused, plagued by expensive clean-up costs and environmental liability.
Carl Spensieri
Environmental Underwriter, XL Insurance (Toronto)
Across Canada, “brownfield” lands sit abandoned or underused, plagued by expensive clean-up costs and the threat of environmental liability that may accompany future use. As a result, brownfield lands have been historically shunned as investment and development opportunities due to public stigma and difficulty in securing financing for contaminated land redevelopment. Today, concern about urban sprawl, protecting open space and job creation is fueling a desire to clean up polluted properties and return them to good use again. All levels of government are driving this push to recycle land. Municipalities are seeking to increase tax revenues via brownfield redevelopment; provincial governments are limiting urban sprawl with legislation limiting Greenfield development; and federal governments are directing stimulus funds to brownfield sites. Examples of such initiatives include Community Improvement Plans implemented by municipal governments across Canada. These plans attempted to encourage brownfield development using various incentives (i.e., tax incentives or
46 Canadian Underwriter August 2009
clean-up cost subsidies). Most recently, the federal government has attempted to spur brownfield redevelopment with stimulus measures contained within Canada’s Economic Action Plan. This is therefore an opportune time to look into some of the issues that arise in insuring brownfield land redevelopment.
THE HURDLES Whenever purchasing property, a buyer is always prudent to seek assurances about a property’s condition. This is often achieved by undertaking environmental site assessments (i.e. investigations designed to identify and characterize environmental conditions at a site). However, even when strict due diligence is performed, there is always the chance of discovering a previously unidentified environmental condition (contamination). Such contamination could be due to an oversight in the environmental site assessment performed or could be the result of an unforeseen condition (i.e. migration of contamination from a neighbouring property). The uncertainty associated with environmental characterization often leads to unanticipated complexities in even the most benign of purchase and sale transactions. In the case of brownfield lands, these complexities often preclude the possibility of land transfer, as owners are often unable to address the potential ongoing liabilities associated with redeveloping brownfield sites.
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Specifically, brownfield redevelopment often results in industrial or commercial property being used for a more sensitive use (i.e. residential). In addition, brownfield sites often require sophisticated clean-up solutions, including risk assessment and highly engineered site controls (i.e. active sub-surface ventilation systems, groundwater pump and treatment systems). Based on their inability to insulate themselves adequately from these risks, brownfield owners often opt to leave their sites vacant and unused. Even when the aforementioned hurdles are overcome, brownfield stakeholders must also deal with potential complications and liability associated with changes in clean-up standards. For example, Ontario is currently revisiting property use standards that have been in place for more than a decade. Anticipated to be finalized later this year, the new property standards will, for the most part, impose more onerous cleanup standards. Such changes can create uncertainty with respect to past clean-up efforts and impede development by discouraging prospective purchasers, developers, lenders and municipalities — the fear being that they might be held liable to fund future clean-up costs. Lastly, brownfield redevelopment is often stalled by transactional issues, including the transfer and assumption of environmental liability between purchaser and vendor, overly burdensome and unsophisticated environmental legislation and lack of adequate brownfield financing.
INSURING REDEVELOPMENT Environmental insurance offers the opportunity to address or assist in managing all these hurdles. It offers a risk transfer strategy that handles potential environmental liability today, as well as in the future. It is an important tool that offers additional comfort and certainty to brownfield owners, redevelopers, investors, government entities and future land users. The use and availability of environmental insurance has helped spur activities in property redevelopment in both
48 Canadian Underwriter August 2009
Canada and the United States. As activity in this market has increased, the insurance industry has responded by developing new insurance programs to fill the vacuum that has stymied growth in the redevelopment of contaminated properties. Realizing the unique needs of participants in brownfield projects, insurers have responded by creating custom insurance packages uniquely designed to address these issues. For instance, environmental insurance can protect landowners or purchasers against the clean-up costs and legal liabilities associated with environmental conditions that were not identified during the due diligence process. In addition, environmental insurance can be crafted to address the site-specific ongoing liabilities associated with a future use. Insurance can insulate a redeveloper from liabilities associated with failure of an engineered risk control measure (i.e. bodily injury claims, property damage claims or clean-up costs incurred to respond to the failed risk control measure). Lastly, environmental insurance can respond to changing regulatory requirements and standards by shielding owners and developers from unforeseen clean-up costs required to bring previously remediated properties into compliance with current or future legislation. At one time, environmental insurance met with a lot of scepticism. The coverage was deemed too expensive and very limited. It was once considered a special luxury for regulated industries such as hazardous waste haulers. But a growing number of policies available in the market today are being used more frequently to facilitate real estate transaction — particularly the redevelopment of formerly used properties. Many developers would have ignored these properties in the past because of environmental liability concerns. In its traditional role, environmental insurance provides a financial cushion if an environmental incident occurs. Today many stakeholders have come to learn that the cost of environmental insurance is more manageable than an unforeseen cleanup expense. Developers are beginning to incorporate environ-
mental insurance into their redevelopment costs.This ensures financial capital remains available for other development projects rather than being diverted to address unplanned environmental complications. Ultimately the financial protection afforded by an environmental policy may be the difference between completing a brownfield redevelopment and being forced to abandon a project. In this way, environmental insurance serves as an important selling tool for attracting buyers, financing and tenants because it provides reassurance to all parties, by eliminating or reducing the uncertainty surrounding the property. Likewise, insurance can be used to assuage the surrounding communities’ fears about contamination, potential environmental incidents or the spread of contamination during construction.
WHAT’S AVAILABLE? One of the most common environmental insurance programs used in brownfield redevelopment is a pollution and remediation legal liability policy. This policy provides coverage for on-site and off-site losses, remediation expense and legal defence expense under one policy for sudden and gradual pollution conditions at or from covered locations. The pollution and remediation legal liability policy can also be combined with a remediation stop loss policy, which provides coverage in the event of cleanup project cost overruns. This coverage can be written for an individual site or for a portfolio of properties. The true value of insurance is often only realized following a loss. This is not the case with environmental insurance for property redevelopment. In these situations, the value of the insurance is recognized at the beginning of a redevelopment project before any loss is suffered or any financial payout is made: the policy assists in overcoming the hurdles to development. It is for this reason that stakeholders involved in redevelopment activities are buying environmental insurance. For these entities, environmental policies are used strategically to allow redevelopment opportunities to move ahead successfully.
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Through the Looking Glass Collecting accurate and reliable claims data is a crucial part of establishing a good risk management program. In today’s demanding environment of stringent compliance requirements and reputational risk Assistant Vice President, exposure, senior management might call upon Risk Management risk managers at any time to provide loss statisServices, tics. This information must be correct because Crawford & Company the executives will rely upon it to make business (Canada) Inc. decisions that will ultimately affect financial outcomes. “Risk managers have a fiduciary responsibility to ensure that data tracked is accurate because reserves for uninsured portions of claims must be carried on financial statements and therefore will impact financial liability,” says Kevin McMullen, risk manager of the Hudson’s Bay Company. “Reserving practices are important and must be accurate in all ways due to the impact on financial reporting.”
Sheri Martinello
50 Canadian Underwriter August 2009
The data reported will usually reflect frequency, severity and financial exposure. Not only will this information provide visibility about what’s going on within the organization’s operations, but it will also keep senior management abreast of any issues that could involve harm to the organization’s reputation. It’s crucial for risk managers to know and understand their data, according to Mullen. “Risk managers need to have the ability to confirm that data is correct,” he says. “In most cases, your loss data will not match the insurers’ 100% of the time, and risk managers need to be able to explain the difference.” When a risk manager is confident his department has developed a thorough process for collecting accurate and reliable loss information — to the point that he would not hesitate to provide a requested analysis promptly — he not only illustrates the worth of the risk management role, but also establishes the organization as a leader in its field.
TRACKING INCIDENTS While the insurer may track claims that fall within the policy, it’s important to monitor any incidents not being handled by the insurer as
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well. For example, if a retail operation settles a minor slip-and-fall accident with a store gift certificate, how is that situation tracked? Are those types of occurrences getting back to the risk management division, or are the costs being assumed as an operational expense, with no record of the incident or payment? Without proper tracking, there’s no opportunity to employ risk control measures to address the issue that led to the accident.While there may have been a small payout in this example, a more serious and costly incident could occur in the future as a result of the same cause. The goal is to catch trends before they turn into expensive claims. Gone are the days of completing a hard copy incident report, putting it in a file and hoping that it can be found if needed in the future. Every incident should be captured in an electronic format and saved in case the issue is raised in the future or a statement of claim is received. Ideally, key reporting variables should be gathered up front.
