Marketplace

CANADIAN MARKET

Travelers to acquire The Dominion

Travelers Companies Inc. has agreed to acquire The Dominion of Canada General Insurance Company from E-L Financial Corporation Limited for about $1.1 billion in cash, subject to adjustment.

The transaction is expected to close in 2013 Q4, subject to regulatory approvals and other customary closing conditions, Travelers notes a statement. Travelers will fund the transaction, subject to market conditions, through a combination of debt and/or preferred stock financing and internal resources.

The Dominion and Travelers’ Canadian operations will be integrated, with the combined organization headquartered in Toronto. “This is a very good opportunity for Travelers to significantly improve its market position and scale in a meaningful market,” says Jay Fishman, chairman and CEO of Travelers, adding that the transaction will have no significant impact on 2013 earnings per share.

Brigid Murphy, president and CEO of The Dominion, will continue in these roles at the combined organization, while George Petropoulos, president and CEO of Travelers Canada, will help Murphy lead the new organization as vice chairman and executive vice president, Bond and Financial Products.

The combined business “will substantially enhance Travelers’ product breadth in Canada by coupling The Dominion’s commercial and personal portfolios with Travelers Canada’s surety, management liability and commercial middle market products,” Petropoulos adds.

Insurers, brokers advised to diversify

In a world with extreme weather patterns, protests that can shut down cities and sudden economic downturns, insurance carriers and their brokers should consider expanding their offerings, Bob Dempsey, president and chief operating officer of The Guarantee Company of North America, suggested in May.

“We’ve never seen weather patterns like we’ve seen in the last decade. We’ve never seen such a sinusoidal curve to the world’s economy, where we’re riding high and then all of a sudden, within two years due to some over-leveraging of mortgages of houses in the U.S., the whole economy goes to hell in a hand basket worldwide,” Dempsey said during a presentation hosted by the Insurance Institute of Canada.

“The only way the insurance industry, in my mind, can survive that is to diversify, to make sure you’ve got a spread of products” to guard against one of those extremes affecting results, Dempsey said.

Brokers will also need to diversify offerings, he said, for both property and casualty, and for life and health. 

REGULATION

Tissue market appeals to Canada’s high court

A manufacturer of paper towels and tissue sought to appeal to the Supreme Court of Canada after a ruling by British Columbia’s Court of Appeal barred the company from making a subrogated claim against the operator of a warehouse where unprocessed paper was destroyed in a 2001 fire.

In June, Canada’s high court dismissed the application for leave to appeal with costs. Kruger Products, formerly Scott Paper, had sought to overturn the B.C. appeal court’s ruling barring the company from making a subrogated claim against warehouse manager First Choice Logistics. The court earlier ruled a lease agreement required Kruger to maintain property and inventory insurance, and to name First Choice Logistics as an insured.

The B.C. court found that when a lease agreement requires a “bailor” who owns goods to buy insurance, the bailee who is responsible for storing those goods should benefit from it, unless the lease agreement says otherwise.

After a fire at the warehouse, Kruger sued, among others, First Choice Logistics alleging that it breached its agreement to maintain the warehouse in such a way as to minimize the risk of damage to Kruger’s inventory.

One issue was the interpretation of agreements between Kruger and First Choice on who was responsible for liability, property and inventory insurance, and who was supposed to benefit from those agreements.

In 2010, the Supreme Court of British Columbia ruled Kruger could make a subrogated claim against the warehouse operator. But the B.C appeal court overtruned that verdict, finding that a clause in the warehouse agreement requiring Kruger to hold insurance was intended for the benefit of First Choice Logistics.

Child in uninsured vehicle covered

The Court of Appeal for Ontario ruled in May against Economical Insurance in determining a woman injured as a child 20 years ago while riding in an uninsured vehicle owned and driven by her father is entitled to benefits from her mother’s uninsured coverage on two vehicles not involved in the accident.

Ashley Jubenville, then 5, was injured in 1993 while a passenger in a car driven by her father that was involved in a single-vehicle crash. Her mother was a named insured under an Economical Insurance policy in 1992-1993 for two vehicles other than the one involved in the accident.

