Canadian Underwriter

More challenging environmental risks may pose insurance coverage issues for Canadian companies: Marsh

February 18, 2016   by Canadian Underwriter

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Canadian companies may find it increasingly difficult to obtain insurance coverage for more challenging environmental risks as the number and size of environmental claims continue to grow, according to Marsh’s Canada Insurance Market Report 2016, released on Thursday.

Cyber risk insurance in Canada will continue to rise, Marsh said, due to increased adoption of cloud-based services, an acceleration in the amount of sensitive data collected by companies and a dynamic threat landscape

Marsh, an insurance broking and risk management company, said in the report that the Canadian general liability and property markets are expected to remain “competitive and stable” throughout 2016. As well, “growing interest in the small- and medium-size market among insurers is driving greater competition and will likely continue to keep rates stable in 2016.”

Furthermore, demand for cyber risk insurance will likely continue to rise “due to numerous factors, including increased adoption of cloud-based services, an acceleration in the amount of sensitive data collected by companies and a dynamic threat landscape,” Marsh added in a statement.

“With 2016 under way, the global insurance marketplace appears to be heading in the general direction of soft pricing, reflecting insurer capacity, competition, and relatively low catastrophe losses,” said Robert Bentley, president of Marsh’s U.S. and Canada Division, in the statement. “Now, however, is not the time to be complacent. Organizations need to stay abreast of the ever-changing marketplace and risk landscape, where new and emerging risks can quickly escalate if not properly managed.”

In addition, “industry developments, including recent earnings announcements, executive leadership changes, and re-underwriting at several companies bear watching,” Marsh added in the statement. “Macro dynamics such as global economic, political, regulatory, technological, and environmental developments will also continue to affect the industry throughout the year.”

For the United States, Marsh is forecasting “generally favourable” commercial insurance market conditions in 2016 for insureds. As outlined in its annual US Insurance Market Report – also released on Thursday – in the fourth quarter of 2015, U.S. commercial property insurance rates declined on average between 5% to 10% for non-catastrophe exposed risks and between 5% to 15% for moderately catastrophe-exposed risks. Likewise, U.S. public company directors and officers (D&O) insurance rates were on average flat to down 10% in the quarter, while U.S. commercial general liability rates on average renewed with between 10% decreases and 5% increases.

Other findings in the US Insurance Market Report include:

• Demand for cyber insurance rose in 2015, a trend expected to continue in 2016. Typical rate increases in the first half of 2015 for similar programs were 10% to 15% over the prior year. However, the retail and healthcare sectors, which have experienced some of the costliest events, saw increases for similar year-over-year programs ranging from 45%-55% and 15%-25%, respectively;

• Automobile liability remains among the most challenging of casualty areas; pricing generally increased in the low single digits in 2015 and is expected to do so again in 2016. Nearly half of all auto liability Marsh clients renewed with rate increases in the fourth quarter of 2015, with “trucking exposures facing a particularly difficult market”;

• Despite significant global political turmoil and violence, political risk insurance rates generally declined in 2015 and are expected to do so again in 2016. Rates for foreign investment insurance generally fell 5% to 10% in the year, while rates for contract frustration insurance and non-payment insurance fell 5% on average; and

• In Q4 2015, the majority of Marsh’s airline clients renewed hull and liability policies with decreases of between 15% and 25%.