CAPTURING DATA When analyzing claims data, it’s necessary to include information from all sources — independent adjusters, insurers, internal resources and captives. Data from incidents and claims handled internally will need to be included for a full analysis. Information should be organized in a meaningful way so that it can be used for risk control purposes in the future. However, pulling this data together can be a challenge. All of the information will need to be brought together into a similar, consistent format, ideally gross of the deductible and over and above the self-insured retention. If claims are tracked by location, region or division, the same format should be used for all categories. This will help when looking at the losses for a particular location or division and may be necessary for the allocation of costs and/or deductibles down the road. All
52 Canadian Underwriter August 2009
Page 13
incidents should be included in the risk analysis for that category. Monitoring all payouts will be relevant to carrying out a full assessment of loss exposures when considering changes to deductibles and self-insured retentions. Preferably, claims data should be tracked in one system. Several risk management information systems are available that provide a variety of features in addition to claims data tracking and risk control features. Many third-party administrators (independent adjusters) and insurers also provide such services. If you are transferring data from your
Gone are the days of completing a hard copy incident report, putting it in a file and hoping that it can be found if needed in the future. insurer to your third-party administrator, broker or risk management information systems provider, it’s necessary to confirm the expectations of the data transfer processes from the insurer. Will the insurer transfer the claims data directly to a service-provider? What will the format of the data transfer be? How often will the transfer take place? Will the insurer allow direct contact from the service-provider to obtain the data? What data will be released? What happens after a file goes into litigation? Is that data obtained any differently? “Insurers are seeing a growing emphasis on the availability and reliability of claims data,” says Vejai Manbahal, claim service manager of Zurich Canada. “There is an increased involvement of the insured in the claims process from a risk management perspective. They are looking to insurers for more sophisticated insurance products and services.” If there is a requirement under the policy, claims must be reported to the insurer from dollar one, even if the loss
is within a self-insured retention. In today’s highly regulated business environment, the insurer may be required to report claim criteria to a regulator. Confirm with your insurer what those requirements are and which source will provide the data to the regulator. Transferring data automatically through technology will decrease the potential for human error. If the transfer cannot be done automatically, then an established workflow is required in order to obtain consistent and accurate data. The process for collecting the data should include breaking out the data by policy terms, in addition to line of coverage. Accuracy related to the policy term is imperative in the event that coverage is changed from an occurrence to claims made basis in the future. Data should be collected and entered on a timely basis, so that information is up to date. Ideally, claims information and data should be available in real time and accessible via the Web in order that the risk manager can obtain the data when working off site. If a service provider is tracking the data, it’s important to have a service agreement in place outlining any expectations of the data to be tracked and the service levels that are expected, such as: • a timeline for entering claims and incidents in the system; • custom fields of information to be collected; • availability of data (real time?); • number of users that would have access to the data; and • PIPEDA access requirements, etc. The contract should specify who owns the data and conditions of termination should the arrangement be discontinued.The agreement should also spell out any fees related to transferring of data to another format, customization programming and on-going pricing in the event that the provider will be tracking data for the life of the file.
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ANALYZING THE DATA The data is valuable only if it can be pulled into a report format that is usable. What format is suitable for your purposes? Do you need reports with coloured pie charts to present to the board of directors or senior management? Do you prefer to pull all data into an Excel format so that the data can be manipulated in a required format? Ideally, the tracking system will allow easy segregation of data over and the above the self-insured retention and/or any applicable aggregates. Does the system allow monitoring of performance measures related to claims handling? Is the time that the claims are open increasing or decreasing? Are claims or legal expenses rising or going down? Are the new risk and expense control measures that have been implemented actually affecting the claims costs and expenses?
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Key performance indicators will allow you to manage your claims portfolio with the goal of reducing shelf life, which will result in lower claims costs. Key performance indicators will allow you to manage your claims portfolio with the goal of reducing shelf life, which will result in lower claims costs. If there’s a high frequency of claims, it’s important to track the types and causes of losses in order to implement risk control measures. Does the system allow the flexibility to add custom fields in order to track claim and industry trends? Can those fields then be pulled into a report that can be referred to operations to address the issues at hand? Even if the organization does not allocate
costs back to individual divisions or operations, they should be aware of the exposures in their area. Your broker can assist you in setting up the reporting requirements to ensure that the key variables are being collected. It’s imperative that the broker be included in the process because he or she will be looking to the data for marketing the program on renewal. Premium levels will be based on the claims data, so it will be necessary to make sure that the information is accurate and up-to-date. Data will also be used for loss forecasting, which in turn will lead to assessing adequate retentions and deductibles. In an instance in which a self-insured retention is under consideration, analysis of data will be required to determine potential cost impacts of changes in the program structure. Because the retention costs will be real expenses to the bottom line, it is imperative that the forecasting uses accurate data to avoid surprises later.
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Oil Change Insurers can help reduce oil spills in a way that regulation cannot, by offering premium discounts to policyholders for risk-proofing their oil heating systems.
Michael Freill
HEATING OIL STORAGE:
President, REGULATION VS. NON REGULATION Mark 1 Engineering Microbial Influenced Corrosion (MIC) appears to Company, Consulting and be affecting domestic oil storage tanks more freForensic Investigation quently than in the past. Currently, there is speculation that the new Ultra Low Sulphur Diesel (ULSD) fuel, which is a cleaner-burning fuel, is more prone to causing internal tank corrosion failures. On the one hand, we improve the air quality using USLD fuel. On the other, we may be increasing the potential of ground contamination should a tank corrode through and ULSD fuel leaks into the environment. Some hypothesize the removal of sulphur in the fuel is somehow allowing MIC to become more prevalent in heating oil tanks. It is suggested that non-ULDS fuel, with its high sulphur content, created a less attractive environment for MIC to grow. It is important to note water has to be present in the tank bottom for MIC to live and grow. Others argue that the higher MIC failures re-
56 Canadian Underwriter August 2009
cently experienced are a result of the tank replacement process, during which MIC and other contaminants from the old tank are pumped into the new steel tank. Tiny blemishes in the new tank’s internal mill scale coating allow the corrosive material from the old tank to instantly attack this unprotected surface.The result is a premature pinhole failure on the bottom of a new steel tank without warning. Neither theory has been proven, although the trend of an increasing number of tank failures in Ontario recently provides evidence this phenomenon is worth further study.The MIC problem associated with ULSD is only the latest issue to plague the oil storage system, which continues to be a major concern for insurance companies and remains an Achilles heel for the oil heat industry.
REGULATING OIL STORAGE For many, the solution to the problem lies with government regulations. However, when we review the provinces with regulations, the anticipated reduction in incidents associated with the legislation appears elusive.This has caused some provinces to delay enforcement of existing legislation; those considering new legislation have put proposals on the back burner. I asked one provincial official why the relevant province hadn’t considered implementing legislation to enforce tank replacement and to insure the in-
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stallers were licensed.The response was: ‘We do not have the technical expertise in the heating oil business to legislate changes to the storage system. The oil industry is in a much better position to regulate itself. Legislation would require policing and administrative costs, taxing stretched resources. Financial decisions requiring homeowners to spend money on a heating oil system has become a political issue in some regulated provinces. Other provinces with regulation are not seeing anticipated reduction in incidents.
BACKGROUND: GOVERNMENT REGULATION P.E.I. introduced legislation in June 2001 that requires all storage systems to be inspected, upgraded and registered. The regulations allow only licensed installers to install storage systems; there is a maximum lifetime limit for storage tanks. The regulation has been tweaked over the years to add things like a guard over the outside valve, and a deadline extension during the times when it was evident too many systems had not been inspected. However, as of 2008, all systems on PEI have been inspected and tagged. If they don’t have a tag on the fill pipe they are not allowed to receive oil. In Newfoundland, the 2002 legislation has become as elusive as a codfish. Initial legislation requiring tank inspection to be completed by trained inspectors, each requiring Cdn$2 million worth of errors and omissions insurance, died a very quick death. It became apparent no inspector could afford the annual insurance premium, estimated to be in the tens of thousands of dollars, thus this requirement was quickly dropped in 2003. Now inspectors do not require insurance. The next portion of the April 2002 legislation to be relaxed was the March 2007 deadline for the initial inspection and upgrade. As soon as the deadline for inspections approaches, it becomes apparent not enough systems have been inspected, thereby resulting in a further extension. This has happened many times; now it
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appears this part of legislation will not be enforced. TSSA in Ontario has requirements similar to PEI. It, too, has had to modify its deadline for inspections a number of times. It has even flip-flopped on a few requirements.
IS GOVERNMENT REGULATION THE ANSWER? For years, the Insurance Bureau of Canada has called for government regulation in provinces where regulations do not exist. Obviously this would move the burden of policing the industry from the insurance companies over to the government. In making this argument more convincing, it would be better if the bureau had data that demonstrated the implementation of regulations had the beneficial effect of reducing leaks and spills (i.e. as compared to data obtained from non-regulated provinces). Unfortunately provinces without regulations do not keep detailed spill and leak statistics, making it hard to draw such a comparison.
P.E.I. LEAK AND SPILL RESULTS Table 1 below is the published leak and spill data available from the Department of Environment in P.E.I.The results indicate the regulations, now in their eighth year, are not yielding the desired outcome, which is to reduce the number of leaks. For the purpose of this summary,
Table 1.
–
I have included totals, averages, leak ratios (annual percent) and inverse ratios. (Please see Table 1.) As indicated in the table, only a modest reduction in incidents has been achieved since the introduction of regulations in the past two years, and the incident rate has been climbing. Does that mean these regulations are a failure? I would argue that they are not. Still, this data suggests improvements needs to be made and that governments don’t have all the answers. In P.E.I., all homes have now been inspected, upgraded and tagged. However, incidents continue to happen a rate of 0.317% annually (1 in every 316 homes). Keep in mind that P.E.I. has stricter reporting rules than all other provinces; thus, the spill numbers will be higher than what insurance companies or other governments will show. All spill incidents need reporting in P.E.I., not just those requiring a major cleanup.
P.E.I.’S IMPORTANT CONTRIBUTION P.E.I.'s use of regulation to reduce leaks and spills may have fallen short of expectations in one way. But in another, it has succeeded in creating statistical data. No other province in Canada has taken the initiative to gather data on failures so painstakingly as P.E.I.The data allows us to focus on solutions in the areas where real problems exist. Here are some very important tips:
PEI LEAK AND SPILL DATA 2004-2008
Tank Location
2004-2008 Spill & Leak Data for Heating Oil Supplied by: Prince Edward Island Dept of Environment
Totals Major and Minor Oil Leaks Inside Inside Inside Inside Outside Year tanks (1) lines (2) overfills totals tanks (1) 21 50 62 133 24 2004 2005 16 44 34 94 37 2006 7 40 44 91 25 2007 15 56 37 108 33 2008 12 36 48 96 23 Totals 71 226 225 522 142 Average 14 45 45 104 28 Leak Ratio .0417% 0.133% 0.132% 0.306% 0.204% Inverse 2400 754 757 326 490 Notes: 1. Refers to tank corrosion failure, > 95% of which is internal corrosion. 2. Refers to fuel supply line, filter, connection or burner leakage. 3. Refers to line or valve breakage outside section supply line only.
