Intact’s message to politicians wanting more commercial insurance regulation

Imposing more regulation on commercial carriers is not going to help make coverage available for clients who are having a hard time finding insurance, Intact CEO Charles Brindamour suggests.

“I don’t think that scaring insurers is the way to bring capital back into the system,” Brindamour said Wednesday during a conference call discussing Intact Financial Corp.’s financial results for the three months ending Sept. 30.

Restaurants, hotels and event venues have often seen huge rate increases, or have not been able to get their insurance renewed at all, brokers and managing general agents have told Canadian Underwriter in recent months.

“In the high-risk areas of the market — take bars and restaurants with heavy liquor liability — this part of the market was largely served by foreign operators and a number of them left,” Brindamour said Wednesday. “This has led to a capacity crunch in a very small portion of the market.”

During the earnings call, an investment banking analyst asked whether Intact executives are worried about commercial insurance becoming more regulated. Ontario Premier Doug Ford was quoted last month by The Canadian Press as promising to take action to stop what Ford called “gouging” by some commercial P&C insurers. Ford warned commercial insurers to rein in what he described as “astronomical” rate increases to businesses or outright denial of coverage, CP reported.

Related: Ontario promises action to address rising commercial insurance rates, critics urge regulation

“A number of foreign operators left and this has created a bit of tension,” Brindamour said Wednesday during the Intact earnings call. “I don’t think you bring capital back into the industry by regulating.”

The commercial insurance market was already “tight” before the COVID-19 pandemic broke out, Brindamour observed, with industry-wide return on equity of less than 10%. [Intact reported Nov. 4 its return on equity was nearly 17% in 2020 Q3].

“There was liability inflation in the system.  Then the impact of natural disasters put a fair bit of pressure on property,” Brindamour said of the Canadian commercial insurance market in recent years.

Some people also forget that there was a soft market in commercial P&C for 10 years, Brindamour observed.

“Then COVID happens, and the investment income potential comes down, and you get a fair bit of pressure on the claims side of things,” noted Brindamour. One example of such claims “pressure” includes lawsuits against long-term care operators, defended by insurers.

Responding to a capacity crunch in the commercial insurance arena, The Insurance Bureau of Canada announced Oct 29 it is implementing a “business insurance action team” that will work directly with insurance brokers and business owners. A risk manager and a committee of insurers will assess and review eligible business applications to make loss prevention recommendations, and determine the level of coverage and premium that can be offered, IBC said in a release.

This is part of an effort to address the fact that some insurers are withdrawing from the hospitality market and commercial rates are increasing, IBC vice president Jordan Brennan said Oct. 21 during the Insurance Brokers Association of Ontario’s annual convention.

Brindamour alluded to IBC’s announcement in his Nov. 4 conference call. “Solutions need to be found, so we are leading a solution with the industry to insure uninsurable risk, and there are a number of mechanisms being put in place to address the issue here,” he said.

Feature image via iStock.com/SIphotography