Bermuda, London and U.S. markets showing interest in Canada: Seminar

Commercial insurance buyers stand to benefit from increased interest from various countries in the Canadian market, speakers noted at the Ontario Risk & Insurance Management Society (ORIMS) “State of the Market” panel discussion Thursday.
Even in the difficult executive risk line, foreign markets are taking notice of Canada, says Adam Briklyn, vice president with Marsh Canada Ltd. “We’re in a healthy setting.” Despite the high-profile corporate scandals and resultant severe market hardening seen in lines such as directors’ and officers’ in recent years, the pace of securities lawsuits is slowing and underwriters are becoming less gun-shy of the market. “Very few underwriters lost their capacity, they just didn’t use it. We’re seeing a return back to primary underwriters using all of their capacity.”
The result is more competition, although Briklyn notes that this is been seen on “clean risks”, and will not be experienced by companies who have had to restate financials or face other similar “clouds over their heads”.
Similar competition is being seen in the property market, notes David Mew, director of national broking for Aon Reed Stenhouse. Both incumbents bolstered by improved results which have freed up capital and new players who are being forced by this increase in capacity to compete to hold onto business are offering not only better rates, but also somewhat more relaxed terms. “Rate adequacy was reached by mid-2003, maybe even the end of 2002,” Mew notes. Some writers continued to increase rates beyond this time, giving some cushion for rates to flatten or even decrease but to still remain technically adequate. In terms of pricing in the property line, he predicts, “we could see a fairly aggressive fourth quarter” and 2005 could easily see rates drop 10-15%.
However, there is a gap between the approach insurers are taking with new business and renewals, several speakers note. Insurers set aggressive growth targets for 2004 which are not being met with rates, and the result is even more aggressive competition setting in with regards to new business, notes Andy Sloan, partner with Vince Tomenson Dickerson. Unfortunately, he adds, some writers are also moving beyond the property line and into casualty lines, which could be a sign of “nave confidence” on the part of some players. “We see insurance companies moving back into lines that two years ago they didn’t think they had the expertise for.”
This kind of price competition is likely premature, given that the industry only has one year of underwriting profitability under its belt, notes Steve Halfpenny, vice president of marketing with Munich Reinsurance Co. of Canada. “Is one year a hard market? Is that the clue that it’s time to start to cut each other’s throat again?”