Total # of Tanks
Inside home
34080
Outside home total
13920 48000
Outside lines (3) 22 15 16 7 36 96 19 0.138% 725
Outside totals 46 52 41 40 59 238 48 0.342% 292
Combined Total 179 146 132 148 155 760 152 0.317% 316
Outside lines (3) 13 10 10 2 30 65 13.0 0.09% 1071
Outside totals 35 37 34 33 48 187 37 0.27% 372
Combined Total 74.5 68.5 66 82.25 87 378.25 76 0.158% 635
Table 2. – MAJOR LEAKS Total Major Oil Leaks (classified as those leaks greater then 5 litres)
58 Canadian Underwriter August 2009
Year 2004 2005 2006 2007 2008 Totals Average Leak Ratio Inverse
Inside tanks (1) 8 10 4 10 8 40 8 0.0235% 4260
Inside lines (2) 16 13 17 30 19 95 19.0 0.06% 1794
Inside overfills 15.5 8.5 11 9.25 12 56 11 0.03% 3029
Inside totals 39.5 31.5 32 49.25 39 191 38 0.11% 891
Outside tanks (1) 22 27 24 31 18 122 24 0.175% 570
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Outside Storage Tanks The most obvious place to start is the outside storage tank. Based on the data, a single-wall, steel outside storage tank clearly represents the worst possible choice for oil storage. At an annual corrosion failure rate of 1 in 490, the outside steel tank represents the highest rate of failure for any oil storage related equipment. The new B139 code slated for 2010 addresses this issue: it would require outside tanks to be double-bottom with interstitial monitoring or nonmetallic. Ironically, the inside-located storage tank (steel or other type), which has a failure rate of 1 in every 2,400 installations, is the best performing piece of equipment of the oil storage system. I have yet to find sufficient data to determine acceptable life for an outside steel tank. It will depend on a number of factors. Certainly an end-tap, 14-gauge tank located outside is a concern. Some insurance companies require replacement after 10 years. My data suggests this type of tank should be replaced in less time than that. Keep in mind that all outside tanks will have water form in the bottom from time to time, unless it continuously drains. It is unavoidable due the condensation process. Those suggesting this can be removed are not being realistic: it is a known fact that condensation can be a daily event when the conditions are right. Inside tanks don’t typically suffer from condensation issues because the temperature is constant. Outside Supply Line The next most obvious choice for upgrade is the outside supply line. End or bottom outlet supply lines located outside are the second most likely place you will get a catastrophic failure leading to an environmental incident.The homeowner should be strongly advised against putting a tank outside at all times. However, if it has to go outside, I suggest installing a top outlet single-line system with an anti-siphon valve and a dearator (air eliminating device). This way, the tank does not leak if the line gets cut or the valve breaks. A two-line burner supply system is not advisable because it will 60 Canadian Underwriter August 2009
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generate additional condensation in the outside tank. Two-line systems are banned in many countries in Europe.
tects the home from corrosion, connection and overfill leaks.
LEAK DETECTION FOR INSIDE STORAGE SYSTEMS Inside Storage Systems Table 1. – PEI LEAK AND SPILL DATA 2004-2008 Total Essen# of When dealing with a storage system in- Leak detection is simple toTank install. Location Tanks side the home, solutions to reduce inci- tially the tank, filter and burner areas are Spill & Leak Data for Heating Oil Inside home dents 2004-2008 of leaks are not obvious. This is protected with specially designed,34080 oil-reSupplied by: Prince Edward Island Dept of Environment Outside home 13920 when having good data becomes ex- sistant containment trays,total which 48000 are emtremely important. As stated above, the bossed to make sure any leaked heating Totals Major and Minor Oil Leaks inside storage tank theInside best- Inside oil is quickly channelled to an audible Inside is actually Inside Outside Outside Outside Combined Year tanks (1) lines (2) overfills totals tanks (1) lines (3) totals Total performing piece21of equipment. Inci- 133 alarm. It 24 acts much smoke 179 detec50 62 22 like a 46 2004 2005 16 44 34 94 37 15 52 146 dent rates from overfill and piping leaks tor, in the sense that an alarm will sound 2006 7 40 44 91 25 16 41 132 2007 15 56respectively. 37 108 33 7 40 148 are 1-in-757 and 1-in-754, when oil is present.The alarms are either 2008 12 36 48 96 23 36 59 155 225 522 142 96 760 Keep Totals in mind that71piping226 leaks include battery-operated or wired238 into a security Average 14 45 45 104 28 19 48 152 with.0417% filters, connections line connecting the tank problems system.The Leak Ratio 0.133% 0.132%and 0.306% 0.204% oil 0.138% 0.342% 0.317% Inverse 2400 754 757 490 the line itself.When we look at major in- 326 to the burner is725 typically292 sleeved316 (douNotes: 1. Refers to tank corrosion failure, > 95% of which is internal corrosion. cidents identified in Table 2 (those that ble-walled), ending over either contain2. Refers to fuel supply line, filter, connection or burner leakage. 3. Refers to line or valve breakage outside section supply line only.
Table 2. – MAJOR LEAKS Total Major Oil Leaks (classified as those leaks greater then 5 litres)
Year 2004 2005 2006 2007 2008 Totals Average Leak Ratio Inverse
Inside tanks (1) 8 10 4 10 8 40 8 0.0235% 4260
Inside lines (2) 16 13 17 30 19 95 19.0 0.06% 1794
Inside overfills 15.5 8.5 11 9.25 12 56 11 0.03% 3029
are not quickly detected) — which in P.E.I. are classified as spills and leaks over five litres — the incident rate for inside tanks drops to 1 failure in every 4,260 installations for inside tanks. Based on this data, it doesn’t make sense to have a policy to replace an inside tank after 10 or 15 years. Just the process of replacing a tank can be disastrous. For example, incidents in Nova Scotia from installations accounted for more than 5% of the incidents from 2002-05. If homeowners decide they want the replacement tank outdoors, they have just created more risk of a major spill for themselves or their insurance company by a factor of three times, as compared with the risk associated with the old inside storage system. It is far better to keep the tank indoors for 25 years provided that the tank, filter and burner connections are equipped with a leak containment tray and alarm system.This system can be added anytime. It pro-
Inside totals 39.5 31.5 32 49.25 39 191 38 0.11% 891
Outside tanks (1) 22 27 24 31 18 122 24 0.175% 570
Outside lines (3) 13 10 10 2 30 65 13.0 0.09% 1071
Outside totals 35 37 34 33 48 187 37 0.27% 372
Combined Total 74.5 68.5 66 82.25 87 378.25 76 0.158% 635
ment tray. Most oil systems have this double-wall protection already (orange, plastic-coated line).The cost of installing a leak detection system is only 1/10th the cost of a tank replacement; it thus provides a higher risk reduction return on investment. With leak detection, the frequency of failure will be reduced considerably.The failure rate with leak detection is estimated to be one incident in 8,000 annually — 24 times better than the current system performance. Keep in mind that leak detection systems are not available for outside tanks. Environmental conditions prevent its use outdoors. Fire departments have endorsed the use of leak detection systems because they reduce the risk leaked heating oil will migrate under the heat source and flash.
OPTIONS FOR PROTECTION Government regulations associated with home oil storage are having mixed results. Governments run the risk of
It’s a risky world. Can you rely on your reinsurer?
Loss Event
Year
Estimated Return Period
9/11 terrorist attacks
2001
1 in 20 years
Stock market decline
2002
1 in 20 years
Casualty reserve increases
2003/4
1 in 25 years
Hurricane Katrina
2005
1 in 40 years
Credit crisis
2007/8
1 in 75 years
It seems like there’s a different major event nearly every year. You need reinsurers who are adept at managing risk across the board, who will provide consistent capacity, and whose capital strength promises an unequivocal ability to pay claims. With that in mind, we’ve provided seven questions to ask your reinsurers. The answers will help you make a clear assessment of whether they deserve your confidence and trust. In a risky world, you need to know who you can rely on.
To see these seven questions, and for more information, go to www.partnerre.com
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homeowner apathy if they fail to get the regulation right. From my experience, homeowners are reluctant to spend money on an oil storage system after it has been inspected and tagged for another 15 years, despite the fact the initial regulation lacked sufficient data. Changes to regulations are not easy to implement and the political delays and fallout is always a consideration. I would suggest the CSA B139 Code should be more responsive to the environmental issues associated with the oil heat system.This is the technical manual for installations of oil burning equipment. These incidents tend to be corrosion-, mechanical- or technical-related failures. Like the NFPA 31 code (The U.S. National Fire Prevention
Association Oil Burning Equipment Installation Code), these codes were initially designed to protect homeowners from fires. Environmental issues seem to have evolved, and now preventing environmental damage seems to be as important as preventing fires. However, there seems to be a gap in the mandate of these codes to address environmental issues. Unfortunately, changes to codes take a long time (typically every five years), thus can the insurance industry stand by patiently and wait? It has been proven that insurance-driven financial incentives have been a motivating factor behind many home-related improvements. If insurance companies underwrite the risk, would it not make sense for insurers to suggest changes that homeowners can make to reduce risk using the incentive of an insurance discount? This would be much more dynamic and responsive to current issues and equipment improvements than the route via codes and/or regulations. Fortunately, we now have valuable data that can guide these risk reduction discount programs. Based on my analysis, the oil storage system can move to safer ground. The data suggests all current incidents can be reduced by 95% if suggestions above are considered. 62 Canadian Underwriter August 2009
GK-CCad-IFC:GK-CCad-IFC
12/16/08
G I F F I N KO E R T H
10:32 AM
Page 1
SMART FORENSICS
How you look at it matters There’s more to smart forensics than superb science and a knack for solving puzzles. Here’s our view on what makes a preferred partner. 360 Services The real world is complex. Forensic files mirror that complexity. So should forensic services.
Unshakeable Science To win more cases and settle to greater advantage, do the forensics first.
Clear Communications Your case is not compelling unless it’s clear – and the telling holds up under fire.
