Across all markets, including Canada, pricing levels are generally at historic lows, which in many cases are well below technical pricing recommendations. Globally, recent natural catastrophes have highlighted the increasing frequency and potential severity of major events, potentially leading to more than US$100 billion in insured losses market-wide arising from natural catastrophes in 2017 Q3.
Although there is rate strengthening in some areas, particularly for catastrophe risk, the general and longer-term impact of the above-mentioned natural catastrophes on the Canadian market is still uncertain and will depend heavily on local market dynamics, reinsurance market developments, as well as the entry or exit of traditional and alternative capital. Insurers need to maintain technical discipline and ensure proper underwriting and pricing of exposure.
Many companies are making increased use of technology to support their operations and risk management programs. Examples include investments into digitization, robotics, artificial intelligence, cloud computing, and 3D printing. Generally, this is a positive development and is expected to have a beneficial impact on pricing and risk quality. However, as maturity of technology solutions develops, there may be glitches and underwriting against these risks increases in complexity.
For carriers, technology innovation and improved portfolio insights, supported by high quality claims information, are essential to manage trends and take appropriate action. Insurers must continually improve their data quality and availability to keep up with an increasingly changing and connected world.
Technology also drives the need to adapt existing products continually and to develop new insurance solutions such as cyber or coverage for unmanned aerial vehicles (UAVs, also known as ‘drones’). Technologically driven underwriting platforms, including the use of big data, will be the key to success in these areas.
Large corporate, specialty and mid- market clients are becoming more sophisticated, connected and technologically driven. Fueled in part by a protectionist U.S. trade policy, Canadian companies are expected to diversify and expand their client base internationally. As a result, exposures are becoming increasingly complicated and more global.
Advancements in technology will improve not only the clients’ capabilities with respect to their own businesses, but also how they interact with suppliers and customers around the world. As a result, cyber exposures and contingent business interruption will require more attention, a good understanding of exposure and adequate coverage solutions.