Marketplace

REGULATION

Revised minimum capital test takes effect in 2015

The Office of the Superintendent of Financial Institutions (OSFI) has released a revised Minimum Capital Test Guideline for property and casualty insurers that takes effect January 1, 2015.

“The new risk-based capital framework results in a slight 2.8 percentage point decline in the capital ratio (MCT/BAAT combined ratio) on average across the entire industry,” OSFI notes.

“Although the decline in the overall capital ratio is not material, the impact may vary by individual company as the new framework better aligns each insurer’s capital requirements with its risk profile,” the statement adds.

Having a three-year phase-in period, OSFI reports the guideline includes new and updated risk factors and margins, and a new revised definition of available capital. “This new version of the guideline represents a more robust risk-based test that more accurately aligns capital requirements to the risks faced by the property and casualty insurance industry,” says OSFI deputy superintendent Mark Zelmer.

Funding for flood risk reduction in N.S.

The Government of Nova Scotia announced at the end of August that it will provide $147,500 to support five projects meant to help communities investigate the causes of flooding and explore solutions.

“These projects will contribute to our ongoing efforts to help communities and homeowners plan for the worst, and prevent excessive damage from flooding,” says environment minister Randy Delorey.

The funding is through the Flood Assessment Fund, now in its second year, which provides as much as 50% of eligible costs. This fund and the Flood Risk Infrastructure Investment Program, administered by the Department of Municipal Affairs, are part of Nova Scotia’s Flood Mitigation Framework.

For 2014-2015, the funding through the former is $150,000 and $700,000 for the latter. “We can’t prevent floods, but knowing which areas of the province are at greater risk will allow us to better manage their damaging effects,” Delorey has said.

Bill hiking liability limits falls short: NDP

Canada’s New Democratic Party will not support Bill C-22, in which the ruling Conservatives propose increasing the absolute liability limits in the nuclear and the offshore oil and gas sectors to $1 billion, arguing that a critical element is missing.

The Energy Safety and Security Act, if passed into law, would make $1 billion the limit of liability, “without proof of fault or negligence,” to which certain offshore energy producers would be “subject in the event of a spill or damages caused by debris.” For nuclear operators, the bill would increase the amount of compensation available to address civil damage from $75 million to $1 billion.

The bill “does not include the polluter pay principle on the nuclear liability side,” NDP MP Jack Harris has said. “In the oil and gas section, there is a $1 billion absolute liability, whether the operator is at fault or not, and in the case of fault on the part of an operator in the oil and gas industry, there is an unlimited liability.”

CLAIMS

August hail storm in Alberta tops $450 million in insured damage

The Insurance Bureau of Canada (IBC), citing figures from Property Claim Services (PCS), reports a major storm that hit southern Alberta August 7 to 8 caused an estimated $450 million in insured damage.

The estimated damage toll ratchets up the tally of Alberta’s insurance payments from natural catastrophes to $4 billion since 2011.

The intense storm – which brought torrential rains, wind and both golf ball- and tennis ball-sized hail to southern Alberta – brushed Calgary and struck Airdrie and surrounding areas.

Bill Adams, IBC’s vice president, Western and Pacific, says the storm damaged tens of thousands of cars and homes. “What’s more is that we are not out of the woods yet. Alberta hail season traditionally runs through the end of September.”

$140 million in flood losses for Manitoba, Saskatchewan

Insured losses from flooding in southwestern Manitoba and southeastern Saskatchewan over this past Canada Day weekend are now estimated at more than $140 million, Catastrophe Indices and Quantification Inc. (CatIQ) announced in September.

The estimate for the June 28 to 30 flooding includes loss adjustment expenses and is based on a recent 45-day re-survey of the majority of insurers affected by the event. CatIQ pegs the flooding as the second largest Cat event to occur in Canada so far in 2014, behind the hail storms in Alberta.

“The heavy rains, up to 230 millimetres in some areas, caused widespread flooding,” with the hardest hit areas being on the Saskatchewan/Manitoba border, notes Carolyn Rennie, CatIQ’s in-house meteorologist and director of catastrophic loss analysis. 

Ontario flood damage estimated at $90 million

Property Claim Services (PCS) reports that an August rainstorm in Burlington, Ontario caused more than $90 million in insured damage.