Collaborative Work Style Today’s cases are simply too involved for people to work on their own.
Vital Culture People make a difference – especially when you make a difference for them.
If you see it the way we do, give Chris Giffin a call at 416.368.1700. Giffin Koerth is located in downtown Toronto at 40 University Ave., Suite 800, M5J 1T1
giffinkoerth.com
FORENSIC ENGINEERING • FORENSIC ACCOUNTING • COMPUTER FORENSICS
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4
ERM to Steps
Richard Daukant ERM programs not only allow Vice President, General Manager of Financial Services, SAP Canada
Andy Hirst
Global Marketing Director of Financial Services, Business Objects (a SAP company)
executives to respond to dynamic market forces and address regulatory compliance needs, but they can also satisfy shareholders' demand for better control of risks. In light of the current financial crisis, many shareholders have lost confidence in the ability of companies to manage their exposure to risk. Companies are thus turning to risk management as a critical skill among their executives and an important part of their business strategy to survive the economic downturn. It is a complex process that will increasingly gain in importance in 2009 as new regulations come into force. Today’s senior-level executives, also known as ‘C-level’ executives, face risks from an increasing number of sources. On the one hand, they are trying to anticipate and respond to dynamic financial markets. On the other hand, they must stay in touch with investor expectations. At the same time, companies must comply with new and changing regulations, from international financial reporting standards like IAS and IFRS to the Sarbanes-Oxley Act. And in fact many experts believe more regulations will be introduced during the upcoming year as a result of the financial
64 Canadian Underwriter August 2009
crisis, which has caused the financial bailout of several companies. Financial risk is typically a top concern, which can be subdivided into several distinct categories: market risk, credit risk, liquidity risk and portfolio risk. Dealing effectively with these multi-dimensional challenges requires a risk management framework that covers the entire enterprise. Enterprise risk management (ERM), enterprise performance management (EPM), and governance, risk and compliance (GRC) are three corporate strategies that inter-relate to improve risk measurement, risk controls and risk mitigation. GRC, a term first coined by Forrester Research, involves governance (the controls to manage risk overrides and processes), risk management (catastrophe risk models) and tracking compliance with local regulations. EPM tracks and monitors overall company performance. It includes an assessment of risk, which is now a critical component for managing risk and reward incentives. Due to the recent liquidity crisis, which has negatively affected companies globally, enterprise risk management has quickly gained the attention of regulators, shareholders and insurers. In Europe, regulators have proposed Solvency II regulation to apply key learnings and improve risk management.This, in turn, will increasingly influence the Canadian market. ERM addresses all aspects of the business and helps outline strategic risk management activities through: • risk identification — outlines various sources of risk; • risk measurement — measures the amount of risk and how it might affect the company’s financial position; • risk management — lists actions taken to meas-
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ure and mitigate risks so as to minimize their impact. ERM should not be viewed simply as insurance against the negative consequences of decisions or actions. The right ERM system can help enhance a firm’s performance and satisfy its shareholders. Once the risks have been identified and parameters defined, an organization can effectively leverage the risk management system to meet compliance requirements and provide timely and efficient regulatory reporting. ERM can increase value for shareholders. Shareholders demand better control of risks and are looking to executive boards to become more accountable. Many companies have failed recently because they underestimated their risk. Managers need to balance their mandate to generate revenue with a careful consideration of the risks associated with new business opportunities. ERM can help insurers reach this balance and ultimately help their businesses survive and thrive in any economic cycle. So how can you effectively implement ERM? Consider the following four-step program:
ERM foundation phase Making decisions about risk requires a solid foundation of clean and trusted data related to risk and finance.The data usually consists of information collected over the past five years or more and needs to be integrated and maintained. In addition to preparing and organizing data, the foundation phase includes the establishment of governance structures, as well as risk policies and resources to track and monitor policies. Establish the position of a chief risk officer, who will report to the chief financial officer and consult frequently with people in the fields of finance, actuarial, investment, law, IT and other lines of business. Educate stakeholders on risk management, whether in the form of self-learning or face-to-face sessions. Risk identification and assessment In this phase, each regional or line of business manager needs to identify key 66 Canadian Underwriter August 2009
risks and control weaknesses. Internal auditors, external agencies and regulators will oversee how these are identified and measured. Forming a loss history of operational or external events is important to run simulations or models.
Risk measurement and reporting Historically, companies retained a lot of data in their computer systems that were difficult to access or read, or that weren’t stored in the right format for cross-disciplinary use.That meant data couldn’t be accessed for use in important stress tests or to help model “what-if” scenarios. In other words, many companies that suffered huge losses during the recent economic meltdown could not foresee the extreme situations we are experiencing now. It’s important to ensure that any chosen ERM program has the technological capacity to analyze data in complex risk models. Simulations and stress testing can create different, extreme business scenarios; key risk indicators, risk reports and dashboards can be created from the risk model output.These need to be distributed to key executives in easy-to-use reports to help them better monitor and track exposures in their lines of business. New reports can be created to react to certain situations without access to IT, empowering managers to take action to mitigate risk. Risk dashboards create effective visualization of complex calculations and information. Many regulators require a system to monitor and track operational risk, and key risk indicator (KRI) dashboards allow this. How does this play out in the real world? Being able to investigate, drill down and form an answer quickly and easily can make or break a company. Let’s use the current credit crisis as an example. One minute you are drinking your morning coffee and perusing your emails, when all of a sudden your office becomes frenzied: another bank is about to go down in the United States! Within seconds, your manager comes to you and demands to know: “What is our exposure if that bank goes down tomor-
row? Tell me by lunchtime.” That’s only a few short hours away. Before your company’s sophisticated ERM system was deployed, it would have taken you weeks to analyze the counter-party risks of that bank — searching, investigating, formating reports and sending them to the manager so he can take action. With ERM, you can quickly mobilize the relevant teams, get the most up-to-date information, identify key information, put it into a report and take action quickly, helping mitigate your company’s risk exposure.
Risk mitigation and management This involves issue resolution, adjusting pricing decisions to reflect the true risk of the client or the deteriorating position of the counterparty.This also entails allocating capital to the most profitable areas and analyzing scenarios for changes in key drivers such as interest rates, currency changes and credit default rates. There are several other components worth looking at when considering an ERM system. Look for applications that are not point solutions for risk management but have wider ability to do controls and compliance. Make sure the vendor has experience in the insurance sector and that the system complies with insurance-specific requirements. As trends in the marketplace evolve, make sure the chosen system complies with local regulations and provides standard and templated reports, frameworks and other information required by the local regulator. Insurers can also reduce costs and IT complexity by choosing fully functional ERM systems that can be deployed out of the box. ERM systems can help insurers balance business opportunities with financial, legal and operational risks, increase transparency and achieve regulatory compliance. By adopting effective enterprise risk management strategies and solutions, insurers can confidently anticipate and respond to changing market conditions and be well ahead of the game.
KRW PROMO JULY09 2
7/27/09
3:05 PM
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Canadian Underwriter wins 2 Golds at Editorial Excellence Awards Held at the Metro Toronto Convention Centre’s John Bassett Theatre on June 1st, Canadian Underwriter magazine came away from the 2009 Canadian Business Press (CBP) ‘Kenneth R.Wilson’ (KRW) Editorial Excellence Awards event with 2 Gold Awards and a top-five nomination:
Gold:
Gold:
Best Cover
Best Merchandising/ Marketing Article
‘Shifting Ground’ December 2008 issue David Gambrill Vanessa Mariga Pylon.ca
‘The Power of Branding’ October 2008 issue Alister Campbell, Chief Agent and CEO of Zurich Canada
Top 5 Nomination: Best Professional Article ‘Eco-Insurance’, March 2008 Issue, Craig Harris Additionally Canadian Underwriter received Top 10 nominations in the following categories:
Best Professional Article • Best Profile of a Person • Best News Coverage • Best Content of a Website
For a complete list of awards and nominations visit online:
www.krwawards.ca ‘Kenneth R. Wilson’ (KRW) Awards: Regarded as one of Canada’s top business writers, Kenneth R. Wilson wrote with clarity and authority. His opinions were widely sought and respected. It is the memory of Kenneth R. Wilson, his example and his achievements in business press journalism that the Canadian Business Press association (CBP) honours each year with these awards.
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In New Brunswick, firefighters’ new immunity from suit and indemnity against defence costs is strong, bold and broad.
Julie G. LeBlanc
Associate Lawyer, Barry Spalding Lawyers Barry Spalding is a member firm of ARC Group Canada
Municipalities have the statutory authority to provide fire protection services and are responsible for their establishment, implementation and operation. In turn, municipalities may be held liable for losses incurred in the course of the delivery of such services and may be held vicariously liable for the actions of their agents and employees. Recent amendments to the New Brunswick Municipalities Act1 have drastically altered the landscape of the law of negligence as it relates to providers of fire protection services. This may have a significant impact on litigation involving municipal fire services in the province and, in turn, on municipal insurers. The legislative amendments prescribe a broadsweeping immunity from suit provision, which may effectively bar all claims against fire services and firefighters for actions done in the course of their duty. At the same time, the amendments also allow the province of New Brunswick to indemnify firefighters against expenses incurred in
68 Canadian Underwriter August 2009
relation to any civil, criminal or administrative action or proceeding to which they are made a party by reason of their actions as a member of a fire department. These new provisions are found at s.27.02 and s.193.3 of the act, the latter providing a strong immunity from suit defence to municipalities: 193.3 No action or other proceeding for damages shall be instituted against any of the following bodies or persons for any loss, injury or damage suffered by reason of anything in good faith done or omitted to be done by a member or former member of a fire department, brigade or association that provides fire protection services within a municipality, rural community or local service district, by reason of the member or former member acting as a member of the fire department, brigade or association: (a) Her Majesty in right of the Province; (b) the minister; (c) a municipality; (d) a rural community; (e) the fire department, brigade or association; (f) a member or former member of the fire department, brigade or association; or (g) the legal representatives or heirs of a person referred to in paragraph (f).
