Surety lines among the first to show signs of hardening

Surety lines in the Canadian reinsurance market are showing definite signs of hardening, Andre Fredette, senior vice president, general manager, CCR Canada, told delegates of an Ontario Risk and Insurance Management Society (ORIMS) seminar.
The seminar, ‘Insurance Market in Canada Update’ was held in Toronto on Dec. 4.
The surety market in Canada has been profitable and stable for the past 12 to 15 years, he said.
“But what we’re seeing now is that the credit crunch is impacting contractors.”
Contractors rely on lines of credit. Some financial institutions are beginning to cut back on those lines of credit. “And this could put some of those contractors into a default situation or lead to a cascading loss where the subcontract is,” Fredette explained.
“So, [reinsurers in Canada] have a concern where the credit crunch will lead to losses which normally would not have occurred but because of the type of credit, we may see some surety losses develop either this year or next year.”
It is unlikely though that the market will harden dramatically, he added. “I think what you will find is it is getting harder but it is a functioning market. Risks will be completed. I don’t see any dislocation in the market place.”