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Personal lines carriers ‘risk losing market share’ unless they cover overland flood: MSA


July 10, 2015   by Canadian Underwriter


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Insurance carriers other than Aviva Canada and Co-operators General Insurance Company are “sure to” announce overland flood coverage in Canada, and those who do not risk losing market share, MSA Research Inc. suggested in a recent report.

“The risk to insurers that don’t offer flood is clear,” wrote Joel Baker, founder, president and chief executive officer of Toronto-based MSA. “Homeowners’ policies and possibly auto policies will likely start migrating to insurers that do.”

Baker made his comments in MSA’s Quarterly Outlook Report for 2015, which also includes detailed financial statistics on the Canadian property & casualty insurance industry, plus commentary on other topics, including ACE Ltd.’s proposal to acquire The Chubb Corp.

 Overland flood was a topic discussed in MSA Research Inc.’s Quarterly Outlook Report for 2015Baker referred in the report to announcements earlier this year, by Aviva Canada and Co-operators General Insurance Company, that they will cover overland flood on some residential policies.

Aviva Canada announced last February its overland flood endorsement, which covers “losses that result from the accumulation or run off of surface waters, including torrential rainfall when water enters the property.”

Then in May, Guelph, Ont.-based Co-operators announced it would cover, in Alberta, flooding caused by an overflow from a body of water, sewer/water backup and accumulation of surface water caused by heavy rain.

“With more announcements sure to follow, those that sit on the sidelines risk losing market share,” Baker wrote in MSA’s quarterly outlook report for Q1 2015, suggesting personal lines brokers will not want to risk errors and omissions exposure “by not offering flood cover when it is available” to residential property clients.

Aviva’s overland flood endorsement “forms a key part of the Aviva Water Protection package, which combines base policy water protection (broken water pipes and more), sewer back-up protection (the backing up or escape of water or sewage) and overland water protection (from water entering the property),” Aviva announced in February. The insurer reported at the time that its overland home flood coverage will be “available as an endorsement to personal property insurance policies that have sewer back-up protection in place.”

Aviva Canada’s announcement was mentioned by RSA Canada officials in March at an RSA reception and presentation for brokers in Toronto.

“On the property side, we are all looking at flood coverage after the announcement a couple of weeks ago,” Donna Ince, RSA Canada’s senior vice president for personal lines, said at the time. “We are assessing what this means. We have to look at the insurance cost and definitely look at our data around flood mapping and we recognize that we will potentially be looking at how those coverages work today. There’s more to come on that in the coming months.”

Alluding to the Aviva and Co-operators announcements, “it will be certainly interesting to see how the water fight plays out over the next 12 months,” Baker wrote in MSA’s Quarterly Outlook Report. “How many more insurers will enter the fray? Will the reinsurance community follow the fortunes?”

The June, 2013 floods in southern Alberta – Canada’s most expensive natural disaster by insured losses – happened when overland flood coverage was generally not available for Canadian residential properties.

At the CIP Symposium in Toronto in early 2014, Jeff Burke – then CEO of Western Financial Group Inc. – suggested some Alberta homeowners got coverage in 2013 under their sewer backup policies.

“These people got sewer backup coverage, but I have never seen sewer backup of 10 or 11 feet in someone’s house before,” Burke said at the time. “I know in talking with some of the folks at Lloyd’s with the reinsurers, they are really scratching their heads about what insurers did. I think it was the pressure, because people saw how devastated they were.”

At the same event, a Swiss Reinsurance Company Ltd. official called on the P&C insurance industry to work with other stakeholders to address flood coverage.

“On this issue, leadership has to come from insurers because insurers have the most skin in the game,” Christine Duffield, Swiss Re’s senior vice president for client markets, said at the time. “All stakeholders, insurers, reinsurers, government and consumers – we have to work together to find an effective and economically feasible solution.”

That the 2014 CIP Symposium, Duffield noted Canada was “the only G8 nation that doesn’t have flood insurance for homeowners.”


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