Illustrations by Philippe BĂŠha/www.i2iart.com
Out of the Line of Fire
WWW SERVICEMASTER CA
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LIABILITY AT COMMON LAW Allegations of negligence may be made against a municipality in the context of its delivery of fire protection services in numerous circumstances. Possible exposures could arise related to the response to the emergency call, the equipment used (including sufficiency of water supply), the steps taken to ensure the fire does not rekindle, inspection and enforcement activities, the operation of emergency vehicles and the overall conduct of the employees in the performance of these services (including professional and volunteer firefighters). The traditional law of negligence makes a distinction between policy and operational decisions.2 Municipalities are generally not held liable for consequences directly flowing from policy decisions unless the policy decision was made in excess of jurisdiction or in bad faith.3 At the same time, municipalities are held to a reasonable standard of care in implementing their policies; they may be found negligent if they fail to do so.4 Even under this common law standard of care, actions against municipalities based on fire protection services have rarely been successful in New Brunswick or in Canada generally.5 However, firefighters, like all emergency services providers, are expected to act reasonably and the legislature has imposed some statutory duties upon them. For example, operators of emergency vehicles have statutory privileges that allow them to contravene some traditional rules of the road (such as exceeding the speed limit when responding to an emergency), but only when sounding the appropriate warning signals and only with due regard for the safety of persons and property.6 Although a breach of these statutory requirements would not in and of itself amount to a finding of negligence, it may nonetheless be on first appearance evidence of such negligence.7 New Brunswick courts have weighed in on firefighters’ duty of care in light of these statutory requirements. In Saint John (City) v. City Transit Ltd.8, a bus and a fire truck collided when they simultaneously
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attempted to cross an intersection. The driver of the fire truck was held 40% liable. A similar situation presented itself in Michaud (Estate) v. Michaud, Edmundston (City) et al.9, in which a firefighter struck the plaintiff’s vehicle at an intersection while responding to an emergency call. The defendant had proceeded through a red light while sounding the emergency siren and signals. The plaintiff was unable to avoid the collision and died as a result of his injuries. The court found that the accident was solely caused by the firefighter’s negligence and awarded Cdn$275,000 to the plaintiff’s estate.
IMPACT ON NEW BRUNSWICK LAW The statutory immunity provisions added in s.193.3 of the act have changed firefighters’ common law standard of care in New Brunswick. Although the immunity provision contained in this act is qualified, the threshold is very high: in order to negate good faith, the plaintiffs must prove bad faith, which apparently in this context means maliciousness, gross carelessness or serious negligence.10 While this high threshold may be considered a political trade-off aimed at protecting emergency personnel from claims from homeowners whose homes are destroyed by fire — the persons whose homes they are seeking to protect — the immunity is not limited in scope to actual fire fighting. Rather, the statutory protection is so sweeping it would likely apply to motor vehicle accidents involving the operation of emergency vehicles in situations in which bystanders might be seriously injured. Unless they are able to prove bad faith (which is unlikely), these plaintiffs would not be able to recover damages incurred from the person or group that committed the civil wrong. It is difficult to conceive of a scenario in which a person responding to an emergency fire call would act dishonestly, with malice or in bad faith. By the nature of their work, we must assume that firefighters will almost always deliver their services in good faith. While such a “good faith” require-
ment is not foreign to statutory immunity provisions, this wording is usually included to protect persons carrying on policymaking, investigatory or quasi-judicial functions. For example, the Fire Prevention Act11 includes a “good faith” provision that protects fire marshals, investigators and inspectors for acts or omissions done in good faith in the execution of their duties. Furthermore, this amendment risks affecting the ability of a motor vehicle accident plaintiff to recover from their own Section D insurer, since they may not be “legally entitled to recover” any sums from the owner or driver of the motor vehicle operated in the rendering of firefighting services. In light of these legislative changes, it is questionable whether plaintiffs in cases such as those in Saint John, supra, or Michaud, supra, would now be entitled to recover for their losses.
OVERALL IMPACT This new provision has not yet been tested in New Brunswick courts and its precise application remains somewhat uncertain. Although it may be subjected to vigorous challenge in the future, at this time it is another tool in municipalities’ — and their insurers’ — litigation defence arsenal. 1 R.S.N.B. 1973, c.M-22. 2 Just v. British Columbia, [1989] 2 S.C.R. 1228. 3 Brown v. British Columbia (Ministry of Transportation & Highways), [1994] 1 S.C.R. 420.4 Kamloops (City) v. Nielsen [1984] 2 S.C.R. 2, adopting the rule from Anns v. London Borough of Merton, [1977] 2 All. E.R. 492 (H.L.); Lewis (Guardian ad litem of) v. British Columbia, [1997] 3 S.C.R. 1145.5 See, for example : Hachey v. Bathurst (City) (1991), 117 N.B.R. (2d) 355 (C.A.).6 Motor Vehicle Act, R.S.N.B. 1973, c.M-17, ss.1, 110, 119, 168.7 R. v. Saskatchewan Wheat Pool, [1983] 1 S.C.R. 205; Michaud, Infra.8 [1954] N.B.J. No. 9 (NBSCAD). 9 2004 NBQB 145.10 Finney v. Barreau du Québec , 2004 SCC 36. 11 R.S.N.B. 1973, c.F-13
IBAO CUW SEPT 09
7/31/09
11:48 AM
INSURANCE BROKERS ASSOCIATION ONTARIO
Page 1
89 th Annual Convention
Wednesday, October 21st – Friday, October 23rd, 2009 The Fairmont Royal York Hotel, Toronto, Ontario Thursday, October 22, 2009 IBAO’s Annual KEYNOTE SPEAKER: Convention is Donald Cooper, Human Marketing & Management the biggest and Since 1991, international business speaker and coach Donald Cooper has devoted himself to helping businesses in over 40 industries throughout the world to redefine and reinvent themselves to create a significant competitive advantage, improve management effectiveness and increase most exciting profitability. Having spent 20 years as a world-class manufacturer (Cooper Sporting Goods) and 14 years as one of Canada’s most innovative Cooper knows what hard work is all about. He got his start working at his family’s business – Cooper Canada at the age of 6. Cooper insurance retailers, Canada went on to become the world’s leading manufacturer of hockey equipment and Canada’s largest maker of both sporting goods and fine broker event on leather goods. After leaving Cooper Canada, he founded Alive & Well, a unique women’s apparel and gifts “warehouse boutique” that fundamentally reinvented the very idea of what a retailer could be and attracted international attention. In just 3 years, it garnered seven awards for marketing, the Canadian service and business excellence and community involvement, including being voted Canada’s Outstanding Innovative Retailer in 1991. benchmark work on vision, mission, marketing and management effectiveness has helped businesses create clarity, commitment and insurance His accountability about where they’re going, and how they’ll get there. industry calendar. EDUCATION PROGRAM AT A GLANCE: CSR SEMINAR: Effective Strategies for Managing Workplace Stress and Boosting Your Productivity
There is simply no other event quite like it!
(RIBO CE - 3 Personal Skills Hours)
Wendy Woods, Watershed Training
MEMBER’S SEMINAR: CEO PANEL Due to an overwhelming response to stay with our 2008 format, IBAO is pleased to announce that back by popular demand, our CEO Panel will be moderated by Evan Solomon - CBC Television Broadcaster, Journalist, Author and one of Canada’s best moderators to participate in a round table discussion with our CEO’s. This year, the Panel will be comprised of five top executives from leading property and casualty underwriters: Jean-Francois Blais, President & CEO – AXA Canada; Robin Spencer, President and CEO – Aviva; George Cooke, President and CEO – The Dominion; Kevin McNeil, President & CEO – Gore Mutual; Charles Brindamore, President and CEO – Intact Insurance.
Friday, October 23rd, 2009 EDUCATION SEMINARS: Human Marketing®…How to Increase Market Share & Profitability in the Face of Ever-Stronger Competition…and ever-faster change! (RIBO CE - 3 Management Hours)
Donald Cooper, Business Management, Marketing and Service Expert
For a complete program and a registration package, please call IBAO at 416-488-7422, 1-888-ASK-IBAO or visit our Website: www.ibao.org
Effective Claims Handling – the Broker Value Proposition (RIBO CE - 3 Technical Hours) Stephen Scullion, Director Professional Development & Brent Hackett, Assistant Vice President, Catastrophe and Property Services - Crawford Adjusters
Banquet & Ball Understanding Consumer Expectations (RIBO CE - 3 Management Hours) Randy Carroll, CEO - IBAO & Paul Taylor, Director of Operations – IBAO Business as Usual No Matter What – Disaster Recovery Planning (RIBO CE - 3 Management Hours) Paul Sullivan, VP & General Manager Agility Recovery Solutions
featuring: 2nd Annual Award of Excellence Gala
This year, don’t question whether or not you should stay for our closing night. IBAO will be hosting its 2nd Annual Award of Excellence Gala where we will be recognizing brokers for their contributions to the industry and community. Once again, we were able to acquire Toronto’s own local celebrity Dina Pugliese, Co-Host of “BT-Breakfast Television” as our Awards Host! Also featuring the entertainment of six-time Juno award-winner Colin James who has driven his 10-album, 25-year career with his blues influenced guitar mastery and soulful vocals!
Be one of more than 500 guests who will be on hand to support the nominees, cheer for the winners and celebrate their peers!
Platinum Plus Sponsors:
Platinum Sponsors:
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Exposed! The Future
Globalization and the expanding use of cutting-edge technologies have introduced potential exposure to liability that can snowball in a hurry. Susan Watts
Senior Vice President, Claims, Chubb Insurance Company of Canada
In just a few short years, the insurance and commercial industries have been exposed to a myriad of emerging risks, as the trend toward corporate globalization and new communication technologies have ushered in a host of “neverthought-of-before” exposures. Who would have guessed that the tumultuous events of last year would make media headlines out of “asset-backed commercial paper (ABCPs),” “re-adjusted balance sheet valuations” and employee and shareholder class-action lawsuits? The economic upheaval and financial volatility introduced as a result of the collapse of the investment markets toward the end of last year focused the attention of insurers, brokers and risk managers on workforce and corporate governance-related liability exposures. In terms of property risk, it is clear now that catastrophic losses — those that would cripple an enterprise — are no longer just accidental and weather-related.
