Marketplace

CLAIMS

$3.2 billion in weather-related losses in 2013

The $3.2 billion in insured losses from severe weather represents the highest ever in Canadian history, the Insurance Bureau of Canada (IBC) recently reported.

The late-year ice storm – which wreaked havoc on parts of southern Ontario and eastern Canada – generated an estimated $200 million in insured losses and was enough to push the annual total for severe weather to a record high for the country.

Data about insured damage is from PCS-Canada.

Events include: the floods in Alberta, with insured damage of more than $1.74 billion; the July 8 storm in Toronto, ($940 million); and the severe thunderstorm last July that hit central and southern Ontario and southwest Quebec (about $200 million).

CANADIAN MARKET

Desjardins acquires State Farm Canada firms

Desjardins Group announced January 14 it has entered into a definitive agreement to acquire State Farm Canada’s property and casualty and life insurance business, as well as its mutual fund, loan and living benefits companies.

The transaction is expected to close in January 2015, subject to regulatory approval. Following the closing, Desjardins will continue operating the State Farm Canada businesses under the State Farm brand for an agreed licence period.

Once the deal has closed, State Farm’s 1,700 Canadian employees and roughly 500 agents will continue to serve about 1.2 million customers in Ontario, Alberta and New Brunswick. Desjardins will continue to operate its other insurance brands separately, the company reported. 

REGULATION

Auto policy language simplified in Quebec

The Groupement des assureurs automobiles (GAA), an industry group in Quebec, recently announced a new plain language auto insurance policy, scheduled to take effect March 1.

In 2010, GAA and the province’s regulator, Autorité des marchés financiers (AMF), began reviewing policies Q.E.F. No. 1 and 5, and their endorsements, so that consumers would find them easier to read and to understand.

The new policy includes shorter sentences and bulleted lists, along with simplifying legal language.

Policyholders will receive the new policy language upon renewal.

For example, the term “financial consequences” replaces the term “pecuniary consequences” and “additional coverages” replaces “additional agreements.”

Ontario auto rates drop 4.66% since August

Auto insurance rates in Ontario have dropped 4.66% on average since August 2013, Ontario’s Ministry of Finance announced in January.

Rate filings approved during the fourth quarter of 2013 declined on average by 3.98% and during the third quarter of 2013 by 0.68%, which together make up the average reduction announced in January.

The Insurance Bureau of Canada noted that rates have dropped for a fourth consecutive quarter, and for the second year in a row.

The announcement from the government is based on rate filings set and approved by the Financial Services Commission of Ontario quarterly, and not all companies were ordered to file new rates, IBC noted.

Ontario considers driverless car pilot

Ontario’s Ministry of Transportation is seeking public comment on a proposal to create a pilot project testing the safety of “autonomous vehicles,” often referred to as “driverless” cars. Comments were due February 24.

The proposal is for a five-year pilot program testing the safety of self-driving vehicles before they are widely available to the public, which could be between 2020 and 2025, based on industry estimates.

The proposal “will allow the ministry to proactively evaluate and determine how these vehicles can be safely integrated with other road users prior to them becoming widely available to the public,” MTO stated at the time.

According to its proposal, only “vehicles manufactured and equipped by recognized parties” would be permitted in the pilot and proof of third-party liability insurance would also be required.

REINSURANCE

Some cat bond return rates hit 18%

Catastrophe bonds have been “extremely profitable” lately, says Philip Cook, chief executive officer of Omega Insurance Holdings Inc.

“The hottest area of new investment into the business is not going directly into insurance companies,” Cook said during the recent CIP Society Industry Trends breakfast. “It’s going into insurance-linked securities and cat bonds in particular.”

According to the latest study Cook has seen, there was $20.5 billion in capital invested in the cat bond market around the world, while $2.5 billion in new capital was invested into that market in 2013.

“Most of those cat bonds have been extremely profitable,” Cook noted, adding some of them had no losses. “As a result, the cat bond funds now are returning rates of return in the mid-teens and I have seen them as high as 17% and 18%.”

Nonetheless, the cat bonds still pose some risk for investors, he suggested.

