Doubling down on specialty

Bernard McNulty, Allianz Global Corporate & Specialty’s new chief agent for Canada, explains the impact of the pandemic and what changes may be in store

cu | How has the COVID-19 pandemic affected AGCS? For example, are you getting claims from clients seeking business  interruption coverage?

We do have a high number of business interruption claims that have been presented, and we are working through those claims from a coverage point of view. The coverage for those has been very challenging; unfortunately, we were not able to provide coverage on a large number of those. We have clarified some wordings when a client or broker is looking for clearer language. We have not approached the business with a broad re-underwriting of risk.

The pandemic has certainly affected the way we conduct business. We have all been working from home now for over six months, servicing our clients that way, trying to stay as close as we can to our clients and brokers. It has changed the way we work, but I think it has been seamless. In fact, we have written some new business through this period despite all the challenges.

cu | Are any of these changes permanent?

I do think this is going to have a long-term impact. To give you one example, we have staff in Montreal who are now permanently remote employees. We have actually given up our space in Montreal through this process, and we haven’t missed anything that way. In Montreal, we shared space with our trade credit insurer, Euler Hermes. We had eight underwriters, as well as a claims and engineering presence. With the exit from MidCorp and programs, the bulk of that underwriting team has left to go to another insurer.

In Toronto, we have a number of bilingual underwriters. Many of them came from Montreal originally. We will depend on those staff to keep us close to our brokers and clients in Montreal. Our employees have worked very effectively and productively from home. They do rely on different technology platforms, whether that is WebEx or Microsoft Teams. We have not been on a single flight since March and our internal meetings are by conference call. But we haven’t missed a step.

cu | What other changes are underway with AGCS in Canada?

Globally, we have embarked on a very comprehensive transformation program. We’re focused on deep underwriting expertise; being in the right markets and segments, enhancing our truly global business model; and digitization, which is so critical to delivering our strategy. We have established four global teams, each focusing on one industry going forward. We will have one focusing on financial institutions, another on telecommunications and information technology, a third on aviation and aerospace, and a fourth on construction. We will leverage expertise globally to make sure we are servicing any Canadian clients in those industries.

We announced in June that we are exiting the MidCorp business, including our program business in Canada. It will take a year to get through that process. We are refocusing on our corporate and specialty business in Canada going forward.

In Canada, our focus going forward will be on our corporate and specialty business, which is exactly the business we started with five years ago. It is a big shift in Canada for us. We had a number of large national programs with a variety of broker partners. It included a few different segments; among them, realty, retail and some of that was restaurant business. It wasn’t business for which we could use or leverage our engineering or deep technical expertise. Frankly, the results were not strong and that’s why we decided to move away from that business.

cu |  What’s driving some of the insured losses related to Canadian restaurants?

I can’t speak for what kinds of losses our competitors are incurring, but for AGCS it was a variety of losses. Restaurants suffer everything from fires, vandalism, and water damage. Vehicle impact claims are also very common: Many restaurants in Canada have drive-thru capacity, particularly in the fast food area. Along with many of these incidents, we incur business interruption claims. I don’t know if our results were any different than any other competitor in this space, but it’s a challenging part of the business.

cu | What are some examples of issues that clients are facing with engineering risks?

Construction projects in Canada, and I’m sure for global projects, are becoming increasingly complex. There are constantly newer designs and newer materials. We consistently see more and more environmentally friendly materials being introduced in projects. In the last five years, there have been many challenges with prototype products and materials that have never been used before. Our climate can be harsh and some of those products have not worked well because of our Canadian climate. We have seen several large losses presented on prototype designs and/or materials. Prototype systems can be anything from building envelope products to building controls.

cu | Within financial lines, does AGCS have any concerns about D&O liability and E&O exposure?

There are concerns. We are a big market in the D&O space. We like to write D&O for dual-listed clients, whose stock is traded on both the Canadian and U.S. exchanges. The only shift for us in 2020 from an appetite point of view is that we are going to move away from cannabis risk, which we started to write two years ago. Some challenges are unique to publicly-traded cannabis companies.

We still have an appetite for D&O risk in some other publicly-listed companies — particularly oil and gas, mining, and financial institutions. Those are all performing very well for us. We will continue to write D&O liability in those categories of business and probably expand our focus in similar areas.

In E&O, we write a lot of business for construction project owners, engineers and architects. That business has performed very well. We use our engineering expertise when we look at the E&O portion of construction risk. Many new construction projects are starting in Canada despite COVID.

cu | Describe AGCS Canada’s approach to claims handling

We don’t use a generalist model at AGCS. We have a line-specific model. That means we have specialists that handle only aviation claims, and a specialist that handles only marine claims, etc. We have a team of lawyers who handle our D&O and E&O claims. I think having lawyers on staff handling those claims has become the gold standard for a number of companies, and that is all they do for us.

Our claims specialists are each part of individual underwriting teams. Our aviation claims experts, for instance, are part of the aviation underwriting team. They sit with the underwriters and they are constantly collaborating on new risks, on renewals and so on.

Bernard McNulty

Title: Chief Agent and Head of Claims, Canada, Allianz Global Corporate & Specialty (AGCS).

Industry experience: More than 25 years of experience in underwriting, claims and management. Joined AGCS Canada in 2015 as head of claims after serving as vice president, strategic broker and customer development at RSA Group. Also held positions at GCAN Insurance, Lombard Canada, CGU Insurance and ACE-INA Insurance.

Education: Bachelor of Arts in English and Economics, University of Toronto. Holds both the Associate (CIP) and Fellowship (FCIP) designation levels from the Insurance Institute of Canada.