72 Canadian Underwriter August 2009
On the liability front, there is no question that class-action lawsuits are here to stay: Canadian enterprises that have thus far been relatively sheltered under a more benevolent legal system are now the targets of creative, new tort actions. This new litigious environment has so far heralded tort actions related to securities, stock options, shareholder returns and mass tort actions related to product liability. The number of classaction lawsuits filed in B.C. rose notably by 68% — from 33 actions in 2004 to 48 actions by 2008. And since Ontario amended its securities legislation in 2005, the number of shareholder class actions has increased by 125% across the country. Furthermore, Canada is experiencing an increasing number of class-actions mirroring pleadings in the United States, where plaintiff’s counsel are looking to “piggyback” on these large mass tort actions. The U.S. court environment is a “looking glass” for Canadian companies: more plaintiffs and solicitors in Canada are getting their ideas from south of the border. In a similar vein, there is an alarming move by American litigation law firms to expand their activities offshore and “mine” for lawsuits against foreign companies (product liability), which are then filed in the United States where the potential financial rewards they might gain from the
CU Web Ad MagSize09ƒ
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Keep Current and Informed Daily… …for all your insurance information needs, there is one website you can call home:
canadianunderwriter.ca
Your online source for insurance industry: • • • • • • • • •
Breaking News Digital Edition of magazine Archived Issues dating back to 1999 Searchable Database of news and archives Careers Events Photos Insurance Marketer Buyer’s Guide Free Email News Alerts
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INSURANCE INTERNET DIRECTORY
ACCOUNTANTS Williams & Partners Inc. Forensic and Investigative Accountants. www.williamsandpartners.com
ASSOCIATIONS Canadian Independent Adjusters' Association (CIAA) "The voice of Independent Adjusters in Canada" www.ciaa-adjusters.ca Honourable Order of the Blue Goose—Ontario Pond Our fraternal organization has been dedicated to fellowship and charity since 1908. www.bluegooseontario.org The Insurance Institute of Canada The professional educational arm of the industry. www.insuranceinstitute.ca Risk & Insurance Management Society Inc. Dedicated to advancing the practice of effective risk management. www.rims.org
edge claims management services. www.scm.ca
COLLISION SERVICES CertifiedFirst Network Consider it done.™ www.certifiedfirst.com
CONSULTING FIRMS Cameron & Associates Insurance Consultants Ltd. Claims consultants to the insurance and reinsurance community. www.cameronassociates.com Keal Technologies Complete technology solutions for insurance brokers. www.keal.com
CONSTRUCTION CONSULTANTS MKA Canada, Inc. www.mkainc.ca
EMPLOYMENT ONLINE I-HIRE.CA Canada's Insurance Career Destination www.i-hire.ca
CLAIMS ADJUSTING FIRMS
ENGINEERING SERVICES
Crawford & Company (Canada) Inc. One Globe, One Company www.crawfordandcompany.com Cunningham Lindsey International independent claims services. www.cunninghamlindsey.com Kernaghan Adjusters The Preferred Adjusting Solution. www.kernaghan.com McLarens Canada International Loss Adjusters and Surveyors www.mclarens.ca Quelmec Loss Adjusters Identifying, Investigating, Resolving...for over a quarter century! www.quelmec.ca SCM Adjusters Canada Ltd. Committed to providing leading-
Giffin Koerth Forensic Engineering and Science Investigate Understand Communicate www.giffinkoerth.com Rochon Engineering Inc. Forensic Consulting Engineers & Code Consultants. www.rochons.com
74 Canadian Underwriter August 2009
Aviva Canada Inc. Home Auto and Business Assurance. www.avivacanada.com/ Catlin Canada Underwriting Ambition www.catlincanada.com FM Global The leader in property loss prevention. www.fmglobal.com Grain Insurance and Guarantee Company Commercial Lines Underwriters www.graininsurance.com The Guarantee Company of North America “Specialized insurance products...professional service” www.gcna.com Kingsway General Insurance Company The Specialty Insurer www.kingsway-general.com RSA Leading car, home and business insurer. www.rsagroup.ca Sovereign General Insurance Company of Canada Since 1953 www.sovereigngeneral.com Wawanesa Insurance Earning your trust since 1896. www.wawanesa.com
INSURANCE LAW The ARC Group Canada Inc. Your Partner in Insurance Law & Risk Management www.thearcgroup.ca
GRAPHIC COMMUNICATIONS Informco Inc. Integrated Graphic Communications Specialists. www.informco.com
INSURANCE COMPANIES AIG Commercial Insurance Company of Canada "THE STRENGTH to BE THERE". www.aig.com
INSURANCE SOFTWARE APPLICATIONS Keal Technologies Complete technology solutions for insurance brokers. www.keal.com Tritech Financial Systems Inc. Provider of an enterprise solution to P&C insurance companies and their agents and brokers in Canada
and USA www.trifin.com
PREMIUM FINANCING Third Eye Solutions Inc. Provides Internet-enabled premium financing/payment plan software solutions. www.thirdeyesolutions.com
REINSURANCE Guy Carpenter & Company The world’s leading reinsurance intermediary. www.guycarp.com Munich Reinsurance Company of Canada Complete reinsurance coverage from Canada’s largest reinsurer. www.mroc.com Swiss Reinsurance Company Canada The leading P&C reinsurer in Canada. www.swissre.com Transatlantic Reinsurance Company For all your reinsurance needs. www.transre.com
RESTORATION SERVICES Winmar Property Restoration Specialists Coming Through For You! www.winmar.on.ca
RISK MANAGEMENT The ARC Group Canada Inc. Your Partner in Insurance Law and Risk Management www.thearcgroup.ca
SPECIALTY INSURANCE Firstbrook Cassie & Anderson Ltd. Your Source For Camp Insurance www.nbrown.com William J. Sutton & Co. Ltd. Insuring Special Risks since 1978 www.wjsutton.com
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courts are much more lucrative. In many respects, the above are “emerging risks” of today. But what about the emerging risks of tomorrow? The high level of attention senior management is paying to financial performance and corporate governance-related liability exposures is understandable given all of the above, are enterprises overlooking potentially greater emerging risks in doing so? Many of these new “perils” are evolving as a result of global product and service outsourcing and the immediate reach of Internetbased technologies.
EMERGING HAZARDS Paul Martin, president of KRG/RRJ Insurance Group Ltd., says the recent disruption of financial markets will likely trigger further lawsuits and claims pertaining to lost jobs and shareholder losses related to directors’ and officers’ (D&O) and errors and omissions (E&O) covers. These actions, however, relate to “immediate and existing exposures” that are already largely beyond the point at which actions can be taken to negate the risk. “We tend to be a ‘reactive’ rather than ‘pro-active’ society, but risk managers and senior management of companies should not be distracted from taking appropriate actions now to limit or curtail exposure to the emerging risks of tomorrow,” he adds. From a property risk perspective, insurers and risk managers have some understanding of the perils related to climate change, Martin says. But such exposure on the liability front is largely unknown. “There is no question that weather is going to pose increasing risks for businesses in the decades to come.” The potential risk of liability inherent in the “new technology age” is also mind-boggling, Martin observes. This applies to enterprises engaged in design and manufacturing through to service providers of consumer-tech goods. Recent advancements in “nanotech” or “biotech” technology — as applied to products ranging from textiles in the clothing industry to sporting goods and “24-hour-lasting cosmetics” — open a
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whole new liability frontier. “This not only applies to long-term, health-related impacts — for instance, the effect of mobile phones and MP3 players — but what does this mean in terms of invasion of privacy and business disruption, as society and the business community becomes increasingly reliant on technology?” he says. “The full effect of technology in terms of liability risk is not fully understood by the insurance industry and what impact this will have on commercial policyholders.” In addition to product and service risks associated with globalization, the threat of pandemic outbreaks in different regions can leave businesses vulnerable to extended business disruption and crippling financial losses if delivery schedules are missed, Martin points out. Many insurers have specialists who research and review the potential of “emerging liability hazards.” Judging from media reports, the following exposures should soon be appearing on insurers’ radar screens:
Globalization/outsourcing How much control do enterprises have over the quality of a growing volume of foreign manufactured goods and the operational processes of outsourced services? What controls exist in foreign countries? Global outsourcing has significantly complicated the product liability arena. Mobile phones Will these devices ultimately prove to be a liability risk? Genetic engineering A recent tort action filed by a farmer against a biotech firm provides a glimpse of the potential liability exposures in this field. Everyday chemical exposures Could pumping your own gas pose a health risk? Cyber risk Data breaches jumped by 70% during the first half of 2008. What does this hold
for the future in terms of D&O liability exposures as well as privacy invasion?
“Taser parties” Now that tasers are available for “personal protection,” word on the street is that “taser parties” have become the rage at high school and college parties. Indiscriminate use of tasers may lead to lawsuits filed against authorities other than the police. Terrorism “liability” Colombian nationals filed a class-action lawsuit in the United States against a company called Chiquita for allegedly having “knowingly engaged in an ongoing campaign of terror” by providing financial aid to paramilitary forces operating in that country. Chiquita claims the money was paid because of the “terrorist” threats against the safety of the company’s workers.
