Canadian Underwriter

Challenging market conditions remain for these two lines in Canada

February 10, 2022   by Jason Contant

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Market conditions for cyber and directors’ and officers’ (D&O) lines of business remain challenging in Canada, according to Aon plc’s latest quarterly Global Market Insights Report.

Aon’s report for the fourth quarter of 2021, released Wednesday, emphasizes how new forms of volatility are impacting insurance market trends and the risk agenda for organizations, driving the growing need to innovate and develop solutions to assess, quantify and treat emerging risk profiles.

For Canada specifically, challenging market conditions remain for cyber and D&O insurance, Aon notes.

In cyber, controls and loss experience are the primary drivers of pricing and terms. Aon notes that a lack of proper actuarial modelling from the outset of the cyber marketplace has led to historic underpricing. However, as more claims are paid by insurers, better claims data is being developed, leading to more accurate models reflecting higher pricing.

In D&O, “profitability issues, combined with ongoing concerns related to the impacts of COVID-19 on some sectors, continue to create a challenging market environment,” Aon says in a press release. “There is a heightened focus on the ability of companies to deliver on their environmental, social and governance (ESG) commitments,” Aon says. “Canadian market trends are lagging behind the U.S. trends, with 2022 expected to be the third year of rate increases in Canada.”

The casualty/liability and property lines appear to be faring better. In casualty/liability, the primary market is stable as insurers focus on profitable growth, Aon reports. But well-performing, non-U.S. exposed risks are experiencing single-digit rate increases. The excess market is challenged in high exposed classes, impacting renewals and new capacity requirements. While U.S. litigation trends and rising loss costs play an important role in pricing, facultative reinsurance rates, capacity and conditions are other considerations.

Signs of stabilization are emerging in property lines. Some rate pressure and capacity issues continue, however, particularly for complex and/or natural catastrophe-exposed risks, Aon reports. Well-performing risks are experiencing modest rate increases.

On a positive note, new capacity is entering the market for trade credit insurance. While limits are gradually increasing, insurers remain cautious in their deployment of capacity. Expiring coverage terms – and in some cases, new coverage extensions – can be achieved. Overall, Aon considers the market to be stable; modest price increases are the norm.

“The Canadian insurance market will continue to climb out of the hard market in 2022,” Russell Quilley, chief broking officer for Canada at Aon, says in the release. “With many of the insurance carriers looking to grow in 2022, this additional pressure will translate to more favourable terms for clients.”


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