In 2011, Ashley Jubenville commenced legal action for accident benefits under the uninsured auto coverage under her mother’s policy.

Economical argued that Jubenville should look to the Financial Services Commission of Ontario’s Motor Vehicle Accident Claims (MVAC) Fund for coverage.

It further submitted Kelly and Kevin Jubenville were spouses at the time of the collision and that Ashley, as a dependent of Kelly, was excluded by Section 265(2(c) of Ontario’s Insurance Act.

Among other things, the section notes when a person is claiming damages as an occupant, an uninsured vehicle “does not include an automobile owned by or registered in the name of the insured or his or her spouse.”

Ontario’s Superior Court of Justice ruled last October against Economical, a ruling upheld by the appeal court. The “legislative intent” of the Insurance Act is to “internalize the costs to the activity of driving, and not externalize it to the general public who would fund the MVAC Fund.”

The high court also ruled the definition of “insured” can have the broader definition in Section 224 of the Insurance Act, or the more narrow definition in Section 265(2).

CLAIMS

Alleged staged auto crash spurs charges

Four individuals have been charged in connection with an alleged staged auto collision in January 2012.

The insurers involved, Aviva Canada and The Dominion, retained engineers to reconstruct the reported collision and contend the vehicle rammed the other multiple times and deliberately.

The Aviva-insured vehicle contained two occupants who both had medical treatment costs submitted on their behalf by a Toronto clinic. Evidence collected during the investigation shows occupants were asked to sign multiple treatment plans by clinic employees.

The charges include fraud over $5,000, attempted fraud under $5,000 and conspiracy to commit an indictable offence. None of the charges have been proven in court.

Aviva Canada notes related claims cost for the two insurers was more than $45,000.

Telematics pilot for motocycle riders

Saskatchewan Government Insurance (SGI) has issued an Advance Contract Award Notice looking for a vendor to help shape a usage-based insurance program for motorcycle drivers in the province.

“Simply put, those who drive responsibly [will] pay less and those who don’t, pay more,” says Donna Harpauer, minister responsible for SGI.

Several hundred riders will be sought to volunteer to have a telematics device installed on their bikes. No rating changes will be made during the pilot.

TECHNOLOGY

Insurer websites good for policy services

Auto insurance customers in the United States find it easier to use insurance company websites to service their existing policies than for shopping for coverage, says a J.D. Power & Associates survey.

Customers were asked to r
ate their experience when doing shopping and servicing tasks on a scale of 1 to 5. The ratings of functional tasks were then used for an overall experience index based on a 500-point scale. The study included 7,000 evaluations of 20 insurer websites.

J.D. Power reports the industry average for shopping experience was 347, and 414 for overall servicing.

When customers find it easy to perform servicing tasks, such as viewing their policies and changing contact information, they are more likely to return to the site and recommend both the site and the insurer to friends and colleagues.

RISK MANAGEMENT

Insider threat needs to be assessed: Report

While almost two-thirds of surveyed Canadian organizations reported being prepared to handle “insider threats,” only about one in seven have developed an internal definition of what those threats could be, the Conference Board of Canada reports.

In all, executives at 115 organizations were surveyed. An insider threat is “any person who has the potential to harm an organization for which they have inside knowledge or access,” notes a conference board report. That person could have a negative impact on an organization’s reputation, financial results, business continuity and other aspects.

Only 14% of organizations surveyed have a specific working definition of insider threat, and only about 19% of respondents said they have employee training on managing internal threats.

Threats noted by respondents included privacy/information breaches, fraud and theft/loss/damage.

REINSURANCE

United Nations calls losses out of control

The United Nations Office for Disaster Risk Reduction reports direct losses from disasters are about $2.5 trillion to date this century.

The office issued a warning to the world’s business community that economic losses linked to disasters are “out of control” and will continue to escalate unless disaster risk management becomes a core part of business strategies.

“Direct losses from floods, earthquakes and drought have been underestimated by at least 50%,” UN Secretary-General Ban Ki-moon says.

Noting that losses can only be reduced in partnership with the private sector, the report calls for the principles of disaster risk reduction to be taught at business schools and become part of the investor’s mindset.