INSURER DUTY Class-action lawsuits are growing exponentially and plaintiffs and litigation lawyers are becoming increasingly creative in exploiting the civil legal system for financial gain. As a result, perhaps one of the greatest emerging risks enterprises face today is “reputational loss.” Unfortunately, in the past, insurers too often decided whether to settle or defend liability claims based solely on “economic merit” rather than taking into account the broader interests of their commercial policyholders. Given the much-higher stakes associated with today’s highly litigious and global marketplace, insureds should be looking for a “partner” in terms of their insurance carrier — one that will serve the broader purpose of the enterprise rather than the simple settlement of a claim. It is therefore crucial that the insurer has the necessary resources and expertise in case handling. The role of the independent broker is also important in performing ongoing risk review/ assessments of an enterprise to ensure that appropriate liability coverage and risk mitigation measures have been fully explored.
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MOVES & VIEWS UPCOMING EVENTS: FOR A COMPLETE LIST VISIT
www.canadianunderwriter.ca
AND CLICK ‘MY EVENTS CALENDAR” ON THE HOME PAGE
1
Crawford & Company (Canada) Inc. has made a number of organizational changes, including the promotion of Bill Johnstone [1a] from his current role as vice president of Greater Toronto Area and Global Technical Services to the position of senior vice president of Global Technical Services (GTS) for the Americas. Johnstone will continue to be the GTS leader in Canada, but will now also be responsible for establishing policy, marketing and business development for GTS in the remainder of the Americas. Other personnel changes include: • Claudine Davoodi has been promoted to the position of director of operations in Quebec; • Sheri Martinello has been promoted to vice president of Risk Management Services (RMS); • Walter Waugh is now the vice president of operations for Western Canada; • Jim Eso [1b] will relocate from B.C. to Ontario and will become vice president of national property and casualty; • Brent Hackett has been promoted to vice president of operations for the Ontario Region; • Rod McDonald will transfer to the position of assistant vice president of branch operations for the Ontario Region; and • Reno Daigle, will become
76 Canadian Underwriter August 2009
director of quality and customer service for the Ontario Region.
2
Two entities of the Totten Group within Quebec — the Groupe Gestionnaire d'Assurances Totten Ltee, and Norac Totten Gestionnaire d'Assurances Ltee — have been merged into one operation going forward. Gino Vaisica will become vice president of the Quebec region for all operations in the province. Vaisica was previously vice president of Norac Totten, having sold his previous firm, Norac Intermediaries, to Totten Group early in 2009. The two companies will retain their legal names and entities for a time, but they will operate as one firm in dealing with brokers and markets. David Millroy, previously vice president of Groupe Gestionnaire d'Assurances Totten Ltee has chosen to take early retirement. Abdellatif Oumami has been promoted to the position of administrative supervisor of the Cremazie office, in addition to his responsibilities as a production underwriter in that office.
3
ClearRisk has announced the launch of ClearRisk 1.0, an online risk management resource for small and medium-sized businesses. Intended to provide practical
1a risk management solutions, ClearRisk designed version 1.0 and its online risk management products to offer easy-to-understand, customizable risk solutions for implementing risk management in any organization. “Coming in September of 2009, ClearRisk 1.0 users will avail of enhanced functionality and a brand new design that supports risk management planning, industry collaboration, partnership networking and many additional resources to support risk analysis and risk management,” said Craig Rowe, ClearRisk’s president and CEO. “Companies that use ClearRisk are better risks and produce better loss ratios.”
4
Vancity, Canada’s largest credit union, has agreed to sell Vancity Insurance Services Limited (VISL) — its subsidiary for home, auto, travel and business insurance — to The Co-operators. The price tag of the deal, which is subject to regulatory approvals, was undisclosed. VISL is a
1b
3 wholly owned subsidiary of Vancity that provides insurance through 17 retail branches in Greater Vancouver and Victoria, as well as an inbound call centre. The VISL portfolio includes approximately 28,000 residential, 48,000 auto, 10,000 travel and 2,000 commercial insurance policies. Under the terms of the agreement, The Co-operators subsidiary, Federated Agencies Limited, will acquire VISL, including all its service locations on Sept. 1, 2009. VISL retail locations will begin to operate under The Co-operators brand Sept. 2
5
Aon Reed Stenhouse Inc. has acquired IAO Actuarial Consulting Services. The terms of the deal were not announced. IAO’s capabilities
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MOVES & VIEWS
Agents & Brokers of New York and chairs the Independent Insurance Agents & Brokers of America council for technology Web 2.0 working group.
7 will be integrated into Aon’s Global Risk Consulting business, which provides a range of services from risk identification and control to assessment and risk financing. The acquisition of IAO will augment Aon Global Risk Consulting’s actuarial and analytics practice in Canada. “Our team is well-positioned to provide Canadian businesses with the insurance information they need to meet today’s challenges,” IAO Actuarial Consulting president Hany Rifai said in a press release. “IAO’s ability to deliver unique market insight will be a strong complement to the Aon Global Risk Consulting actuarial and analytics offering in Canada.”
6
Risk Control at The Economical Insurance Group has expanded its Infrared Thermography program. Historically used on farm business, infrared thermography is now being used for inspections on general commercial risks where the technology provides customers
8 with a predictive inspection on electrical and mechanical components of their operation. The infrared camera measures the level of heat radiation emitted by a target surface, which is not visible to the naked eye, and presents a two-dimensional image. Risk Control efforts will initially target electrical and mechanical hazards. The insurer plans to introduce water-related inspections, such as building envelope inspections, that will help indicate the need for roof or envelope repair and could help avoid unnecessary mould growth.
7
Rick Morgan has been named interim CEO of Applied Systems Client Network (ASCnet). Most recently, through his own consulting firm and in association with insurance branding firm Aartrijk, Morgan has worked with agencies and other industry organizations to help improve their effectiveness and tap new technology to better engage customers and prospects. He is a director-at-large for the Independent Insurance
8
Andrew Cartmell has been appointed president and CEO of Saskatchewan Government Insurance (SGI). “We are extremely pleased Mr. Cartmell accepted Saskatchewan’s offer to lead SGI’s 1,800 staff forward in the years ahead,” June Draude, SGI minister, said in a release. “Mr. Cartmell has over 25 years’ experience in the insurance industry, working his way up the ranks at the Cooperators General Insurance Company to his most recent position of regional vice president for central Ontario.” SGI’s previous president and CEO, Jon Schubert, resigned in 2008 to become president and CEO of the Insurance Corporation of British Columbia.
9
The Co-operators has donated a total of Cdn$237,000 to 93 charities across Canada as part of the Directed Donations program. Each staff member has the opportunity to direct Cdn$75 of corporate money towards the organization of their choice from a list of charities. In all, 2,961 staff directed a total of Cdn$222,075, representing 82% of all Co-operators employees. Members of the board of directors and dele-
gates of member-owners invested a further Cdn$15,375. The five largest staff-directed donations went to: • The Toronto Hospital for Sick Children ($23,775); • The Canadian Cancer Society, Regina branch ($13,725); • The Alberta Children’s Hospital Foundation, Calgary ($8,775); • Sofia House - Women’s and Children’s Shelter, Regina ($8,025); and • The Canadian Cancer Society, Guelph branch ($7,800).
10
FirstOnSite Restoration LP has acquired Calgary-based Servpro Disaster Restoration and Saskatoonbased First General Services (Saskatchewan) Partnership. Terms of the transactions were not disclosed. Since early 2007, FirstOnSite has acquired operations in all Canadian provinces except Newfoundland. Including the original founding companies, this brings the number of First OnSite’s acquisitions to 17 in less than three years. It is First OnSite’s second acquisition in Alberta in eight months. With its newly acquired operations, FirstOnSite now has more than Cdn$200 million in annual revenue and more than 1,100 direct employees in 38 cities and towns across Canada. FirstOnSite says it anticipates additional acquisitions as it continues to grow nationwide.
August 2009 Canadian Underwriter 77
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A party to honour David J. Eastaugh’s retirement from the insurance industry was held at Bravi Restaurant in Toronto on May 21, 2009. More than 100 guests celebrated the occassion. Eastaugh, president of Elliot Special Risks Ltd. (ESR), joined the industry in 1964 in London, England. Upon his arrival in Canada, he worked for the Guardian Insurance Company and General Reinsurance Corporation. He opened the Toronto office for Elliott Special Risks Ltd. in 1976. He took over as president in 1992 and grew ESR to a shop of more than 70 people in Toronto and Montreal. He has spoken at many
industry functions across Canada, and was a supporter of charity events big and small. He is well-known in the insurance industry for his integrity, quick wit, sense of humour and generosity. Eastaugh was a member of the Society of Fellows in Toronto, past board member of the Toronto Insurance Conference, and a past president of the Property Casualty Underwriters Club of Toronto.
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August 2009 Canadian Underwriter
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APPOINTMENT
Todd Cooper President
ASAP Secured Inc., Ontario’s leading provider of emergency security personnel to the insurance industry, has appointed Todd Cooper as its new president. He officially assumes the position effective immediately. Mr. Cooper brings 20 years of progressive leadership in the service industry to ASAP. Prior to his appointment, he was with Intercon Security as its eastern Canada division director, overseeing 42,000 man hours of guard coverage. Before that, he held a senior leadership role (regional director) with the U.S.-based staffing company Labor Ready. There, he was responsible for sales and operations for branch offices spanning Saskatchewan through Nova Scotia. The appointment of Mr. Cooper signals a new era of aggressive growth and expansion for the emergency response leader. Mr. Cooper has ambitious aims to expand the team, building on its success in the Ontario market to explore more disaster relief and security opportunities throughout the region, and across Canada. Since 2000, ASAP Secured Inc. has been Canada’s leading fire and disaster security service, integral in securing countless sites ravaged by fire or other calamities at the request of insurance providers. ASAP dispatches internally-trained security professionals at quick response times. It also provides court- ready information and documents from its PIPEDA-approved headquarters.
www.asapsecured.com
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GALLERY
More than 140 CARSTAR Collision Centres in Canada and the United States washed in excess of 6,000 cars, earning the Guinness World Record title for the largest car wash. In Canada, on June 20, more than 80 locations participated in the Soaps it Up National Car Wash Day, which raised more than Cdn$100,000 for the Canadian Cystic Fibrosis Foundation and local charities. Over the past nine years, CARSTAR Automotive Canada has raised more than Cdn$1.6 million to help find a cure for cystic fibrosis.
