For the rest of 2021, restaurant and hotel operators should expect to be asked to beef up their risk profiles.

This is what it will take to get insurers back into the market and add capacity, Aon said in its Insurance Market Report Canada mid-year 2021 review. As a result, premium increases are inevitable.

Insurers’ decreased appetite for this type of risk over the past year has eroded underwriting capacity, pushing up prices in most segments of the hospitality market, Aon notes. “Most domestic insurers are implementing a communicable disease/contagion exclusion,” the brokers add.

Peak approaching  

Capacity in the hospitality insurance market is expected to tighten into 2021, the review predicts. Yet Aon anticipates a peak in rates in the near future, followed by a decline. “Contamination coverage renewals are showing signs of flattening as insurer results improve,” the firm points out.

Aon's competitor Hub reported early this year that reduced or vacant locations in these types of businesses, combined with operators’ financial stress, will drive both property insurance and commercial umbrella rates up 15 to 50 per cent in 2021. “The amount each insurer is willing to write for a particular line is limited,” the brokerage firm said in its 2021 hospitality outlook.

Hub's brokers also cautioned their clients about executive liability, with coverage increasing by an average of 25 per cent owing to financial difficulties. “Director and Officer (D&O) and Error and Omission (E&O) exposures are ramping up with the prospect of more bankruptcies and business consolidations and creditor suits in response. The significant number of layoffs also may trigger Employment Practices Liability actions by employees, and by regulators if payroll tax payments have lapsed,” Hub says.

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