September 21, 2020 by Adam Malik
Brokers during the COVID-19 pandemic can expect to see carriers tighten up policy wordings to reduce ambiguity about pandemic cover, but that might cause delays in quota share subscription business as insurers ponder the precise wordings they want to use, a pair of national brokerage leaders warned.
“Right now, there’s a focus on policy wordings,” Dave Partington, CEO of Canadian brokerage operations at Gallagher, said during a recent webinar. “Maybe the thinking was, some of the existing wordings — particularly on program business — were a bit ambiguous when it comes to pandemic cover. So, really, there’s a push driven primarily from reinsurers to be crystal clear in these wordings [about] what is covered and what is not.”
Partington was speaking as part of the recent Gallagher Talks virtual event last week. He was joined by Kevin Neiles, chief marketing officer and Western Canada president, during a presentation entitled, Canadian Market Projections.
Insurers that had reinsurance policy renewals at the end of June witnessed reinsurers calling on them to insert specific pandemic exclusionary wording, Neiles reported. Primary carriers that haven’t yet renewed their reinsurance are voluntarily doing the same, knowing they will have to add the wordings upon their next renewal.
In the case of quota sharing, insurers are quite cautious about following the wording of another carrier, Neiles said. But he doesn’t seem to think it would be too much of a roadblock, since everyone is adding more exclusionary wording.
“When you have a quota share subscription, or when you’re putting excess [insurance] into place that has follow form, you want to make sure you understand those wordings fully and review those wordings fully,” Neiles cautioned. “Because of the wording changes, as subtle as they are, insurers are all wanting to review the wordings of other insurers prior to agreeing to subscribe with them.”
That will create a delay in placing a quota share subscription if carriers are hung up on following another carrier’s wording, Neiles predicted. Brokers are trying to work with insurers, telling them, “Here are the most common carriers that are leading for us where you’re subscribing,” he said, giving an example of what brokers are telling carriers. “Please review these wordings for us first so you can get approval on them so we’re able to place the coverage.’”
Added Neiles: “It’s tough enough with the tightening capacity to fill quota shares, never mind the fact that somebody would be willing to participate but can’t because they’re not able to follow that unapproved wording.”
Partington and Neiles also discussed how insurers are helping out clients in terms of relief during the pandemic. Unfortunately, there wasn’t much they could do, Neiles said. “There was some relief in personal auto where reductions were granted. But a lot of it has been wait-and-see in terms of how it impacts the business at the end of the day.”
The impact on clients has varied. For some, there was a short-term impact and they were soon able to get back up and running. For others, it’s been a longer process.
“Hopefully as insurers start looking at renewals, they’ll start to look at the reduced exposure and perhaps some relief from a premium point of view,” Neiles said. “They did provide some payment relief in terms of allowing delaying of some payment.”
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