How the hard market is changing commercial underwriting

The ongoing hard market means underwriters are asking commercial clients more in-depth questions about their organizations’ risk management practices and culture, suggests the new CEO of the Canadian Universities Reciprocal Insurance Exchange.

“We are very much in a hard market,” said Patrick Lundy, CEO of Burlington, Ont.-based CURIE, in a recent interview. Therefore, commercial underwriters want to understand what clients are doing to mitigate risk, how they think about enterprise risk management, and what their “aggregate risk profile” looks like, he suggested.

“I think underwriting continues to evolve and has now gotten to a point where insurance companies, particularly in the hard market, are making very sound decisions about how they want to deploy their capital,” said Lundy. “The questions are changing. They are getting much more in-depth, and they are going into concepts around what is a client’s top-down driven view to identifying risk, to mitigating risk, and the resources associated with it. Those are all critical components.”

A commercial client ignores risk mitigation at its peril, Lundy warns. “If an organization does not want to manage its own risk, an insurance company won’t either,” he told Canadian Underwriter.

Lundy was CEO of Zurich Canada from 2012 through 2017. More recently, he worked for commercial brokerage NFP as senior vice president of manufacturing and real estate in Canada. Lundy replaced Keith Shakespeare as CURIE CEO on Apr. 19, 2021.

Lundy was asked if commercial or institutional clients can undertake any specific risk mitigation measures to make themselves more attractive risk to underwriters.

“Insurers are looking for well-structured operations and risk-based informed decisions, from the boardroom table right down through the whole organization,” he replied. “Clients need to demonstrate and describe how their organization has developed a strong risk culture and framework that will mitigate risk to people and property while supporting organizational strategy and objectives.”

CURIE, which represents 64 universities, was founded in 1987 when a group of post-secondary institutions created their own reciprocal in order to stabilize premium costs for all Canadian universities.

During his 24-year career in the property and casualty insurance industry, Lundy has worked in the United States both for Travelers and American International Group; in Canada, he has been the national business unit leader, general industries at Purves Redmond Limited.

Canadian Underwriter asked Lundy whether, after taking the helm of CURIE, he saw any major differences between underwriting risk for post-secondary institutions and underwriting risk for for-profit commercial enterprises.

“I would say the main difference between post-secondary and for-profit is [that] for-profit [clients] tend to be based in one business sector, whereas [post-secondary educational institutions] have so many different exposures.”

Post-secondary institutions are normally funded by government, research grants, and tuition.

“Post-secondary is unique because their strategy and operations are focused on pushing the boundaries of knowledge and harnessing intellectual power to transform the future through teaching, research and innovation,” he said.

Feature image via iStock.com/picture