September 25, 2018 by David Gambrill
As if mounting auto insurance losses aren’t enough, the industry now has a new emerging issue to worry about this year – an alarming spike in home and commercial property claims.
Catastrophe losses and fire are among the chief culprits cited for a noteworthy increase in personal property claims ratios, industry commentators tell Canadian Underwriter.
Canadian federally regulated insurers incurred $5.5 billion in home and commercial property claims up to the end of the second quarter this year, according to data published by the Office of the Superintendent of Financial Institutions (OSFI). That’s a 22% increase over the same period last year, when they incurred $4.5 billion in personal property claims costs.
Overall, claims ratios for Canadian P&C home insurers in personal property lines increased from 64% last year to 71% this year. For foreign insurers writing personal property business in Canada, the increase was more dramatic – from about 49% last year to 72% this year.
What accounts for the nationwide rise in personal property claims?
“Mostly the cats,” Joel Baker, president and CEO of MSA Research, told Canadian Underwriter recently. “There were a slew of them in the first half of the year.”
Ontario alone has almost $1-billion worth of property thus far, based on winter and spring storms. The biggest storm was a May 4 windstorm that hit Ontario and Quebec, causing insured damage of almost $500 million. That followed just weeks after an ice storm in Ontario and Quebec that caused insurers $190 million in damage.
Tack on $200 million in insured damage from summer storms in the Prairies in July and August, and between $10-25 million for flooding in New Brunswick in the spring, and Canada has seen more than $1.4 billion in insured damage only nine months into the year, the Insurance Bureau of Canada reported.
“Commercial writers had a tough time, followed by multi-line personal lines writers,” Baker observed of the cat losses. Federally regulated insurers paid $1.8 billion in commercial property claims in 2017 Q2, and $2.4 billion during the same time this year – a 32.9% increase.
But while cats are an important factor in the losses, something else may be going on in habitational lines. And that’s the age-old industry nemesis of fire. The CEO of one mutual insurer said the company is still seeing fire losses, which he attributed to “distracted living.” In other words, someone cooks up some food on the stove, and starts a house fire when they leave it there to go watch TV or play on their mobile devices.
Glenn McGillivray, managing director of the Institute for Catastrophic Loss Reduction (ICLR), observed that even with the catastrophe losses due to flooding in New Brunswick earlier this year, that didn’t entirely explain the escalating property losses in the area.
“Not enough people have overland flood cover in New Brunswick to drive those kinds of numbers,” McGillivray says. “If you look at the loss ratios by province, you may be able to match them up with a particular cat or cats. But in some cases, like New Brunswick, there appears not to be a match, so the problems lie elsewhere.”
OSFI data does not break down the causes of the incurred claims in property lines. Anecdotally, McGillivray says he has heard of fire presenting a problem for underwriters this year. “Despite all the talk that structural fire losses are going down in every industrialized country in the world, we clearly still haven’t licked the fire problem,” he says. “It is still a bane to insurers.”
[…] Although, it may be obvious that you know your own property boundaries, there will be more details that you can find out on the exact boundary markings if you go through your property deed. These property lines can limit you in where you place your shelter. Stepping outside to find these boundaries by using the landmarks on your property will be helpful in identifying how exactly to place your garage. In case your property deed is not available to you then your local zoning department will have a map with your property lines. […]
David Gambrill, as always, presents an insightful study on an extremely topical subject.
In a related sense, in one of this morning’s papers, varies areas of the GTA are cited as being the least affordable for home buyers based on median and required income, the difference between the two representing either surplus or deficit in terms of being responsibly able to purchase a home.
Which would lead one to question the degree of responsibility in the maintenance of the property when funds could be in short supply and the effect on such things as roofs requiring replacement, outflow drain lines checked for root invasion and crumbling basement walls.
I will leave it to the claims people to advise me otherwise.