How IBC plans to help restaurants find insurance

Clients in the hospitality sector who cannot find affordable coverage can now go directly to the Insurance Bureau of Canada for help.

IBC has hired a risk manager to help commercial clients improve their risk profile, said Jordan Brennan, IBC’s vice president of policy development.

“We began in condos but we have broken out and expanded to hospitality now,” Brennan said Oct. 21 during a keynote address at the Insurance Brokers Association of Ontario’s annual convention, which was held online.

Brennan was alluding to IBC’s announcement this past January that it would hire a risk manager who could make practical recommendations to condominium corporations to reduce their risk. At that time, IBC said its risk manager could advise condo corporations with a bad history of water damage claims on how to improve their property maintenance in order to reduce their risk. IBC is aiming to increase the awareness of condominium boards about how insurers view risk and evaluate properties.

Expanding its risk management advice to the hospitality industry is part of an effort to address the fact that some insurers are withdrawing from the hospitality market and commercial rates are increasing, Brennan told Ontario brokers last week.

In a press release Oct. 29, IBC noted that restaurants and bars have been impacted by COVID-19 and are some currently experiencing challenges securing insurance.

Separately, some brokers and MGAs have told Canadian Underwriter that some insurers are no longer covering restaurants, hotels, motels and event venues.

“We have launched a national task force on commercial insurance to bring stakeholders together – customers, business groups, brokers, underwriters and other stakeholders. The focus is on defining practical steps that can be taken to solve the availability and affordability challenge,” Brennan told the IBAO convention.

On Oct. 29, IBC announced its new “business insurance action team” will work directly with insurance brokers and business owners. A risk manager and a committee of insurers will assess and review eligible business applications to make loss prevention recommendations, and determine the level of coverage and premium that can be offered, IBC said in a release.

“The industry is going to have to deal with some practical realities,” Brennan said Oct. 21 at the IBAO Convention. “Foremost among them is, if people cannot find the insurance they need, or can’t find it at an affordable price, there is going to be a risk to the collective reputation of the industry and this may invite government or regulators to step in with a regulatory response.”

One key industry is the challenging commercial market, said Brennan. “This segment was already showing signs of difficulty going into 2020 and [the COVID-19 pandemic] only exacerbated the problems.”

Key drivers include high catastrophe losses in recent years and a low interest rate environment, which means that insurers can no longer count on good investment returns to subsidize underwriting losses, Brennan said.

In 2019, IBC saw concerns emerge in the condominium markets in British Columbia and Alberta, Jordan reported.

“More recently we have seen challenges in Ontario, localized predominantly in the hospitality sector as policyholders see increases in premiums at renewal time,” said Brennan.

“At IBC we anticipate there to be challenges in this market going forward. It took a couple of years for this to wind itself up. In the second quarter [of 2020], commercial property posted a six percentage point deterioration in the net loss ratio and the loss ratio for liability lines has been higher than 80% for two consecutive quarters. So these problems have deep origins – some of them going back decades – and it is unrealistic that they will wind themselves up any time soon.”

Feature image via iStock.com/marcoventuriniautieri