Canadian Underwriter

Where Intact sees commercial premiums heading after pandemic is over

May 26, 2021   by Greg Meckbach

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Many commercial clients are “hurting” because of COVID-19, but once the pandemic is over, small businesses currently under lockdown could see their insurance rates rise, Intact Financial Corp. executives suggest.

“The biggest difference between the environment in which we operate and the post-pandemic environment is [in] the lines of business where there are gaps in [rate] adequacy that are subject to lockdown at the moment,” Intact CEO Charles Brindamour said during a recent earnings call. “There is not much rate [increase] activity going there because we feel this is not the right time to [raise rates]….

“Once we return to normalcy, we will make sure that, [in] the segments that are most vulnerable [to lockdowns], rate increase will resume. That is the main difference I think,” Brindamour said May 12 during the conference call discussing Intact’s financial results for the three months ending Mar. 31, 2021.

During the call, an investment banking analyst asked Intact executives about the impact of the lockdowns and the resultant economic downturn on Canadian commercial insurance lines. The executives were also asked for their views about premium growth.

Darren Godfrey, senior vice president of commercial lines at Intact, alluded to relief measures for commercial clients that Intact took during the last three months of 2020. In a securities filing released this past February, Intact said it provided $50 million of relief to its small business customers in 2020 Q4. Those measures included premium adjustments to reflect changed commercial automobile usage, mid-term premium adjustments, and rate relief for small- and medium-sized businesses that have been affected by declining revenues.

In the three months ending Mar. 31, 2021, Intact recorded $792 million in direct premiums written in Canadian commercial P&C, up 5% from $753 million in the same period in 2020, the insurer announced May 11. The 5% commercial premium increase was due in part to hard market conditions, though it was offset by the fact that Intact stopped writing Uber’s ride sharing coverage as of Aug. 31, 2020.

Outside of the premium relief for small business clients impacted by COVID-19, “rate momentum very much continues” in commercial lines, said Godfrey.

“Capacity remains very very tight,” Godfrey said. “We are not seeing any form of new underwriting capacity into the market. Obviously we saw a bit [of commercial underwriting capacity) leave Canada last year and none of that has returned, so the operating environment is very, very consistent at the moment [with] where we were at the start of the pandemic.”

During the Barclays Americas Select Franchise Conference on May 18, Godfrey was asked about the impact of the pandemic on commercial lines. Specifically,  Barclays institutional sales manager Jeff Bigelow asked Godfrey what he thinks the lasting impact COVID-19 will have going forward on commercial insurance lines.

“I think if you were to ask the question back in March [2020], we were expecting quite an economic impact in the last 12 months,” Godfrey said May 18 during the Barclays virtual fireside chat. “Clearly for individuals and businesses, people were hurting, but we haven’t seen the tough, tough, high level of bankruptcies and the like that maybe we were expecting.”

Many businesses depend on government support during the pandemic, he added.

“Obviously it is tough times for individuals and businesses right now,” Godfrey said, “but I think with a lot of the support that governments have been providing, [that’s] really been able to create a sort of buffer for people to help get them through. I think what is going to be interesting is light is coming at the end of the tunnel [due to the vaccine rollouts.]

“A lot of businesses have pivoted, which is fantastic. A lot of the entrepreneurial spirit has arisen and people have been able to pivot their operations.”


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