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Paid Northern Exposure: even in hard times, the Canada insurance market is heating up


June 3, 2021   by Renato Rodrigues


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For the global insurance industry, Canada offers a unique opportunity from a legal, regulatory, and economic perspective. AXA XL’s newest Country Manager for Canada talks about how the market is becoming a favourable frontier for growth and innovation.

 

Climate, supply chain, cyber, political -– just a few of the emerging risks that many organizations in Canada face.  Even traditional insurance placements have come under stress as insurers seek to remediate their portfolios both on a domestic and global basis.  All while the industry and the economy work through a global pandemic and resulting economic turmoil that it has brought.

Yet even amid a pandemic and with economic constraints the situation entails, Canada’s insurance market has remained resilient and now is well positioned to meet the needs of Canadian companies.

In 2020, insurers in Canada wrote $60.3 billion in direct written premiums in the P&C market[i].  Many risks formerly placed internationally were repatriated to domestic insurers.

Market Focus

With international players pulling back, local insurers have been able to take an expanded role in the industry. That has offered domestic carriers the opportunity to capitalize on and grow in a market that holds plenty of potential, even amid a hard market. Yet so much of that potential has been put on hold. Things like infrastructure projects were paused as the global pandemic hit. Still, as populations vaccinate and economies begin to recover, expect an acceleration of projects and insurance needs over the next few years.

Some of the market needs organizations and governments are facing are as follows:

Environment and Climate: Thanks to a wide diversity of weather, Canada’s environmental and climate insurance market is expected to take off. In 2019, the Bank of Canada recognized Climate change as one of the top 3 financial risks in the Canadian economy.  Extreme weather, from droughts and wildfires to heavy snowfall and winter storms, the country’s insurance needs are growing rapidly.

Those needs are tempered by claims. A 2020 report from the Insurance Institute of Canada reveals that payouts for severe weather damage have doubled every 5 to 10 years since 1980[ii]. Between 2010 and 2019, property claims have risen from 28.3% to 33.9%[iii]. That creates huge potential for growth for carriers and underwriters looking to ride out the current conditions and for innovative risk management solutions like Parametric insurance.

Political Risk: Rising nationalism and protectionism, uncertain economic times, low consumer confidence, and political upheaval in other parts of the world can impact business and supply chains. Currently, the prolonged COVID-19 pandemic has really shown how interdependent economies are and has put pressure on the Canadian industry sector and the economy.  The country’s risk climate depends on the reopening of economies around the world.

Also, civil unrest and global protectionism[iv] have caused strains on diplomatic efforts, as has competition among other countries, such as that of the US and China.

Trade Credit: Thanks to a slowdown of industry, falling global oil prices, and a dip in consumer activity, the impact on the Canadian economy (estimates show a 7.1% drop in the overall economy[v]) was noticeable. The result: more debt taken on by businesses and governments.

Export Development Canada (EDC) says that the lagging economy globally has prompted central banks to reduce interest rates. Countries looking to shore up their economies are borrowing more.

Cyber: Cyber-crime is proliferating, and cyber insurance is now an integral component of many companies’ risk management programmes. Operating locally and globally with constant exposure to cyber risks is an incredible burden for companies and a true partnership is required to assess, manage, mitigate and get ahead of potential vulnerabilities. Growing awareness of this need presents an unprecedented opportunity for qualified insurers in Canada.

Cannabis: The Canadian cannabis market is growing rapidly. Since legalization of cannabis in 2018, sales in just the first three months after legalization topped $151.5 million and grew to $1,186 million in 2019[vi].

With increased business comes increased risks. Road accidents, impaired driving, theft, and product liability issues bring additional risks to organizations in the industry.

 

Insuring Canadian Interests

With all the risks that organizations in Canada face, organizations need solutions and resources to help navigate the market complexities and economic pressures impacting business. Especially in the hard market where organizations are facing more challenges and even retaining more risk, there is opportunity to mitigate risks with those carriers that are innovating.

We recommend working with a carrier that looks not just at traditional markets, but at alternative markets and devises creative solutions to solving complex risks. Because of tightening capacity and limits, organizations need to work with a carrier that will present alternative market options.

AXA XL’s Canada Group is putting more effort and emphasis on providing solutions from various areas – excess, captives, parametric, and global programs. We create bespoke solutions that are tailored to a client’s risk portfolio.

AXA XL’s Canada operations have doubled in the past few years. Our teams are incredibly well positioned to continue to play a major role in the commercial insurance arena in Canada. As organizations and government entities continue to face a tough insurance market and tight economic conditions, our Canada team will continue to work hard to develop and deliver new and innovative solutions to current and emerging risks.

 

Northern Potential

The Canadian insurance market is a mature yet growing market with insureds who require coverage on both a national and a global scale. Canadian companies doing business in Canada or operating globally from the country, look for a solution provider that understands their organization’s challenges and has the solutions you need to mitigate those challenges.

Because most risks are multidimensional, an insurance carrier should be offering multi-risk coverage and solutions that keep businesses operating even in the most difficult of circumstances. We at AXA XL are excited to be part of this burgeoning market, and we look forward to helping organizations in Canada protect their interests and create new opportunities for growth.

[i] IBC’s Facts

[ii] Climate Risks: Implications for the Insurance Industry in Canada – Insurance-Canada.ca – Where Insurance & Technology Meet (bingj.com)

[iii] IBC’s Facts

[iv] Top 10 global risks Canadian businesses face | EDC

[v] Economic and Political Overview of Canada (rbc.com)

[vi] Cannabis Stats Hub (statcan.gc.ca)