“It would only take one or two major exposures, I think, to reverse the whole popularity of the cat bonds.” 

Insurance-linked securities sales grow

The insurance-linked securities market continued to grow in 2013, though new issuances were not as large last year as they were in 2007, notes a recent report by Swiss Re Capital Markets Corp.

“For the second year in a row the new issuance ILS market climbed to its 2nd largest yearly total,” Swiss Re stated in its Insurance Linked Securities market update.

Swiss Re added there were $7.42 billion worth of new ILS issued, across 31 transactions, in 2013. All figures are in United States currency. Last year “surpassed” the 2012 total by $1.14 billion, though $8.24 billion was issued in 2007.

But 2013 “ends up being the largest year on record” if one excludes securities that are related to natural catastrophes, Swiss Re suggests .

RISK 

Nat cats, BI top risks for Canadian firms

Natural catastrophes, business interruption(BI)/supply chain, pollution, legislative and regulatory changes, and loss of reputation/brand value represent the top risks for Canadian companies in 2014, notes the third annual Allianz Risk Barometer, issued in January.

“We are seeing an increased interconnectivity and dependency of different risks. Thus, client’s business continuity plans must prepare for different risk scenarios that reflect hidden incidental effects,” notes Kevin Leong, CEO of Allianz Global Corporate & Specialty SE (AGCS) Canada, in a statement.

“For example, a natural catastrophe such as the floods we experienced last year in Alberta and Toronto or the recent ice storm can result in BI, IT-systems failure and power blackouts, among other perils,” Leong points out.

The barometer is based on feedback from an AGCS survey of more than 400 corporate insurance experts from 33 countries.

Specifically, 50% of Canadian respondents identified natural catastrophes as the number one risk for 2014. AGCS reports that BI/supply chain losses – accounting for 50% to 70% of all insured property losses, or as much as $28 billion annually in Canada (based on 2013 data) – followed nat cats.

BI/supply chain was cited by 42% of Canadian respondents, but topped the global list. Pollution, changes in legislation and regulation, and loss of reputation/brand value tied for third place at 25% in Canada.

Global temperatures continue to rise

It has been 38 years since the world has had a year of cooler-than-average temperatures, while 2013 was either the fourth or the seventh warmest year since 1880, depending on which United States government agency figures are used.

2013 is tied with 2009 and 2006 as the seventh warmest year since 1880, according to a recent study from the United States Natio
nal Aeronautics and Space Administration (NASA).

In a separate release, the National Climatic Data Center (NCDC) of the National Oceanic and Atmospheric Administration (NOAA) stated that 2013 “ties with 2003 as the fourth warmest year globally since records began in 1880.”

In December, 2013, NCDC published a table listing the 10 warmest years since 1880, when ranked by temperature anomoly, which is the difference between the average temperature that year and the 20th-century average. The highest anomoly, in 2010, was 0.66 degrees Celsius. Two years (2013 and 2003) were tied for fourth place, with anomolies of 0.62 degrees Celsius.

“With the exception of 1998, the 10 warmest years in the 134-year record all have occurred since 2000, with 2010 and 2005 ranking as the warmest years on record,” according to a release in January from NASA’s Goddard Institute for Space Studies (GISS).

Both NCDC and GISS noted that 1976 was the most recent year in which the global average temperature had been cooler than the norm. 

TECHNOLOGY 

Top brass contribute most to cyber risk

Senior management accounts for the greatest information security risks within organizations, according to a recent survey out of the United States from risk services firm Stroz Friedberg.

According to its survey of 764 workers, 87% of senior managers send work materials to a personal e-mail or cloud account to work remotely (either frequently or occasionally), the firm noted.

A significant percentage (58%) also reported having accidentally sent the wrong personal sensitive information, according to the survey. That compares with just 25% of workers overall, the company noted.

Overall, 71% of survey respondents indicated sending themselves company information, often because they prefer working on their own home computers.

Management also creates more potential risk of intellectual property loss, with 51% of senior management and 37% of mid-level management admitting to having taken job-related e-mails, files or material with them when they left a job.