MarketPlace (April 01, 2011)

Regulation

Feds’ commitment to new demutualization rules postponed by Spring election

The federal government’s proposed budget, introduced on Mar. 22, 2011, confirmed the government was working on a regulatory framework that would allow property and casualty insurance companies to demutualize.

As of press time, the budget had been defeated, triggering a May 2, 2011 election.

“The government is developing a framework for the demutualization of federally regulated property and casualty mutual insurance companies, which will provide, for companies that choose to demutualize, an orderly and transparent process and ensure that policyholders are treated fairly and equitably,” the government notes in its 2011 budget. “The government will be in a position to review applications to demutualize once regulations are in place.

“Amendments to the Insurance Companies Act, including amendments that would prevent any mutual company from demutualizing indirectly, will be introduced.”

Ontario resolves to target auto insurance fraud

The Ontario government announced its intention to target auto insurance fraud in its 2011 budget.

Both Insurance Bureau of Canada (IBC) and Insurance Brokers Association of Ontario (IBAO) applauded the announcement.

In the budget, Ontario Finance Minister Dwight Duncan said the government intends to augment the set of reforms implemented on Sept 1, 2010 with the following initiatives:

• working with the industry to use the newly established Health Claims for Auto Insurance (HCAI) database to detect potentially fraudulent activity;
• introducing new rules to ensure treatments are provided as invoiced;
• establishing an auto insurance anti-fraud task force to determine the scope of auto insurance fraud in Ontario and make recommendations regarding detection, investigation, enforcement and consumer education; and requiring auto insurers to annually attest that their companies have established effective compliance controls to satisfy and protect the rights of policyholders and accident victims.

Canadian Market

Canadian P&C insurers reporting improved combined ratios in 2010

Slightly more than half (53%) of 221 Canadian property and casualty insurers posted an improvement in their combined operating ratio, according to data posted by MSA Research.

For the entire group of companies, the composite COR for 2010 was 99.7%.

Net income increased for 125 of the 221 companies, while it decreased for 83. Overall, the group of insurers’ collective net income for the year was $3.5 billion.

Ontario auto continues to plague insurers’ results, MSA noted. The industry’s direct Ontario loss ratio for the year was 99.4%

P&C insurers’ profits flat from 2009 to 2010: OSFI data

Federally regulated property and casualty insurers reported a net income of $2.5 billion in 2010, virtually flat when compared to 2009’s profit of $2.52 billion, according to filings with the Office of the Superintendent of Financial Institutions (OSFI).

Claims

Japan earthquake, tsunami modeled to cause between $15 billion and $35 billion: AIR

Insured property losses from a Magnitude 9.0 earthquake that hit the northeast area of Japan on March 11 will likely range from $15 billion to $35 billion, reported AIR Worldwide.

The earthquake and resultant tsunami has officially killed almost 12,000 people and more than 16,000 remain missing. The earthquake was the largest recorded quake in Japan’s history.

The damage estimate does not include damages from the tsunami triggered by the quake, nor any potential loss that may stem from nuclear loss. Efforts to repair damage to Japan’s Fukumi nuclear plant, damaged during the natural catastrophe, have raised radiation levels in areas around the plant.

Fitch Ratings released a statement stating it does not anticipate any major rating downgrades for (re)insurers resulting from the Japan quake. Primary insurers may see their catastrophe reserves “significantly depleted,” and reinsurers are “currently well-capitalized following several profitable years and is capable of absorbing a loss of this magnitude,” Fitch said.

AIR also noted that Japan’s national seismic network remains offline, so ground motion observations are still unavailable, making the damage estimate very preliminary.

Japan earthquake expected to cause pricing tension in the global property market: Aon

Japan’s recent earthquake and tsunami, combined with recent natural catastrophes in Australia and New Zealand in 2011 Q1, are likely to cause considerable pricing tension in the global property market, said Andrew Laing, property and casualty brokering team leader for Aon in the United Kingdom.

Laing spoke as a panel member during Aon’s Webinar, Japan Earthquake and Pacific Tsunami Response, on March 23.

“While there is a lot of speculation about the ultimate size of the loss in Japan, it would seem clear the total of all international cat events in Q1 are likely to have some impact on pricing, if not across all regions, then certainly in the recently affected parts of the world,” Laing said.

Should the Asian domestic insurance market tighten, he continued, “more business will flow into the global markets and that is likely to attract a hardening of price.”

Insurers should “try hardest” to settle cases with self-represented litigants: judge

Given the additional time, effort and expense required to try cases involving self-represented litigants, insurers might want to give special consideration to settling these cases early, a Nova Scotia judge observed at the Canadian Defence Lawyers 7th Annual Insurance Symposium held in Toronto on March 4.

“There’s not always going to be a good experience [in cases involving self-represented litigants], no matter what you can do,” said Nova Scotia Supreme Court Trial Division Justice John D. Murphy. “The difficulties that arise can be very hard to predict. There may be a lot of ill will, frustration and expense for your [insurance] client.

“We always like to see you in court, but the cases that you may want to try hardest to settle are those where there is a self-represented litigant on the other side.”

Murphy spoke at the CDL judges’ panel, which included trial judges from B.C., Ontario, Quebec and Nova Scotia. Judges on the panel all noted the number of self-represented litigants in Canadian courts is increasing.

Ontario Superior Court Justice David Brown noted self-represented litigants are estimated to be involved in 25% of the Ontario’s civil cases, and in a much higher percentage [up to 50%] of family law cases. “We can’t handle that,” Brown said. “The system is not designed to manage that large of a volume of litigation with parties who really don’t know what they are doing.”