MarketPlace

Regulation

CCIR seeks comments on proposed best practices for regulatory surveys

The Canadian Council of Insurance Regulators (CCIR) is seeking comment from the insurance industry on its issues paper, Best Practices for Regulatory Surveys.

The CCIR says the paper addresses the increasing use of regulator surveys, which is linked to an increasing emphasis on a risk-based regulation. CCIR’s draft best practices include the following (among others):
• Developing a project plan that clearly states the problem the regulator is trying to address and clarifies the intended use of the survey.
• A consideration of whether the data or information could be obtained in any other way, or by means of surrogate data or information.
• Coordination among regulators, including a consideration of whether information gathered in multiple jurisdictions should be working through the CCIR, in addition to realizing the potential for regulators to invite other regulators to join in a survey.

The deadline for comments is June 30, 2011.

Alberta rate board commits to moving towards file-and-approve regulatory system

With the province’s auto insurance product now stabilized, the Alberta Insurance Rate Board (AIRB) is now committing itself to moving towards a file-and-approve regulatory system.

“The board is now looking forward to working with government and industry to review the premiums regulation with the view to moving away from the current industry-wide adjustment process to a file-and-approve system,” AIRB chairman Alf Savage commented in the AIRB 2010 Annual Report. “The board believes a model that deals with each company on its own merits will provide for more efficient and effective regulation, which in turn should foster greater competition for consumers over the longer term.”

Currently, the board is required under Section 656 of the Insurance Act and Section 4 of the Automobile Insurance Premiums Regulation to conduct an annual adjustment process that uses the industry-wide experience to determine whether premiums for basic coverage on private passenger vehicles should be adjusted.

Alberta issues revised guidelines covering unbundled/segmented rating programs

An Alberta driver’s insurance premium should not increase by more than 10% per year solely as a result of their insurance company switching from a traditional rating program to an unbundled or segmented rating program, the Alberta superintendent of insurance has announced among its revised rating program guidelines. Alberta’s superintendent of insurance posted the new guidelines on its Web site on Apr. 14, in response to the emergence in Canada of “unbundled or segmented auto insurance rating programs.” Such programs rely on advanced analytics to more accurately determine the premium for a consumer, based on complex combinations of individual risk factors. The full set of guidelines can be found at: http://www.finance.alberta.ca/publications/insurance/super_bulletin0211.pdf

Canadian Market

“Modestly positive” trends in Canadian P&C industry’s 2010 financial results: IBC

Trends in the 2010 financial results of Canadian property and casualty insurers were “modestly positive,” showing marginal improvement over 2009, according to statistics released by the Insurance Bureau of Canada (IBC).

IBC reviewed the 2010 financial trends at the Swiss Re 2011 Canadian Insurance Outlook 26th Annual Breakfast meeting held in Toronto on Mar. 31, 2011.

Underwriting results have generally improved, but the industry as a whole posted its third straight underwriting loss, observed Gregor Robinson, senior vice president and chief economist at the IBC.

Overall, the industry’s summary ratios – including combined ratio, return on equity and capital adequacy test scores – were about the same or slightly better in 2010 as they were in 2009.

And “on the positive side, the [underwriting] loss was substantially smaller last year -$54 million, compared to a loss of $207 million in 2009,” Robinson noted.

But the underwriting picture “becomes less positive when we remove the effect of reserve adjustments,” Robinson said. “In 2010, there were net releases of prior-year reserves of about $1.2 billion. Removing these from the underwriting results shown [for 2010], the industry’s underwriting loss grows to $1.3 billion.” Additionally, when the effect of reserve development is removed, the 2010 combined ratio increases by three percentage points, up to 103.6%.

Reinsurance

AccuWeather forecasts risk of northerly landfalling hurricanes in 2011, including Canadian Maritimes

AccuWeather.com’s hurricane centre is predicting more U.S. hurricane landfalls for 2011, including a risk during the late season of tropical storms sweeping through New England and the Canadian Maritimes.

Overall, the centre predicted fewer tropical storms in 2011 than in 2010. Nevertheless, the centre’s estimated number of tropical storms (15), hurricanes (8) and “major hurricanes” of Category 3 or higher (3) in 2011 are all above seasonal average.

And while there may be fewer storms this year than last, more of this year’s hurricanes will affect the U.S. coastline than in 2010, AccuWeather.com predicts.

“As with most Atlantic hurricane seasons, the areas where storms are most likely to make landfall shift as the season progresses,” AccuWeather.com notes.

The mid- to late hurricane season may see a shift in storm direction towards the eastern Gulf and Caribbean areas. This could shift to the northeastern area of the United States by the late season, AccuWeather predicts.
“Another mid-to-late season concern for landfalls will be northern New England and the Canadian Maritimes.”

Despite seismic advances in earthquake prediction, surprises can still happen: ICLR

Catastrophic earthquakes in New Zealand and Japan in 2011 Q1 present new lessons for insurance companies, according to Institute for Catastrophic Loss Reduction (ICLR) executive director Paul Kovacs, who spoke at the ICLR’s annual general meeting in Toronto on Apr. 8.

One is that surprises can happen.

“The science community predicted the strength and location of the earthquakes in Haiti and Chile, but was not able to forecast when the earthquake[s] would strike,” Kovacs said. In comparison, Kovacs noted seismologists in New Zealand were surprised by the location of the Magnitude 6.3 earthquake that hit Christchurch on Feb. 22, since the area was not on a known fault line.

And in Japan, Kovacs noted: “Seismologists were very aggressively saying: ‘The worst I can imagine for this location is an 8.2 earthquake,’ and we had a 9.0 earthquake [on Mar. 11, 2011], which is much worse than an 8.2 earthquake.

“So one of the new lessons from New Zealand and Japan is that, despite advancements happening in seismology and the science, there are surprises. Decision makers need to use the science, but they need to use it carefully and understand that there are limits and find the right way to take the scientific knowledge and build it into their decision making process…”