“During the storm, Burlington received so much rainfall that local highways had to be closed because of flooding in some places, as creeks and rivers throughout the city were inundated and crested at the same time,” notes the Insurance Bureau of Canada.

The City of Burlington announced in late August 3,097 homes were reported to have been flooded when almost 200 millimetres of rain fell in three hours. The city has filed to receive Ontario Disaster Recovery Assistance Program funding.

CANADIAN MARKET 

Jones Deslauriers, Lloyd Sadd partner on new brokerage network 

Two independent insurance brokerages in Canada have joined together to create Navacord Inc., a new national brokerage network.

Jones DesLauriers Insurance Management Inc. and Lloyd Sadd Insurance Brokers have partnered, along with Fairfax Financial Holdings Limited, to create the new platform.

Shawn DeSantis will serve in the role of president and chief executive officer, and T. Marshall Sadd will take on duties as executive chairman.

“The company will invest in and form a nationwide partnership of entrepreneurial brokers with deep roots in local business communities,” notes a statement from the founding brokerages.

At present, Navacord partner firms manage about $400 million in premium volume.

RISK 

Priorities for protecting Canadians against overland flooding: Report 

Canada is lagging behind on the issue of overland flooding, necessitating measures to ensure greater resiliency and to guard against associated losses, suggests a new report.

The report – commissioned by The Co-operators, with the research undertaken by Blair Feltmate and Jason Thistlethwaite of the University of Waterloo – reflects input received from a wide range of stakeholders, including all levels of government, banking, real estate developers and builders, insurance and reinsurance.

“Canada is well behind other nations when it comes to managing the risk associated with overland flooding,” says Rob Wesseling, executive vice president at The Co-operators.

Stakeholders identified three priority areas where action could most effectively reduce flood damage risk: flood plain mapping, preparedness of cities and built infrastructure.

“Canada must operationalize adaptation measures,” consistent with the three priority areas, “to limit the potential for flood damage to the residential property market,” the report argues. 

Cargo theft a hit to Canadian economy

Cargo theft is not just about stolen goods – affecting an individual load or a particular company – but extends to adversely influence the economy as a whole, Richard Dubin, vice president of investigative services for the Insurance Bureau of Canada (IBC), suggested during the Annual
Toronto Fraud Forum.

“We’re trying to increase the awareness of it and the seriousness of how it affects both our economy and in terms of security for Canadians,” Dubin said.

“Sentencing hasn’t been very tough for this type of crime,” he said, one reason IBC lobbied for Bill S-9, an Act to Amend the Criminal Code, which at its heart, is auto theft legislation.

Under the act, trafficking in property obtained by crime and possession of property obtained by crime for the purposes of trafficking are subject to imprisonment for as long as 14 years.

There is also a need for greater consistency in how cargo crime is reported. “Without data analysis, you really are in the dark in terms of what trends are basically taking place,” Dubin argued. 

TECHNOLOGY

Mobile app aims to curb distracted driving

Belairdirect recently released the “bumpr” app in a bid to help curb distracted driving.

The app automatically senses and responds to incoming calls and text messages when a vehicle is moving, notes a company statement. Depending on the settings selected, the app can redirect calls to voicemail, temporarily block various kinds of alerts and notifications (such as social media notifications) and send a pre-selected response to incoming text messages, without requiring the driver to touch the phone.

The app, free for Canadian drivers, is available for Android smartphones.

REINSURANCE

Reinsurers may be underestimating impact of climate change: S&P

A scenario from Standard & Poor’s Ratings Services that seeks to test the potential impact of climate change suggests reinsurers might be underestimating their exposures to catastrophe losses by an average of 50%.

“Under this simple scenario, we estimate that on a gross basis, reinsurers may be understating both the one-in-10 and the one-in-250-year loss by around 50%,” notes a company statement.”Most reinsurers do not believe that climate change is having a material quantifiable impact on their current risk exposure, nor do they think it is likely to do so in the near future.”

However, Standard & Poor’s views it as “unwise to rule out the possibility that climate change has already begun to affect reinsurers’ risk exposure, especially given the number of catastrophe events recently triggered by extreme weather.”