MarketPlace (March 01, 2011)

Canadian Market

Canada’s new rules prohibit banks from promoting non-authorized insurance on Web sites Canada’s Department of Finance has published its proposed rules for preventing banks from promoting non-authorized insurance products on its Web sites.

The regulations are a follow-up to the federal government’s stated intention in 2009 to include bank Web pages within the general prohibition on banks from promoting certain types of insurance services.

The proposed amendments for Section 2, subsection 7.1(1) of the Insurance Business Regulations read in part:

“A bank shall not, on a bank Web page, provide access to a Web page – directly or through another Web page – through which there is a promotion of:
(a) an insurance company, agent or broker that does not deal only in authorized types of insurance; or
(b) an insurance policy of an insurance company, agent or broker, or a service in respect of such a policy, that is not of only an authorized type of insurance.”

A “bank Web page” is defined as “a Web page that a bank uses to carry on business in Canada, including any information provided by the bank that is accessible on a telecommunications device.”

Canadian P&C industry’s underwriting profit declines on a quarter-by-quarter basis

Canada’s property and casualty insurance industry has seen a gradual, quarter-by-quarter decline of its underwriting income, which plummeted from a profit of $592 million in 2009 Q4 to an underwriting loss of $308 million in 2010 Q4.
Statistics Canada reported the data in its 2010 Q4 Quarterly Financial Statistics for Enterprises, released on Feb. 23.

The $308-million underwriting loss in 2010 Q4 was a slight improvement over the $315-million underwriting loss the industry posted in 2010 Q3.

But the deterioration of the industry’s underwriting income from quarter to quarter is evident.

Prior to the underwriting losses in the last two quarters of 2010, Statistics Canada data show the industry posted a quarterly underwriting profit of $592 million in 2009 Q4, a $389-million underwriting profit in 2010 Q1, and a $60-million profit in 2010 Q2.

Soft commercial lines in Canada are expected to persist in 2011: Marsh Canada

Soft commercial insurance market conditions persisted throughout Canada in 2010 and are poised to continue into 2011, according to a comprehensive report published by Marsh Canada.

“Key commercial insurance market drivers from 2009 – including intense competition among insurers, abundant capacity and relatively few insured catastrophe losses – continued through 2010 and are forming market conditions for 2011,” Marsh said in its report, Approach Your Risk With Clear Direction: North American Insurance Market Report 2011.

The report found clients are seeing lower rates on average across all major coverage lines. For Marsh clients renewing in the fourth quarter of 2010:

• property rates typically declined 5% to 10%;
• primary liability rates declined 7.5% to 12.5% for clients with low-risk profiles and little U.S. exposure; and
• directors’ and officers’ (D&O) liability insurance rates for public companies not listed in the United States were flat to 15% down.

Claims

Value of property loss estimates reported through Xactware in Canada increases by $200 million in 2010  

The value of property loss estimates reported through Xactware in Canada grew to $1.32 billion in 2010 from $1.10 billion in 2009.

The total monthly loss estimate value started at $84.9 million in January 2010 and peaked at $148.3 million in August. The spike followed the massive July 12 hailstorm in Calgary and Southern Alberta, Xactware said in its 2010 Year-End Claims Analysis.

By December, this figure dropped back down to $87.6 million.

In total, 136,927 loss estimates were reported to Xactware in Canada, the report adds.

The average value of a property estimate in Canada in 2010 was $9,659, marking an increase from 2009’s average of $9,007 per estimate. The value of the estimates peaked in February, when they averaged $10,184.

Sum of catastrophes in 1998, 2005, 2009 and 2010 costs industry $3.8 billion in claims: PCS-Canada

PCS-Canada has reviewed the sum of all catastrophes in Canada from 1998, 2005, 2009 and 2010, and has determined that these events collectively cost the industry $3.8 billion, involving 850,000 insured properties.

“These may be surprising numbers to the Canadian insurance industry,” according to a ‘Summary of Catastrophe Activity in 2010 and Earlier Years,’ appearing in the MSA/Baron Outlook Report Q3-2010.

PCS-Canada identified four catastrophes in 2010, including tornadoes in Ontario, storms and flooding in Saskatchewan, a hail storm in Alberta and Hurricane Igor hitting Newfoundland and Labrador.

“In summary, the four catastrophes caused an estimated insured property loss of nearly $800 million, based on current estimates,” according to the summary. “These same events also produced over 85,000 claims to the insurance industry.”

PCS-Canada said reviewing past catastrophes was a difficult assignment, because many insurers did not have recoverable records and mergers and acquisitions made it difficult to capture some data.

But a review of the 1998 Ice Storm shows it resulted in $1.5 billion of insured property damage to more than 660,000 properties.

Regulation

B.C. implements new rules for placing coverage with unauthorized insurers

A new rule outlining procedures B.C. brokers must follow when placing coverage with an unauthorized insurer took effect on Feb. 28, 2011.

Section 76(1)(c) of the Financial Institutions Act in British Columbia provides a limited exemption from the restriction prohibiting the placement of insurance with an unauthorized insurer.

Rule 7(11.1), which took effect in February, establishes a course of action when conducting an insurance transaction related to this exemption.

According to Rule 7(11.1), brokers must notify the Insurance Council of British Columbia in writing prior to conducting any insurance transactions with an unauthorized insurer.

The written notification must include:

• the name of the individual broker or agency;
• the primary broker at the agency; and
• confirmation that the broker understands the disclosure and trust requirements contained in Rule 7(11.1).

Related to the last point, the broker must disclose to a client in writing the risks associated with an unauthorized insurer.