Canadian Underwriter


August 1, 2013   by Canadian Underwriter

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Greater Toronto Area Sees Record Rainfall

The Greater Toronto Area (GTA) experienced rainfall on July 8, eclipsing Hurricane Hazel almost six decades earlier, that resulted in flooding and power outages.

Pearson International Airport is reported to have recorded 126 millimetres of rainfall, slightly more than the 121 mm during Hurricane Hazel in 1954. The onslaught resulted in, among other things, transit and commuter rail delays from flooded subway stations, buses and train tracks; flooding of roads and throughways; cancelled flights; closed city services; and power outages affecting 300,000 homes in Toronto.

An update from Standard & Poor’s Ratings Services says “early reported estimates suggest that insured losses could be comparable with those from the 2005 Toronto wind and rainstorm, which were about $590 million.” 

Bureaucracy Top Problem When Doing Business in Canada

Government inefficiency and an environment not conducive to innovation are among the top issues Canadian executives view as barriers to doing business here, notes a new briefing from the Conference Board of Canada.

Generally, Canada is a good place to conduct business, notes the briefing, based on data from the World Economic Forum’s executive opinion survey. But the responses “point to potential areas for improvement that could enhance business performance and competitiveness.”

For example, 16.4% of those polled said inefficient government bureaucracy was the top problematic business issue. That issue was followed by insufficient capacity to innovate, access to financing, an inadequately educated workforce and tax rates.


Improved Disaster Mitigation Needed

Canada’s premiers are calling on the federal government to create a “distinct Canada-wide disaster mitigation infrastructure initiative,” as well as ensure liability insurance requirements for railroads are sufficient.

The cost for a new mitigation program would be split evenly between the provincial or territorial governments and Ottawa, notes the Council of the Federation.

The premiers also agreed there is a “clear lack of information on hazardous materials travelling on the rail network,” after discussing the event in Lac-Mégantic.

The federal government should put in place a system to monitor rail convoys transporting hazardous materials. “This system would provide real-time data on the location and content of the trains, which would be shared, for public safety purposes, amongst the relevant authorities of the federal, provincial and territorial governments.”

The premiers also called on Ottawa to take action and ensure the safety and liability insurance requirements for railroads are sufficient.

Small Businesses at Particular Risk

Small business in the United States is particularly at risk from climate change and extreme weather, contends a new report released jointly by Small Business Majority and the American Sustainable Business Council.

“The median cost of downtime from a small business affected by an extreme weather event is $3,000 per day,” the groups report. “Small businesses’ physical assets tend to be more concentrated: A single building or factory could represent most of the book value of a small business, whereas large businesses benefit from greater geographic diversification.”

Among the other factors of concern are that 57% of small businesses have no disaster recovery plan; for those that do have continuity or risk management plans, 90% spend less than one day monthly preparing and maintaining them; and small businesses tend to operate out of one location and derive most of their business from within a few miles of those locations.

Total Cost of Risk up 5% in 2012: RIMS

Driven mainly by firming market conditions, the average total cost of risk (TCOR) increased by 5% in 2012 over a 1.7% climb in 2011, notes the latest RIMS Benchmark Survey.

The annual survey includes benchmark statistics with industry data for more than 52,000 insurance programs from almost 1,500 organizations. Advisen was a partner in producing the survey report.

In 2012, TCOR rose from $10.19 per $1,000 of revenue to $10.70 per $1,000 of revenue, the result of hard market conditions, reports RIMS, the Risk Management Society. Although rates are rising, the research shows that improving rates attract new capacity, which makes it difficult to sustain the trend towards progressively higher rates. 


Insurer Loses Bid in Disputed Attendant Care Auto Claim

Some lawyers say a mid-July ruling by Ontario’s appeal court is significant because it does not define “economic loss” in the auto insurance regulations governing attendant care benefits, when the person caring for the accident victim is a family member and not a professional.

Ruling in favour of Tyrone Henry, who was left a paraplegic after a motor vehicle accident in 2010, the Court of Appeal for Ontario upheld a lower court finding that Gore Mutual Insurance Company’s obligation to pay for Henry’s attendant care benefits “was not restricted to care provided during the 40 hours per week of paid work foregone” by his mother, who quit her job to care for him.

In a lower court ruling in 2012, Henry’s attendant care needs were assessed at about $9,500 per month based on a Financial Services Commission of Ontario Assessment of Attendant Care Needs form. Section 19 of Ontario’s Statutory Accident Benefits Schedule notes the maximum payable for attendant care is $6,000 per month, if the victim sustained a catastrophic impairment and if the policyholder did not buy optional additional medical, rehab and attendant care benefits.

Gore Mutual argued its liability is limited “to the number of hours that the applicant’s mother had been working as a proportion of the total attendant care hours assessed as reasonable.” It calculated attendant care at about $2,120 per month.

Henry argued he should get the maximum $6,000 per month. The lower court ruled in his favour, Gore Mutual appealed and the appeal court upheld the ruling.

“Gore argued that because ‘economic loss’ is not defined in SABS-2010, insurers risk facing claims for attendant care benefits founded on wide and expansive interpretations of economic loss, or de minimis financial or monetary loss,” Daniel Strigberger, a partner with Miller Thomson LLP, says on a company blog.

A Dutton Brock LLP bulletin adds that “by failing to define ‘economic loss,’ the court has left the term open to a wide range of interpretation.”


Policyholders Want More Online Services

Very few insurers allow policyholders in Ontario and Quebec to change their billing information and conduct other transactions online, identified by respondents to a new survey as something they want.

The Deloitte LLP report is based on a phone survey of 384 residents in Quebec and 384 in Ontario who purchased home or auto insurance, or both, within the last five years. In all, 28% of respondents younger than 40 with a post-secondary education reported they used an online service (such as a general web search, aggregator, insurance company website or social media) to select an insurer.

Deloitte reports customers want online capabilities to handle “simple tasks” that do not require a live conversation with a carrier representative, but “virtually none” of their carriers provided the online services they wanted.

In all, 52% of respondents noted that they would switch insurance companies if they could get “greater online capability,” Deloitte adds.

Cyber Crime Loss to Economy Estimated at as much as US$500 Billion

Cyber crime and espionage could leach US$100 billion to US$500 billion from the global economy, notes a new report released on Ju
ly 22.

Sponsored by McAfee, a subsidiary of Intel Corp., loss estimates are based on an economic model and methodology built by the Washington, D.C.-based Center for Strategic and International Studies. The report posits a $100 billion annual loss to the U.S. economy and up to 508,000 U.S. jobs lost as a result of malicious cyber activity, McAfee notes in a statement.

Malicious cyber activity was classified into six areas: loss of intellectual property and business confidential information; cyber crime; loss of sensitive business information; opportunity costs, including service and employment disruptions, and reduced trust for online activities; the extra cost of securing networks, insurance and recovery from cyber attacks; and reputational damage to the hacked company. 


Insured Losses in First Half of 2013 $20 Billion

Insured losses for 2013’s first half were US$20 billion, down from US$25 billion in the same six months of 2012, an amount that equals the 10-year average, Impact Forecasting reported in July.

Total economic losses for the first six months of 2013 were approximately $85 billion, up from $75 billion in 2012, but about 15% lower than the $100 billion average for between 2003 and 2012, notes the catastrophe model development arm of Aon Benfield.

Approximately half of the insured losses were from natural disaster events in the United States, Impact Forecasting notes.