November 13, 2001 by Canadian Underwriter
In light of the events of September 11, Canadian companies can expect to see rising insurance rates, reduced availability of cover and closer scrutiny paid to business risk, say representatives of KPMG’s insurance practice. At the consulting firm’s annual Insurance Conference in Toronto, delegates learned that the terrorist attacks on the U.S. will definitely impact Canadian businesses.
Those companies will be expected to show their ability to deal with and recover from events as they face a tough insurance market.
But even more important than insurance will be companies’ ability to restore consumer confidence with effective business contingency plans, delegates heard.
“Insurance is cold comfort in the event of business disruption,” says Dick Freeborough, industry leader at KPMG’s Insurance Practice. “The real test for companies moving forward is their commitment to business resumption readiness after thoroughly examining the nature and extent of their risks.”
“Most existing contingency plans focus on maintaining data files and data processing operations, and attribute the greatest risks to accidents and natural events,” adds Neil Parkinson, a partner in KPMG’s Insurance Practice. “Businesses need to fortify their plans to deal with deliberate malevolent acts and address people and communications issues better.”
Speakers note that the reinsurance market is reacting to the September 11 events as well, increasing rates and making some covers, including terrorism, difficult to find. They suggest a government terrorism risk pool is likely needed to address these risks.
For life insurers, the events will trigger higher reinsurance rates, and create the need for greater reserves to meet guaranteed returns on segregated funds.