US casualty and auto severity serve as warning signs for Canadian underwriters

Canadian underwriters need to beware of increasing severity of claims within the U.S. casualty and auto lines, as the potential exists for “leakage” that could hit Canadian insurers’ books, said Lynn Oldfield, president and CEO of Chartis.

Oldfield offered the keynote address during the Property and Casualty Underwriters Club (PCUC) luncheon in Toronto on Feb. 15. She shared insights on emerging risks facing Canadian corporations in 2012.

“A lot of our [Chartis’] clients are major corporate clients that cross the Canada-U.S. border. I’m going to give you a warning sign folks, because there are things brewing in the US with respect to automobile and casualty that you need to be aware of,” she told delegates.

Medical inflation — or the increasing cost of a hospital visit in the US — is “slaying” US workers’ compensation rates, she said, noting the line has seen increasing rates and will likely record a combined ratio between 120 and 130% for the industry in 2012.

“That has leakage in the casualty market, because it has to be contained and rate is required.”

She also pointed to the fact that last year, in the US, five claims in jury trials amounted to $1.6 billion. Three of those five claims were motor vehicle accident losses, she said.

“So, what we’re sharing with our Canadian clients, and what I encourage you as underwriters to think about is that it’s the CEO of your Canadian client that goes to a conference in Florida and rents a car and goes to play golf with his clients, and then gets into a catastrophic accident on the way back,” she said.

“There is leakage and there are developments, and there are still run-away torts in the States that needs to concern us as Canadian underwriters.”