August 6, 2020 by David Gambrill
Aviva Canada overcame high claims costs related to pandemic losses and severe-weather catastrophe events in Alberta to trim its combined operating ratio (COR) down from 98.1% in the first half of 2019 to 95.5% during the first half of this year.
In announcing its 2020 half-year results, Aviva Canada’s parent company, Aviva plc, observed that globally, including in Canada, “COVID-19 had a dampening effect on premium volumes as government-enforced restrictions reduced demand, and this may continue depending on the economic effects from COVID-19.”
Aviva plc reported that its general insurance division — which includes its operations in Ireland, the UK and Canada — absorbed a combined hit of £165 million (approximately CAN$288 million) in COVID-related losses during the first half of 2020. “This impact is based on estimated claims in business interruption insurance, other commercial lines, and travel insurance, and allows for favourable impacts in other product lines.”
Commenting on the results, Aviva Canada CEO Jason Storah told Canadian Underwriter in an interview that Aviva Canada did have “a small number” of commercial policies that included pandemic coverage, with the most well-known being the company’s dental program.
“We’ve now paid out over 95% of those claims,” Storah said of claims arising from the dentist program. “We’ll close off those claims any day now. So, where there was coverage for a small number of people, we’ve paid as quickly as we can.”
Storah said BI claims are among the most complicated and lengthy claims to settle “because of the financial information that you require and the back-and-forth, so I am feeling really good about our response to the few [pandemic BI] claims that we had.”
The future of pandemic BI claims in Canada is uncertain, Storah observed.
“There are class actions floating around, and there is litigation,” he said. “Suddenly, everybody’s become a COVID and a BI expert these days, and I don’t think that most of them were experts before that. But I understand the world makes people uncertain, it makes people ask questions.
“I don’t worry about that. We will handle the claims and class actions on an individual basis, with a view towards what the right thing is to do for our customers, and what was the wording and intent of our policies. I’m very cognizant of the fact that insurance is in a long game. My lens is, ‘How can Aviva best manage all of the risks that are out there and that face our customers?’”
Catastrophes in Canada, particularly recently in Alberta, also affected Aviva’s results. Aviva plc’s financial results did not indicate the exact amount that Aviva Canada paid out for catastrophe-related claims, but noted that the financial impact of the claims payouts for Calgary’s June hailstorm and Fort McMurray’s floods were substantial. “All regions experienced increased weather costs compared with the benign prior year, with flooding and hailstorms in Canada and winter storms in the UK having a notable impact.”
Collectively, the entire Canadian P&C industry has paid out more than $1.7 billion combined as a result of the June hailstorm in Calgary and this spring’s flooding in Fort McMurray, Alta.
“It’s no secret that we aren’t through Cat season yet,” Storah told Canadian Underwriter. “With the Fort Mac floods and the Calgary hail, we paid significant claims out of those events, and our reinsurers will also be paying out significantly.
“What surprised me about the Calgary hailstorm is that it’s the fourth-largest Cat event in Canadian history, but [outside of Calgary] I don’t feel that it got the attention that the fourth-largest Cat event [deserves]. To me, that says we are becoming immune to the fact that this is part of life, and these big events will happen. I don’t have a crystal ball, but if history is anything to go by, we’ve got some other Cats ahead of us.”
Aviva plc noted that Aviva Canada’s actions since 2017 to increase rates, as well as improve risk selection and indemnity management, “more than offset the adverse effect of COVID-19.”
The company’s Canadian operations reported net written premiums of £1.502 billion overall (about CAN$2.613 billion), a modest increase over last year’s half-year result of £1.458 billion (CAN$2.537 billion).
In personal lines, Aviva Canada’s NWP over the first half of 2020 reduced to £1.012 billion (CAN$1.76 billion) from £1.018 billion (CAN$1.771 billion) over the same period last year. This was “primarily as a result of the impact of COVID-19, as we offered more consumer relief in motor insurance,” the parent company reported.
In commercial lines, Aviva Canada generated £490 million (CAN$852.6 million) in the first half of 2020, an increase over £440 million (CAN$765.6 million) during the same period last year “due to growth in Global Corporate and Specialty new business and rate increases put through during renewals,” Aviva plc reported.
Feature Image courtesy of iStock.ca/imagedepotpro