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The 11th Annual McKellar Charity Golf Day raised more than Cdn$19,500 for Women in Insurance Cancer Crusade (WICC). The golf day was held at Crosswinds Golf & Country Club in Burlington, Ontario on June 15, 2009. Partici-
pants from the legal and insurance claims communities enjoyed a fun-filled day of events, including morning clinics with golf professionals, a buffet luncheon, golf, massages, prizes and a cocktail reception.
Bob Manson, vice president of The CG&B Group Inc. and his Drivers First Insurance Team, joined local residents and took part in the Ontario 50 Million Tree Weekend. The Ontario government introduced a program in August 2007 to
fund the planting of 50 million trees across the province by 2020. CG&B’s Drivers First Insurance Team volunteered their lunch hour and planted dozens of trees as a part of their commitment to the community.
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The insurance industry came out in droves for The Canadian Cancer Society’s Relay For Life. The relay is a celebration of survival and a tribute to the lives of loved ones who have been touched by cancer. In June, teams of 10 people participated in a 12-hour overnight non-competitive relay, taking turns walking, running or strolling around a track. More than 400 friends and members of the insurance industry formed teams under the Team WICC banner in 17 different locations across the country. WICC’s headquarters for the event was located at Esther Shiner Stadium in North York, Ontario. Approximately 200 participants at this location raised more than Cdn$140,000 in pledges and corporate sponsorships. WICC Ontario presented a cheque for Cdn$180,000 to the Canadian Cancer Society at the North York Relay.
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APPOINTMENT
GALLERY
Spencer Shusterman Director, Broker Solutions.
Greg McCutcheon, President of SCMRisk Management Services Inc. is pleased to announce the appointment of Spencer Shusterman to the position of Director, Broker Solutions. Spencer will have responsibility for the development, marketing and delivery of innovative outsourced services to the Broker community under the banner of the “Broker ACE” program. These services will include claims advocacy and management, claims intake/triage, technology solutions, loss control and engineering services. Spencer joined SCM-Risk Management Services Inc. in June bringing with him thirty years of claims experience most recently as National Claims Practice leader for a major Broker and Risk Management advisor. SCM-Risk Management Services Inc. is Canada’s largest and leading edge provider of inspection, loss control, appraisal/valuation services, risk management and other specialized risk consulting services. They are part of SCM Insurance Services, the largest privately-owned provider of claims management, risk management and related services in Canada.
www.scm.ca WICC at Relay for Life continued on page 84... August 2009 Canadian Underwriter
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APPOINTMENT
Michael Willms Vice President, National Sales and Business Development
Greg McCutcheon, President of SCMRisk Management Services Inc. is pleased to announce the appointment of Michael Willms to the position of Vice President, National Sales and Business Development. As Vice President, Michael will have responsibility for strategic leadership and guidance in leading the business development team to promote and develop new business and to grow the existing client base nationally across all facets of Risk Management Services. Michael is the key relationship lead across all RMS’s customers leveraging these relationships for key growth initiatives. In addition, Michael will promote our Guiding Principals and foster a team environment nationally. Michael joined SCM-Risk Management Services Inc. in July of 1991 and in his 18 years with our firm has held a number of management and executive positions most recently as Director, Business Development Western Region. SCM-Risk Management Services Inc. is Canada’s largest and leading edge provider of inspection, loss control, appraisal/valuation services, risk management and other specialized risk consulting services. They are part of SCM Insurance Services, the largest privately-owned provider of claims management, risk management and related services in Canada.
www.scm.ca August 2009 Canadian Underwriter
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Hundreds of people attended an evening of support and celebration for Siobhan UsherPost of National Brokers Insurance Services, courtesy of the Butterfly Kisses and Granting Wishes Fund. The event, the first for the fund, was held June 23 at the Steam Whistle Brewery in Toronto. Usher-Post, a non-smoker, was diagnosed with lung cancer in December 2008 when she was five months pregnant with twin boys. The event raised funds for a cuttingedge cancer treatment for Usher-Post, who has been undergoing chemotherapy and radiology and will begin a pioneering chemical treatment at a cost of Cdn$3,000 a month. “We are in awe of your steadfastness and nobility of heart and mind, and look forward to your complete recovery to raise your beautiful sons,” fund chairwoman Eileen Green said during the event. Anyone wishing to make a donation can still do so by contacting butterflykissesgrantingwishes@gmail.com or by calling 905-564-8488 ext. 231. Please make cheques payable to “Butterfly Kisses & Granting Wishes Fund”, 6725 Edwards Blvd., Mississauga, Ontario, Canada, L5T 2V9.
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APPOINTMENT
Joseph Colangelo National Director, Valuation & Data Analytic Services.
Greg McCutcheon, President of SCMRisk Management Services Inc. is pleased to announce the appointment of Joseph Colangelo to the position of National Director, Valuation & Data Analytic Services. Joseph is responsible for providing strategic directions and leading initiatives in the areas of Architectural Appraisal and Valuation, as well as providing oversight to ongoing special ITV projects, including construction data and valuation validations. Joseph joined SCM-Risk Management Services Inc. in May 2009 bringing with him over thirty five years of operational management leadership, valuation systems development experience and appraisal and construction data expertise. Joseph has managed the development of valuation programs (both data and technology requirements) designed specifically to meet the unique market needs of the Canadian insurance and appraisal industry. Joseph has extensive experience in the appraisal of various property types and asset classes across North America, dating back to 1973. SCM-Risk Management Services Inc. is Canada’s largest and leading edge provider of inspection, loss control, appraisal/valuation services, risk management and other specialized risk consulting services. They are part of SCM Insurance Services, the largest privately-owned provider of claims management, risk management and related services in Canada.
www.scm.ca August 2009 Canadian Underwriter
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South Barrie Collision Centre raised Cdn$6,000 for the City of Barrie’s Royal Victoria Hospital at its charity car wash event. On July 11, members of South Barrie Collision Centre washed more than 80 cars to raise the funds. The money was donated to the RVH Hospital Expansion project and the Simcoe-Muskoka Regional Cancer Centre. “We wanted to help raise money,” said Jamie Rogers, South Barrie’s marketing coordinator. The estimated cost of the expansion project is Cdn$56.1 million, Cdn$15.6 million of which must be raised by communities. “Knowing that the money we raised is in great need, we hope to hold more events to raise more!”
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14896 M Wallace Announce CU4C:Murray Annou
GALLERY
XL Capital Ltd celebrated its fourth annual employee volunteer day — XL’s Global Day of Giving — on June 3. The day is dedicated to supporting the communities in which XL companies operate. Employees have donated thousands of hours of community service to hundreds of charitable projects in various locations worldwide since the Global Day of Giving began in 2006 to commemorate the Company’s 20th anniversary. “In these tough economic times, communities need the assistance of reliable and caring companies like XL more than ever before,” said XL CEO Michael S. McGavick. “We at XL are more than willing to spend a day giving our time, energy and expertise to
Granite Partners
those causes and organizations that sustain the communities in which we live and work.” In Canada, XL’s staff in Toronto dedicated their day to helping two worthwhile organizations, including Creating Together, a drop-in and family resource center in Toronto that offers family assistance, and the All Saints Church Drop-in Center, which provides friendship, food, clothing and medical facilities for those in need. In Montreal, XL helped Moisson Montréal, Canada’s largest food bank. In the food warehouse, they were involved in quality control, recycling and sorting out food that will be distributed to 204 organizations benefiting some 107,000 people in need.
Murray Wallace President Granite Global Solutions Doug Buchanan, Managing Director of Granite Partners II L.P. is pleased to announce the appointment of Murray Wallace as President of Granite Global Solutions Inc. Granite Global Solutions (GGS) is Canada's leading risk mitigation company offering independent adjusting, private investigation, disability management, structured settlement and forensic engineering services to corporate, legal, insurance and government clients. Mr. Wallace is the former President of Wellington Insurance and Saskatchewan Government Insurance and was Executive Vice President at Royal Trustco. He is currently a member of the Canada Pension Plan Investment Board and holds a number of other Board positions as well. Founded in 1996, Granite Partners is Canada's most successful boutique private equity firm. Granite Partners focuses upon building businesses in a variety of industries along with senior management partners. Granite is the controlling shareholder of Granite Global Solutions.
GRANITE PA R T N E R S August 2009 Canadian Underwriter
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Assured Automotive hosted a Toronto Harbour Charity Cruise with donations going to the MS Society of Canada. On June 25, 300 guests boarded the River Gambler — a boat known for its large, 2,000square-foot dance floor. Guests were treated to an inspirational speech from Pinball Clemons and the evening was filled with good food and lots of dancing.
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reputation: n. recognition by other people, the state of being favourably known. Brokers' reputations rest on the quality of insurance company they represent. Chubb is consistently ranked superior in service. Chubb has received the highest financial rating from A.M. Best each year for 50 years.
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www.chubbinsurance.com Chubb Insurance refers to Chubb Insurance Company of Canada. The precise coverage offered is subject to the terms, conditions and exclusions of the policy as issued.
The wonderful thing about common ground is what you can build on it.
As a broker you’re successful because your priority is satisfying your customers. We get that. We admire that. It’s one of the important things we have in common. And why we’re so excited about our future together. Like you we believe insurance isn’t about things, insurance is about people. It’s a clarifying belief. The kind that’s generating new thinking around here. We want to help build your business by building on our common ground; our proud Canadian roots and our shared focus on putting the customer first. It’s the right thing to do. And it’s the right course for an exciting and successful future together. And we really do mean together. Because when you succeed we succeed.
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The BIP logo is a registered trademark of the Insurance Brokers Association of Canada (IBAC). All other trademarks are property of Intact Financial Corporation used under license. © 2009, Intact Insurance Company.
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